After Record-Setting Year, Developers Aim for Connectivity, Wellness
Tomorrow’s winners will be those who translate the past two years into thriving environments, says Jennifer Rosenberg of Keystone.
After two years of uncertainty, the outlook for commercial real estate development is positive, especially after a record year for CRE sales.
As pandemic impacts linger, like hybrid work and supply chain disruptions, commercial real estate developers are catching up with these changes and adjusting plans accordingly. Smart developers are learning from the experiences of the past year with a renewed focus on wellness and connectivity. Above all, it will be vital for developers to build trust through their choices of locations, designs, and amenities, to entice workers back to the office and residents back to urban centers.
Office Return Led by Varying Spaces, Air Quality
The future of work has been redefined in the past 24 months. It’s clear that a hybrid approach to work with offices designed for collaboration and connection is the way forward. Flexible spaces with a greater emphasis on social distancing are highly sought after. The modern workplace also demands high-performance outdoor spaces that offer heating, cooling and a variety of options to meet or relax.
When it comes to technological connectivity, automation and digitization are leading the way. Developers are prioritizing technology and data to maximize infrastructure efficiency through connected, smart office buildings. This also applies to indoor air quality, another important factor for tenants aided by new technologies.
In addition, developers are making more investments in their office buildings’ sustainability to increase value and align interests with prospective tenants. Renewable energy and energy recovery are popular choices for developers with an eye on ESG. Similarly, with interest in health and well-being at an all-time high, wellness is the driver for developers’ amenity strategies.
Multifamily Set for Banner Year
Many are expecting 2022 to be a robust year for multifamily with occupancy and rents rising above pre-pandemic levels.
Like the office sector, apartments will see an increased emphasis on flexible space, outdoor spaces, and wellness-focused amenities. As a result, studios are not as popular as they used to be, with apartment-seekers more interested in extra rooms to serve as a home office or space for workouts or relaxing.
Renters are also interested in outdoor spaces and access to different common areas where they can perform their job but still get a change of scenery.
Life Sciences Demand Has Developers Converting
In 2021, there was a 62 percent increase in investment in U.S. life sciences real estate, and that’s expected to grow another 10 percent at minimum this year. Life sciences companies sought 24 million square feet of new real estate in Q3, exceeding the amount of lab space under spec construction by nearly 2.8 million square feet.
Spec construction can’t keep pace with life sciences demand in traditional hotbeds like Boston and San Francisco, or in up-and-coming markets like Philadelphia and Raleigh. A lack of supply is driving adaptive reuse to meet industry-specific needs, like the high ceilings, load-bearing floors and backup power that are essential for life sciences firms. Location and community are also important to these companies—they all want to be a part of a well-connected hub.
Cities Will Rebound
While the pandemic placed a premium on space and privacy, driving people out of urban areas, this exit from cities is only temporary. Those who moved to the suburbs were always planning to; the pandemic just accelerated it.
Look for more mixed-use developments in urban centers with high-density residential against the backdrop of a healthy, thriving city landscape to create connected environments for live-work-play. These developments will see more ground-floor amenities and connectivity to outdoor spaces.
Ultimately, the onus is on developers to provide enough incentive and comfort to bring workers back to offices and tenants back to cities.
With demand growing across the commercial real estate industry, developers will be busy in 2022. Tomorrow’s winners will be those who effectively translate the lessons of the past two years into thriving, connected environments built for the future.
Jennifer Rosenberg is the development director at Keystone Development + Investment. From concept to completion, Rosenberg is the driving force behind several of Keystone’s signature developments, including The Curtis in Philadelphia and Hotel West & Main in Conshohocken. She gets involved in all aspects of her projects—from defining the vision to budgeting to construction management. And she does it all by staying on task, organized and agile, relying on strategic and creative thinking to tackle those inevitable glitches that arise during the development process.
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