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Real Estate Trends for 2023

Real Estate Trends for 2023

Vladislav Doronin, OKO Group CEO, founder, and chairman, leads a real estate development company that has overseen the creation of numerous landmark buildings across Miami and several other US cities, including Missoni Baia, a collection of luxury condominiums created in partnership with the Missoni family. From AI and VR to affordable housing, this article will provide an overview of some of the most prominent real estate development trends in 2023.

Fractional Ownership

Fractional investment is nothing new in real estate, with investors using real estate investment trusts (REITs), syndication, and other forms of partnership to own shares in real estate assets for decades. However, the advancement of PropTech is accelerating this trend in a way that some suggest could pave the way for the democratization of the real estate market.

Historically, even with fractional ownership, investors needed a significant amount of capital in order to get started. However, a rising number of PropTech platforms are enabling investors to gain a foothold in the real estate market with much smaller sums.

Rental Growth Across Major Real Estate Sectors

Macro trends have impacted different sectors in different ways, yielding varying results in terms of rent growth, but by and large, rent prices have continued on an upward trajectory.

Over the last year, multifamily properties saw a 2.5% increase in rent growth, which was the lowest growth level seen since early 2021, according to a report from Dealpath. Meanwhile, offices saw even lower growth at 0.9%. However, industrial rents saw a healthy growth rate, topping 10.3%, while warehouses reached an impressive 11.7%.

Streamlining of Processes

One of the biggest benefits of the boom in real estate technology is its scope to enhance efficiency, enabling real estate agents, property managers, investors, brokers, lenders, sellers, and homebuyers to automate many routine responsibilities, allowing them to complete tasks more efficiently than ever before.

Shifting Population Demographics

Around the world, homeowner and renter priorities are shifting, triggering changes in local populations. In many countries, migration to cities in the search for better job prospects and amenities is predicted to pre-empt a staggering rise in urban development. Meanwhile, aging populations could have a significant impact on healthcare real estate trends throughout 2023 and beyond.

Today, many workers are migrating to large cities to secure better job opportunities. In addition, there has also been a push towards secondary cities as remote workers abandon downtown areas and move to surrounding towns, enabling them to achieve the best of both worlds – enjoying a quiet life in the suburbs while still maintaining easy access to urban spaces.

Virtual and Augmented Reality

Virtual reality (VR) and augmented reality (AR) are increasingly being deployed across the real estate sector following a huge acceleration in their adoption during the COVID-19 pandemic. With lockdowns, social distancing guidelines, and public health concerns effectively causing real-world viewings to grind to a halt at the height of the pandemic, forward-looking estate agents innovated, embracing VR and AR technologies and presenting prospective buyers with the opportunity to engage in virtual tours from the comfort and safety of their own homes.

Virtual viewings pose huge benefits for buyers, sellers, and agents alike, enabling homebuyers to get a feel for what it would be like to live in a property without the need to visit the location in person. Even in a post-COVID-19 world, experts predict that the use of VR and AR real estate technologies will continue to expand, particularly in the rental market, enabling landlords and short-term rental hosts to provide virtual tours to attract new renters.

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Affordable Housing

In many countries today, demand for affordable housing far outstrips supply, forcing developers to come up with creative new ways to increase affordable housing stock, such as:

  • Mixed-income properties
  • Adaptive reuse of buildings and modular construction
  • Unique capital solutions
  • The use of historic tax credit

The World Economic Forum warns that with an urgent need to boost housing affordability and production, the cost of inaction could result in a deep social crisis and even civil unrest. With a lack of affordable housing predicted to reduce the metro GDP by $1.6 billion annually in London alone, policymakers all over the world are coming under increased pressure to tackle the global shortage of affordable homes.

AI-Enhanced Analytics

Advancements in AI are revolutionizing the real estate sector, enabling property investors to find and analyze deals at a speed and rate that was unimaginable until relatively recently. Enabled by AI and big data, these advancements could be accelerated further still once quantum computing gets into its stride, with experts predicting that the quantum computing market value will top $1.7 billion in 2026 and some suggesting that this is just the tip of the iceberg according to Forbes.

Although quantum computing is still in its relative infancy, with only limited applications in real estate currently, its potential is vast, prompting a rising tide of PropTech start-ups to apply quantum in their algorithms as the technology develops.

| Photo courtesy of Vladislav Doronin OKO Group

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