Real Trends: The future of real estate in the United StatesFrom the MIT Center for Real Estate and Urban Economics LabThe future of real estate is filled with disruption, innovation and challenges.Real estate investors can get the edge by looking beyond today’s market cycle at long-term trends shaping development in the future.

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Growth and migration patterns

2021 6.60 million new homes added

2020 4.95 million new homes added

2019 3.30 million new homes added

2018 1.65 million new homes added

Strong short-term demand for housing will be strongThe population is expected to jump to 334 million by 2021— the equivalent of 1.65 million new homes a year.

Both urbanization and suburban sprawl will drive developmentExpect to see town centers arising in suburb and exurb communities, while consumer cities with elastic housing supply—such as Cleveland, Oklahoma City and Pittsburgh— make their comeback.

Immigration will drive housing growthFor each percent that immigrants add to a metro population, rent growth will increase by an extra 1%.

Innovative ways of living and workingSelf-driving cars will reshape the suburbsAutonomous cars will accelerate suburbanization and accelerate sprawl by increasing the distances that people are willing to commute.

3 models for shared office space to thrive

Short-term: original tenant uses lease arbitrage for single desks/office space.

Mid-term: owner makes direct investment in flexible spaces with bundled services.

Long-term: original tenant/ owner converts underutilized area to long-term co-working space for another company.

Developing shared office space requires well-defined contracts, innovative design, ways to resolve disputes, new management practices and reasonable local regulations.

Big data and smart buildings will deliver added efficienciesDevelopers will construct a new generation of buildings that are self-monitoring and self-regulating—saving time and money.

Affordable housing shortageAdaptive reuse will add affordable housing to areas in needHistoric properties are being retrofitted as affordable housing communities close to city centers, allowing residents to benefit from improved access to transportation and services. They also can attract new development.

New advancements will reduce construction costsDevelopers will increasingly turn to advances in prefabricated and modular building techniques, new materials, building information model (BIM) software and 3-D printing.

Inclusionary zoning will make mixed-income communities possibleNew zoning laws will emerge as a strategy to promote affordable housing in communities that have hot housing markets, flexible zoning regulations and a consensus supporting greater density.

Conclusion: Staying ahead of the futureA series of interrelated demographic, economic and technological trends will disrupt long-held assumptions about real estate, challenging established business models and opening opportunities for those with the foresight to envision a future that breaks in significant ways with the present.

Real Trends: The future of real estate in the United States is a report commissioned by Capital One to provide members of the real estate community a framework they can use to identify trends as they emergein their market, assess their implications and change course accordingly.

Disclaimer: This report results from the research conducted by the MIT Center for Real Estate and the Urban Economics Lab. It is based on a review of academic literature, research projects, interviews, discussions with MIT staff and professors, and presentations at the MIT World Real Estate Forum and Real Disruption conferences. It was conducted from February to August 2017.

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