The Southern California Development Forum (SCDF), an organization that brings together a community of real estate leaders on the latest trends, strategies, projects and provides networking opportunities, hosted a panel discussion on Tuesday, January 11, 2022, discussing where the built environment is headed in 2022.
Presented by Dave Gilmore, President and CEO of DesignIntelligence and Design Futures Council, offered a glimpse at what lies ahead in 2022 for the AEC industry amidst the global challenges we’ve been experiencing. He explored multiple asset classes of development, sharing those which will be most disrupted and may prove the most challenging. Leveraging his economic acumen and conversations with real estate leaders across the industry, Gilmore predicted a range of trends we can expect in 2022.
Trends to Expect in 2022: The Challenges
Slow recovery in the service sector is dampening growth and represents a downside risk to the U.S. economy.
Gilmore believes we will continue to see high inflation across all sectors as a result of supply chain issues and international geopolitical strains.
According to Lasse Sinikallas, an economic analyst from Fastmarkets RISI, in 2022, growth in all major regions is expected to slow as reality sets in after an initial post-COVID boost. National debt levels are high, supply-side and logistics issues persist in everything from microchips to US housing stock and inflation is rising. “In the next few months, we’ll be watching central banks closely to see whether or how they will intervene. Of course, we’ll be watching China’s economic indicators most keenly – any deviation from forecast there will have a ripple effect through the entire global economy.”
The Effects of International Geopolitical Strains
Gilmore notes it is important to be aware of rising tensions with China and several other countries.
“If there is any type of military clash, it will send signals globally that will suppress investment for a period of time,” states Gilmore. “Another major concern is cyber security.”
The U.S. Department of Homeland Security, FBI, Australian Cybersecurity Center, and the UK’s National Cybersecurity Center have warned that hackers associated with the government of Iran are targeting transportation, healthcare, and public health sectors.
Trends to Expect in 2022: The Opportunities
The largest funds that go into the built environment are from pension funds, insurance dollars, and private equity.
The industries most poised for success in 2022 include: property technology, healthcare, hospitality and retail.
The property technology sector is believed to be the next trillion-dollar industry as it grows to be a point of necessity.
“We’ve been limited in property technology and we think that production will accelerate in the upcoming years,” said Gilmore. “It is far more than managing a building’s cooling or lighting system. If it’s deployed correctly, it will allow the building to have its own network and nervous system. Though, property technology opens a wider landscape for cybersecurity problems we need to keep in mind.”
“The healthcare industry is on its way back up, but is not believed to pass pre-pandemic levels,” said Gilmore. “So many of our healthcare institutions were damaged in the last few years that their credit score rating has dropped, making them a higher-risk target for investment. On the other hand, we are seeing a lot of capital being moved throughout that sector.”
As Americans are learning to live with the pandemic and emerging again, the hospitality industry has begun to rebound.
According to the Hospitality Global Market Report 2022, the global hospitality market is expected to grow from $3,952.87 billion in 2021 to $4,548.42 billion in 2022 at a compound annual growth rate (CAGR) of 15.1 percent. This growth is due to the recovery after the closure of commercial activities as a result of the pandemic that resulted in operational challenges. The hospitality market growth is also on an upward swing as a result of the economic growth forecasted in both developed and developing countries, as well as hotels utilizing richer technologies to impact the customer experience, including automating processes for guests.
According to CBRE, many factors are impacting retail opportunities including the more efficient use of retail space with sales per square foot, record levels of venture capital targeting retail-focused companies, and consumer spending, predicted to rise in 2022 with a build-up of savings during the pandemic, and more inbound international travel in tourism-heavy markets.
Baby Boomers and New Construction
Another interesting transformation Gilmore noted that is pretty significant is the amount of funding being placed into senior living with over 70 billion private equity dollars that have been invested over the last couple years.
“Baby Boomers, the wealthiest demographic, are wanting to see new constructs and expressions of what senior living looks like,” said Gilmore. “I believe senior living will move to private economy versus public economy.”
There are a lot of challenges and opportunities. One thing is for sure: the built environment will continue to play a key role in all aspects of our life as it impacts every area of how we live, work, and play.
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