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Why the Need for Innovation in Commercial Real Estate Will Only Increase With Time Innovation and commercial real estate (CRE) go hand-in-hand.

By Robert Finlay

Opinions expressed by Entrepreneur contributors are their own.

Every businessperson understands that innovation is essential. In commercial real estate, however, this principle is especially true. Since early 2020 when the coronavirus pandemic rocked the commercial real estate world, professionals in the industry came up with innovative ideas for not only surviving, but thriving. That kind of cutting-edge innovation will become more and more necessary in the future of the industry.

Real-estate professionals who want to thrive in the long term will have to become the most innovative in their field. Each year, the need for innovation only grows stronger. Luckily, the commercial real estate industry is capable of keeping up.

Sustainability needs will increase every year

As climate change causes harsher weather and the world races to become more and more sustainable, the commercial real estate industry will have to do its part. Both investors and tenants will be looking for companies with strong sustainability metrics.

Real-estate professionals will also need to find ways to keep up with new sustainability initiatives to remain profitable. A 2020 study found 40 percent of real-estate professionals saw increasing demand for sustainability among tenants, while 47 percent had seen increasing sustainability demand among investors.

As advancements in sustainability technology improve, real-estate professionals are likely to lose both investors and tenants to their competitors if they can't quickly implement the latest tech.

Additionally, the requirements for sustainability may increase over time. Many U.S. states have implemented laws requiring commercial buildings to meet certain standards. California passed a law requiring new buildings to operate through solar power.

If you're operating an older building that does not use solar power, you'll soon be competing with solar-powered buildings, as consumer trends suggest that tenants will be more likely to choose the solar-powered options.

Other sustainability initiatives require companies to pay large fines if they do not meet certain standards. Failure to keep up with these standards could have a huge impact on the profitability of your investment. As the world's goals for sustainability become more and more ambitious, real-estate professionals will have to become ambitious as well.

Related: Build Sustainability Around Your People, Not Just Your Office

The cultural shifts from the pandemic require

A 2020 report from commercial real estate company JLL found four main factors are impacting the change in need for office space: remote work, office design, commuting patterns and technology.

Many people expected remote work to change the commercial real estate industry — however, some of the changes are unexpected. Rather than everyone working at home, many companies are only partially remote. This requires office space to be optimized for video calls. The traditional open floor plan makes video calls more difficult, so office spaces will require more enclosed space than before.

Additionally, there will be greater demand for smaller offices, as companies have fewer employees on site. This allows commercial real estate investors to divide up their buildings and provide smaller spaces to a greater number of tenants.

Commuting patterns are also shifting. During the pandemic, many people moved away from cities and toward more suburban or rural areas. This means there will be more demand for office space in these areas. Commercial real estate investors should look at less centralized locations for their new investments.

Demand for multi-functional places will require creativity

One of the largest upcoming trends in the commercial real-estate industry is the need for multifunctional buildings. As consumer trends shift, real-estate professionals will have to be creative to create buildings that can operate in many ways.

Coworking spaces will be especially popular as remote work continues, but remote workers will also want to be near others during the workday. It's not enough to simply call a former traditional office space a coworking space and expect customers to come flocking.

To be profitable, you must take into consideration the interests of workers. They're looking to be social, but not distracted. Unlike in traditional office spaces, employees don't have to be in coworking spaces, so your space must be enticing enough that people choose to be.

Successful commercial real estate buildings of the future will likely have the capability for tenants to rent office space, retail stores, yoga studios, salons and any other type of business. Often these buildings may even include residential living. Real-estate investors should look at investing in properties where mixed-use is an option because it will be the most profitable.

Related: The Emerging Trend of Smart Home Technology in Real Estate

Automation technology will be a requirement

Automation technology will continue to advance in the coming years. It's not enough to adopt technology that is already available and stop paying attention as new technology enters the market. Commercial real estate professionals will have to remain ahead of the curve in adopting new advancements in automation technology to compete.

The most successful real-estate companies to date have implemented new technology before their competitors. As the rate of advancement in technology speeds up, those in the CRE industry should become well-versed in the new tech tools available so they can advertise the upcoming possibilities to customers.

Related: How To Get Started in Passive Real Estate Investing

Robert Finlay

Entrepreneur Leadership Network® Contributor

Founder at Thirty Capital & Lobby CRE

Robert Finlay helps operators and investors in the commercial real-estate industry generate market-beating returns. He has built multiple nine-figure real-estate tech products, including his primary focus, Lobby CRE. He recently released his first book, "Beyond the Building."

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