Emerging Trends in Real Estate, produced by PwC and the Urban Land Institute, continues to be the premier source of forecasting in the real estate sector. While the report is centered on real estate, the forecasted trends will impact a range of businesses. I believe the following economic predictions from the report to be the most important for business owners and entrepreneurs in the coming year.
The Emergence of Midsized Cities
Twenty years ago, Emerging Trends in Real Estate was the first to advise people to focus on real estate in the “24-hour City.” Smaller cities saw workers shifting away from the typical nine-to-five downtown markets of yore, and fleeing to the suburbs. Recently, small and mid-size urban areas have begun to grow, and we are seeing the revival of downtowns and the emergence of the “18-hour City.”
In cities like Denver, the availability of housing, retail, dining and walk-to-work offices extend the life of the city beyond nine-to-five, and attract more affluent residents and more real estate investment. If you’re considering opening a business, setting up shop in a fast-growing “18-Hour City” will increase your chances of success. Even businesses like Google think it’s smart to invest in mid-sized cities.
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Tightening Labor Market
Coming off of the heels of a recession, it is jarring to consider that labor shortages are expected in upcoming years. Even though many boomers are staying in their careers, swaths of experienced employees will be retiring in the near future, clearing space for new workforce entrants. With millennials already staples of the workforce, who will replace the boomers? With Generation Z being much smaller than Millennials and Boomers, the simple answer is that the United States will have to entice foreign talent to fill the ensuing labor gap; which makes immigration reform a very important issue in 2015, despite the current political stalemate. Both foreign and local laborers will have the upper hand as businesses feel the effects of labor shortages, so employees can be expected to expect higher wages as the job market swells and the economy improves.
Retail and Workplace Flexibility
Technology has helped ecommerce companies see explosive growth, while challenging traditional retail with the result being larger warehouses and smaller brick-and-mortar stores. More companies are using modern logistics and automation to operate with razor-thin inventory. And the effect on the workplace? With the rise of the sharing economy, more companies are renting out unused conference rooms, and offices are becoming smaller, collaborative spaces with open floor plans and fluid work environments. When possible, companies should consider allowing employees to telecommute. This economy of space goes hand-in-hand with cost-savings for business owners, as renting out large multi-office spaces is no longer necessary.
The modern workplace is making an evolutionary leap forward. Open offices are trending (for better or worse), communication is immediate and marketing strategies are changing quickly alongside developments in technology. Companies who embrace change will find success by attracting top talent and harness their ideas to grow their customers. Competition is here to stay, and as such, it is imperative for firms to have a clear brand identity and harness social media opportunities to manage and market themselves.
Fortunately, the United States is resurging as a cost competitor, and managers are reversing the trend of outsourcing as in-house talent is becoming more cost-effective. The IT world, a sector known for setting trends, has reverted to in-sourcing as a means of cutting costs, with the added benefit of improved communications. Your entire enterprise may be on the cloud, but the best information sharing happens when you’re face-to-face.
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This is the most (and perhaps the only) dismal section of the economy. As anyone will tell you, the United States’ roads, electric grid, water systems, communications network, schools and health care facilities are outdated and inefficient. And the government simply isn’t spending the resources required to update these systems.
Crumbling infrastructure can deter investment in areas where there would otherwise be a flourishing market. With the growth of online sales, the shipping industry is relying on roads, railways and ports more than ever. Poor infrastructure hinders the efficient delivery of goods at a time when consumers expect virtually instant access to their purchases. Business owners should put extra pressure on state and local lawmakers to begin to address the decades-old neglect of infrastructure investment.
Forward-thinking managers should keep these trends in mind when planning the future of their business. With labor markets tightening, companies in-sourcing and offices becoming more like creative playgrounds for employees, 2015 will be the year of the American worker.
Not only American workers will see their fortunes improve in 2015, but small and mid-sized businesses will see an increased opportunity to compete both globally and against large brands. With an ever-growing marketplace of analytics services geared towards small and mid-sized businesses, executives will be able to find valuable insights about their customers and squeeze every penny out of their marketing efforts.