Real Estate Companies Adapt to Flexible LifestylesBy María José Goytia | Fri, 06/24/2022 - 14:02
Q: To what extent has the entry of millennials into real estate altered the tenets of the market?
A: Millennials today are not worried about having a residence unless they are married. What they desire more is liberty and flexibility. They are rediscovering their position as human beings and reject past conceptions and socioeconomic practices. Young people are looking for novelty, places that create a sense of belonging, have a high technological capacity and feature a great deal of ventilation due to COVID-19. This requires projects that are completely different compared to what was built previously. Sensitivity toward these changes is very important for the real estate market.
During the past three years, we have all migrated from our previous way of living. We are more conscious about what we do and less trapped in a traditional way of living. This has generated change. Now, nobody wants housing in the large and medium market. Everyone wants small, flexible spaces. Furthermore, technology allows us to rediscover where intrinsic value already is and where we can further create it. Today, young people want the flexibility to be able to move. They prefer life experiences over owning a house or a car.
Digitalization is a tool that has inspired this shift but the real change is coming from society itself. Before, the government or companies dictated the way people lived. Now, the individual does. The market segment to target is not as clear as before. Generating new proposals and services is practically impossible. With time, new patterns will emerge but it is impossible to classify how this will define living and working spaces.
Q: What would you say has been the biggest shift in the real estate market in recent years?
A: The biggest changes relate to offices. Five years ago, Gaya focused on corporate buildings, which represented 70 percent of our projects. The rest was residential. Now, Gaya has a slew of projects with different requirements. Clients have new needs and by looking at office space availability, we can see the change. In 2020, offices occupied 6 million m². By 2023, they will occupy 500,000 m², leaving another recently constructed 2 to 3 million m² of office space as oversupply. These are extraordinary figures that marked the start of this real estate crisis, in which rental markets will not be able to sustain themselves. Rents do not have to drop but the sector must reinvent itself and adapt. The office will not be what it once was.
Q: How is the trend of mixed-use spaces developing and what do these changes mean for real estate portfolios?
A: Mixed-use developments represent an uncertainty and lack of definition on the side of real estate developers. The concept is valid but it must reach deeper. Society needs more spaces in which people can coexist because people want to see each other. Malls and stores previously functioned as social anchors; now these spaces need to evolve to take on different characteristics. For instance, if developers want to transform a mall into a cultural and working center, then the mixed-use component could look like a co-working space with some co-living and a community center. Moreover, it is better to develop inside of an old building than build a new one. This is more sustainable because it consumes less energy and uses existing assets optimally. There will be a great deal of available real estate inventory, with great locations and accessible prices, that will be easy to transform as well.
Real estate portfolios in Mexico, therefore, need to be redefined, which poses a challenge but also yields opportunity for the sector. Developers must recognize the changing value of their assets. The winners in the market will be those developers that adapt quickly and take advantage of the new opportunities. Today’s generations are aggressively pushing for change. Governments and companies are taking too long to accept this radical shift. Developers will have to be the ones to capture these new values. These changes are still in progress. Massive 1,500m² houses do not have a sustainable future. Even if young people have that money, they would not live there because it would not seem right. Real estate must support how we want to live life in the future instead of dictating past obligations. After all, the changes to come are a benefit for the world’s sustainability. There will be no standard: developers will come to different conclusions based on the characteristics of their inventory.
Q: What is the role of mixed-use development in Gaya’s own projects?
A: Gaya is working on a big project in Mexico City featuring 600 residences for the middle market. Part of the project’s main program is a community center with up to three levels that would have been a mall before and now will be adapted as a living, working and recreational space. This creates an unknown factor that our future projects will have to consider.
Q: How can Gaya change the mindset of investors and developers to explore these new opportunities?
A: Gaya is changing its approach, moving from being a builder to becoming a service integration company, including consulting services. This model helps our clients in this new transformation, offering financing and helping to identify areas of opportunity while proposing a functional project. If companies wait to see new market patterns emerge, they will never develop anything. There is enough information out there showing that the market has different needs. Now, it is crucial to create new specific projects for every community instead of focusing on following historical patterns. If we do not listen to the end user, we will not succeed.
Gaya is a construction and real estate development company that sets disruptive and differentiating tendencies, providing fun, profitable, functional and sustainable living spaces for people.