On October 15, 2020, PwC and the Urban Land Institute (ULI) released their “Emerging Trends in Real Estate 2021 Report.” According to PwC leaders, the annual report looks forward to the year ahead, unlike most reports that look back at the last quarter or year. The report was compiled from surveys and interviews of over 2,950 real estate executives, investors, developers and market experts. Trends that shaped the 2021 outlook were dominated by the eruption and rapid spread of COVID-19 in early 2020 and continuing through October 2020 and assuredly beyond.  

In dealing with certain uncertainties, “there are a bunch of things that will change at the margin.  And changes at the margin can have huge impacts on the use of real estate.”  The challenge for this year’s version of “Emerging Trends” is to start the process of discerning the trends that COVID-19 has instigated and their long-term potential, while still in the early days of the pandemic.

The consensus of most respondents to this year’s survey was that COVID-19 did not create new trends but accelerated those that were already underway.  One of the biggest trends that lost momentum is the rising appeal of big cities.  After decades of revitalization and population growth, many of the largest U.S. cities have been hit the hardest as tourism, use of office buildings, mass transit ridership, and live entertainment have been curtailed.  Also, a number of residents decamped to second homes or to live with parents or other relatives, leaving quieter streets and commercial establishments behind.

The next three to five years could be difficult for large cities as demographics favor suburban locations, and restrictions on public transit, office and retail/restaurant density, and live entertainment make big-city life less appealing.  But, like many of the changes that have occurred due to the pandemic, the ultimate impact on the desirability of large cities will be on the margin.  While large cities are likely to struggle for several years, the COVID-induced pause in their appeal is not likely to be permanent.  Cities will likely creatively adapt perhaps adding more green space and outdoor activities, and continue to improve livability to retaining and attracting residents who continue to value an urban lifestyle.

COVID-19’s Impact on Key Trends


  • Work from home <WFH>
  • Move to Sun Belt States
  • Suburban migration
  • Public open space
  • Retail sector transformation

Stopped or Slowed

  • Appeal of CBDs/density
  • In-person conferences and meetings
  • Leisure travel/tourism
  • Business travel
  • Mass transit use

Starting in March 2020, rolling COVID-19 regulations forced many office-using companies to implement work from home <WFH> policies for their non-essential workers.  WFH has been around for years, but has been slow to catch on.  The pause on in-office activity continues through mid-October 2020, longer than anyone had imagined possible.  The ensuing debate about the future of WFH and the impact on office demand has exposed two camps of thought:

  • WFH can be productive and collaborative, potentially allowing companies to reduce office footprints.
  • In-person workplaces are critical for company culture, innovation, onboarding of new employees, and training.  Plus, WFH may be a challenge for younger and lower-income workers due to space and connectivity issues at home.

One CEO observed that “people can’t rise in an organization in a remote-only setting.”  A few firms, notably Amazon, have affirmed that philosophy by having the vast majority of their workforce back in the offices as soon as it is safe to do so.

Companies that plan to go back to a pre-COVID office setup may face short or medium-term complications when they start to reopen.  Many younger employees and some families have left for less dense and less expensive locations and may need time to relocate back to the place of employment.  Some workers have purchased or rented houses in communities further out and may balk at the notion of resuming a daily commute.

Looking beyond the pandemic to the future of office space, over 90 percent of the survey respondents agree that “in the future, more companies will choose to allow employees to work remotely at least part of the time.”  WFH may lead to different models of how companies lease and use office space.  Some companies may move from a consolidated model to a hub-and-spoke system with satellite offices in suburban areas.  At the margin, this favors suburban markets over central business districts <CBDs>.  WFH is not preferred or ideal for all employees and raises important cultural and social equity issues.  Younger employees may prefer working in an office due to better learning environment and business and social connection opportunities.  Also, younger and lower income employees may be less likely to have adequate space to work from home.

History suggests that offices will remain the dominant location for most white-collar employment, but the pandemic has taught us that there is a definite new variation now in the mix.  “There seems to be almost an optimal productivity situation where working in the office three or four days a week and then remotely one or two days a week is actually more productive than working in the office all five days a week or being out of the office all five days of the week.”  A significant change in the single-family housing market is a trend emanating from the COVID-19 pandemic called “the Great American Move.”  Some observers argue that large events, like a pandemic, do not create new trends but rather accelerate existing ones.  That certainly seems to be the case with housing today.  The “move” was occurring prior to the pandemic, already spurred by geographic, demographic, and consumer shifts in the United states.

Central-city population growth rates have been slowing since 2011, while suburban population growth rates have been steadier.  The slowdown coincides with the leading edge of the millennial generation turning 30.  This continued shift is being facilitated by the success of the work-from-home experiment.  The ability to work from home, even part time, is providing the opportunity for employees to live further away from city-based jobs while avoiding or reducing the cost and stress of long commutes.

Markets to Watch

Over the past 18 years, “Emerging Trends” has surveyed its members and asked them to evaluate the investment and development prospects of what has grown to be a list of 80 real estate markets across the United States.  The survey results from the viewpoints of a diverse group of real estate professionals.  The year 2021 also adds a new and very impactful consideration:  how has COVID-19 affected and how will it affect the demand for and use of real estate in each community?  The long-term impact on local markets has been hard to pin down, since hot spots and infected areas have spiked and waned since the pandemic started in early 2020.  However, looking at the markets moving up in the overall real estate prospects rankings, the suburban markets tracked in the survey have gained the most over the past year.

Raleigh-Durham has replaced Austin in the number one slot.  Nashville retains the third slot and Charlotte is fifth.  The largest move upward into the top ten is Tampa, having moved from eleventh to sixth.

Several years ago, “Emerging Trends” identified these cities as “The 18-Hour Cities.” This category works for a select number of medium-sized cities, although COVID-19 has temporarily slowed both daytime and nighttime activity in many of them.  The 18-hour cities are popular in-migration destinations due to lifestyle, culture, and employment opportunities.  They are not necessarily inexpensive markets but are more affordable than the establishment markets, from which they draw many newcomers.  The dynamic economies of these markets continue to make them popular with developers and investors in 2021.

A new category in the survey this year is “niche markets.”  These are smaller markets with lively downtowns; diversity in leisure, cultural, and natural/outdoor amenities; and stable economic bases that withstood the COVID-19 downturn better than many markets.  Altogether, along with their lower cost of living and cost of doing business, they offer something for everyone.  All have positive in-migration, an indication of the appeal of these towns.

Included in this category is Greenville, S.C., which moved up in the survey from 44th to 26th.  Real estate professionals in several focus groups expressed a sentiment that likely applies to many if not all cities in niche markets saying that “real estate is still comparatively undervalued, so there is significant upside for newcomers.”

Property Type Outlook

In recent years, the industrial/distribution market segment maintained its #1 status primarily from long-term demand catalysts including e-commerce, speed-to-consumer supply chain strategies, and customer adoption of high-throughput modern logistic facilities.  COVID-19 not only validated the value proposition offered by these established structural demand drivers, it also accelerated their growth trajectory.

On the other end of the spectrum, the retail property sector was already struggling on the eve of the pandemic, and now conditions threaten to get much, much worse.  Despite a decade of sustained economic growth, vacancies have been rising for several years as retailers close stores at a recession-like pace.  Shopping has been moving from physical stores to online retailers, and more and more space in shopping centers is occupied by nonretail uses.  All this was happening before the pandemic, which most real estate experts believe will hasten the pace and magnitude of change.

The COVID-19 pandemic introduced a significant disruption to the U. S. office market in early 2020 as strict shelter-in-place mandates rolled through the country beginning in March.  While unemployment rates skyrocketed, particularly for those working in the leisure and hospitality sectors, the pandemic displaced much of the ongoing work that had been taking place in offices.  That work shifted primarily to residences.  Thus began the “Great American Work from Home Experiment.”

Despite numerous natural disasters, previous pandemics, new technology, and even terrorist attacks, office buildings have been a key part of human productivity for quite some time.  Office buildings have been more than a place to work.  “Emerging Trends” interviewees frequently cited the importance of centralized workplaces in establishing corporate culture, brands, training, and mentorship programs.  During the most recent real estate cycle, the quality of office amenities became a prime tool in the recruitment of talent.  Corporate culture and working collaboratively are less possible when you’re working remotely.

Offices have also played another important role.  People have gone to work to be more productive and expected their employers to optimize workplaces accordingly.  At least pre-pandemic, employees in workplaces designed for high performance indicated a preference to work in the office rather than at home.

Suburban versus Urban.  Suburban office investors highlight the fact that the suburbs were already the largest office market with the most absorbed square feet of Class A space in the last 10 years as well as in 2019 and postulate that the pandemic may accelerate suburban outperformance.  Suburban office buildings account for about two-thirds of occupied office space and are also closer to office workers’ homes and offer lifestyle and school choices to the largest population segment, the millennials, who are in the family formation stage of life.  Suburban office markets can also offer lower-cost space while in key submarkets that still offer nearby amenities.  In fact, suburban office rose significantly in the “Emerging Trends” survey this year, ranking 10th of 24 potential sub property types in terms of investment prospects, up from a ranking of 21 a year ago, while central-city office fell from a ranking of 8 a year ago to 20 this year.

Top of the list of attractive investment markets, as noted by “Emerging Trends” survey respondents, are areas such as Raleigh/Durham and Nashville.  These markets offer growing and educated job bases, and some valuable urban submarkets, but unlike their larger coastal brethren, they have lower housing and business costs, which create attractive life-styles.  Office nodes in these markets can also be accessed more easily by car, an attractive attribute, at least in the short-term.

Overall, the work-from-home experiment has given us some solid data points upon which to base future decisions.  Innovative companies have the opportunity to develop processes to support both remote and in-office work environments that maximize worker productivity and well-being.  The outcome could result in healthier buildings with higher worker productivity, flexibility, and satisfaction.

The latest “Beige Book” report, issued by the Federal Reserve Board September 8, 2021, based on information collected in July and August, indicated that the national economy strengthened at a moderate pace in early July through August.

The regional economy in Richmond’s Fifth District continued to grow at a moderate rate in recent weeks.  Office leasing improved as businesses returned to the workplace, and some agreed to longer-term leases than in the past year and took advantage of leasing concessions. Industrial leasing continued to grow from already high levels, driving rental rates higher.

On balance, business activity in Philadelphia’s Third district continued to grow out at a moderate pace of growth during the current Beige Book period.  Non-residential construction and leasing activity remained steady.  Demand for warehouse space remained strong.

Economic activity in Atlanta’s Sixth District continued to expand at a moderate pace from July through mid-August.  On balance, commercial real estate (CRE) activity was steady since the previous report.  Contacts noted that competition is accelerating among lenders for a small segment of CRE loans.  Smaller banks and non-bank lenders were noted as the more aggressive CRE lenders.

Updated 09/09/21