The digital real property market is still in its infancy, and developers still struggle to make an impact, according to a report released Tuesday by a consulting firm.
The real estate consulting firm Edelman said that only 2% of the homes being built in the U.S. are digitally developed, and only 12% are digital-ready.
The vast majority are residential.
The report also found that the market is in flux, with new construction beginning only in the second quarter of the year.
This is not good news for developers, Edelman chief financial officer Mike Mankin said.
“The pace of change is pretty much at an all-time high,” he said.
“The biggest problem that we see is the lack of certainty around when the first commercial homes are going to go online.
We are seeing a huge gap between the market and what is being built and what’s being offered by developers.”
The lack of clarity has been driving a massive shift in the residential real estate market, said Mankins.
More than 40% of new homes built in 2019 were digital-oriented, with a similar share in 2020.
The report found that a staggering 77% of newly built homes are located in areas that have fewer than 10,000 residents.
While developers are trying to figure out what the best way is to capitalize on this shift, they have to be realistic about their prospects, said Edelman’s Mankinos.
“What’s going on with digital development in general is going to take a long time,” he explained.
As of the third quarter of 2021, a mere 11% of all residential buildings are digitally ready, and Edelman expects this number to decline to less than 10% by 2025.
The digital real-estate industry is expected to see $3.5 trillion in sales by 2025, which will be almost triple the amount spent in 2015.
The report highlighted a slew of factors that will drive demand for digital-driven residential construction.
“A big part of that is the fact that the U of C is in a boom period.
So there are a lot of people in the country that are looking to move,” said Minkins.
“There are also a lot more young professionals looking to buy in this time of growth.”
The boom will continue in the coming years, with developers looking to capitalize upon this trend, said Robert Tewksbury, an analyst at Edelman.
Tewksington predicts that digital development will be a big part, with more than 2 million new units being built by 2020.
This boom is also fueling the housing bubble, with prices in some areas skyrocketing in the past few years.
According to Edelman, there is also the possibility of another bubble forming in the real estate markets.
With the economy struggling, housing costs have soared, and demand for homes has decreased.
Some of the most-hyped projects in the industry are being built near the border with Canada, which has been a hotbed of digital realty.
Meanwhile, the real-life impact of this boom is being felt in other sectors of the economy.
In 2020, the UofC is expecting to create 6,800 jobs, while more than 4,000 more are needed to fill the gap created by the digital bubble, according the report.
These are still very early days for digital realestate, said David Hickey, president and chief executive officer of Edelman Real Estate.
“The market has been volatile, and I think there are still some really big issues to be addressed,” he added.