Dec 10, 202311 min read

9 Trends that will change the real estate industry in 2024

Approaching 2024 requires foresight into upcoming changes. We are on the cusp of a changing era and exerting unprecedented influence in shaping the future for generations to come. Yet our collective consciousness lags. In 2023, a determined commitment to sustainability, a wave of AI discussions and adaptation to a new financial reality defined the landscape. Following my previous blog on real estate trends for 2023, we now explore '9 trends for 2024'. These trends bring new dynamics that will redefine the real estate industry. From new laws & regulations, emerging technologies to sustainability and market shifts, these forces will shape the real estate landscape in the coming year. Against the backdrop of the 'fourth turning', these nine trends are positioned to shake up the real estate sector in the coming year.

Trend 1: Burnout of the financial system

The 'burnout of the financial system' heralds a pivotal moment for real estate, unfolding amid the economic tumult of 2023. Inflation and rising interest rates are disrupting the traditional landscape, leading to a standstill in real estate transactions, reduced asset values, dwindling venture capital inflows and slow decision-making. The prevailing global atmosphere of risk and economic downturn adds to the challenges within the sector. As a result of the reverberations of the COVID-19 pandemic, the global real estate arena is undergoing a profound introspective metamorphosis. How to navigate the new financial reality, grapple with changing legislation, address sustainability, adapt to digital transformation, respond to changing customer concerns and address social issues are becoming critical questions. The impact of shrunken innovation and training budgets, the drive for 'cost-efficiency' and 'right-sizing' will manifest in 2024. Amid global economic uncertainties in 2024, the industry is balancing on the edge of a possible financial reset and growth recession, requiring a conscious embrace of change. At the same time, (central) banks are facing technical insolvency, the US continues to print money unabated, Central Bank Digital Currency (CBDC) initiatives are taking shape, the Decentralised Finance (DeFi) ecosystem is heating up, $BTC is about to halve, oil does not have to be paid for only in petrodollars, and purchasing power is steadily eroding. The collective awakening in the real estate industry of the vulnerabilities inherent in today's financial systems is prompting a reassessment of established norms. By 2024, opacity becomes unsustainable as obvious gaps in existing systems necessitate proactive stakeholder engagement (see Trend 3). A paradigm shift towards resilience, and perhaps even anti-fragility, becomes necessary, reflected in a concerted focus on creating system value. As Google Trends indicates, collective fatigue prevails; perhaps the winter of 2024 offers an appropriate time for reflection, as the year unfolds with a wake-up call to the burnout of the current financial system.

Trend 2: Building Climate Resilience

Over the past year, the importance of adaptability to natural events such as floods, drought, heat stress, freshwater shortage, forest fires, and bad air quality has been emphasized. These events highlighted the interconnectedness of sustainability and resilience. The urgent need to move beyond Anthropocene thinking underlines and emphasizes the profound impact of human activities on planetary stability. In 2024, the real estate industry will undergo profound change in response to the growing challenges of climate change. The industry is moving away from its historically hostile attitude towards nature and is now taking the lead in promoting urban climate resilience. There is a growing emphasis on nature-positive initiatives, influenced by indigenous wisdom and a collective effort to build environmentally responsible cities. The success of real estate is being redefined by the social return on investments, moving away from purely financial measures. ClimateTech, GreenTech and NatureTech, particularly nature-based solutions and Traditional Ecological Knowledge (TEK), are increasingly becoming part of real estate practice, driven by the aftermath of COP28 and the commitment to tangible environmental action.

Trend 3: Nature as our 5th Stakeholder

In 2024, the need to recognize 'nature as our fifth stakeholder' is increasingly recognized. By embracing the Fivefold Helix paradigm, the real estate industry is called upon to recognize nature as an essential stakeholder, alongside the traditional quartet of 1) the private sector, 2) government, 3) academia and 4) civil society. This paradigm shifts in decision-making puts biodiversity, water conservation, and healthy soils at the forefront and addresses the pressing environmental challenges of our time. Progressive real estate structures, with elements such as green roofs/facades and green public spaces, play a central role in preserving biodiversity and securing clean water sources amid urban development. Legislative measures such as the European Nature Restorative Law and the UK TNFD underline this recognition of nature as a client and reflect a growing understanding of its inherent value. In the context of the Rights of Nature, where more than half of global GDP ($140 trillion in services) is intertwined with nature, the economic imperative for sustainable real estate practices becomes irrefutable. Recognizing nature as the fifth stakeholder represents a transformative role, extending beyond mere stewardship and into a co-evolutionary partnership. This means we are going to see business developments around 'nature services'. This evolution shapes the trajectory of responsible and sustainable built environments, positioning nature as a decisive force influencing the current challenges and future value of the industry. In 2024, nature will finally get back what it is entitled to, a regenerative existence.

Trend 4: Recalibrating of the PropTech landscape

The landscape of PropTech is undergoing a profound recalibration in 2024, a transformation driven by the myriad developments in 2023. Last year saw the further development of data driven ESG insights, digital operational services, engagement strategies, industrialised construction, digital twins, and the imminent formulation of construction passports. By 2024, the global North will consolidate, and the global South will continue to mature. Last year, the Middle East, boosted by financial strength and ambitious megaprojects, saw a remarkable advance in PropTech and LATAM region made much samba too. PropTech venture capitalists have major fundraising challenges, portfolio devaluation and increasing competition, laying the groundwork for possible mergers, acquisitions, or liquidations, confirmed by the notable demise of major companies such as Veev, Wework and Blend, in which venture capital had a significant stake. A downturn in later stages led to falling investment volumes, in contrast to the rise in venture capital investment in early stages. In contrast, earth observation, energy/grid storage and retrofit installers were the big winners. Metaprop's research shows an uptick in investor confidence, reflected in a substantial increase in PropTech investments and an increased focus on Architecture, Engineering and Construction. The Startup Confidence Index shows a modest uptick, accompanied by expectations for more M&A and liquidity events in the next 12 months. Last year, we saw an adjustment of propositions at existing startups towards impact. Impact startups and impact investing (ESG is not impact), in line with the UN Sustainable Development Goals, reinforces the commitment to long-term sustainability continues in 2024. Notable transformations in 2023 include rebranding, mergers, partnerships, dissolutions, and new initiatives within PropTech associations. Examples include the name change of the German PropTech Initiative to the German Platform for Technology and Innovation, the acquisition of the UK PropTech Association by The British Property Federation, withdrawing member states and the new co-working initiatives by PropTech Lab (Belgium) and PropTech Sweden. However, PropTech associations are expected to give greater priority to local initiatives and strengthen regional partnerships (as in the Nordics), in response to a competitive landscape where technological solutions are becoming more commonplace. Overall, the PropTech landscape manifests itself in 2024 as a comprehensive recalibration, symbolising the changing dynamics of the sector.

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Trend 5: More Fu and focus on infinite game

In 2024, 'more fu and focus on the infinite game' is going to manifest itself more emphatically. This means a change in mindset, aligning digital ambitions with sustainability goals, demonstrating a commitment to a sustainable future. Real estate companies are using technology not only to reduce carbon footprints but also to the broader sustainability movement. Despite challenges for those adhering to the carbon tunnel vision in the management phase, momentum towards sustainability with digital transformation as a lever continues. Inspired by the Japanese ethos of 'Do more for others than for yourself', real estate and technology companies will prioritize social contributions. Japan's 53% share of the world's oldest companies is a testament to the success of this approach. The concept of finite and Infinite Game, as expressed by James P. Carse, underlines the trend, and emphasizes sustainable participation and continuous improvement and development over immediate victories. In 2024, it will become clear that implementing solutions alone, called 'solutioneering', falls short of addressing the root causes. “More Fu and Focus on the Infinite Game” signals a transition to a future where sustainability and digital practices are integral, redefining success as an enduring commitment to the greater good and the infinite game of our planet's well-being.

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Trend 6: AI's rapid rise continues

In 2023, the technological landscape underwent a transformative shift, symbolized by Nvidia's CEO proclaiming the "Tipping Point" of a New Computing Era. Artificial Intelligence (AI), identified as a general-purpose or systemic technology, set the stage for global transformation, shifting the focus from selling dashboards to delivering user-centric experiences. The World Economic Forum acknowledged the escalating significance of AI, and Gartner signaled an inflection point, triggering industry-wide discussions about AI's transformative potential and ethical quandaries. In November 2023, the Bletchley Declaration, an international accord endorsed by 28 nations and the European Union, was established with the aim of fostering the secure and ethical advancement of artificial intelligence. The EU has achieved a historic milestone by reaching a political deal on the AI Act, making it the first continent to establish clear regulations for AI use. The AI Act is not just a rulebook but also a launchpad for EU startups and researchers to spearhead the global pursuit of trustworthy AI. Despite AI's playful and endearing aspects in 2023, the approaching year, 2024, is projected to be pivotal for confronting and navigating complex ethical challenges. This surge in AI's prominence is not without its concerns. As part of the AI, Generative AI (GenAI) claimed the spotlight in the 2023 Gartner Hype Cycle. The impending impact focuses mainly on knowledge and creativity, with faster adoption strengthening the disruptive influence of AI on the real estate labor market. This accelerated integration requires a rapid understanding of the transformative dynamics of AI, especially within the real estate sector, where traditional work approaches will undergo significant changes. Generative AI is poised to redefine real estate consulting practices, according to Antony Slumbers. As organizations increasingly adopt GenAI APIs and models, reaching over 80% by 2026 according to Gartner, issues like energy consumption and environmental impact have gained prominence. Sustainable AI practices are emerging as a critical focus, necessitating modern data architectures that efficiently and responsibly support energy-intensive workloads. In 2024, the industry is expected to shift from Silicon Valley's "move fast and break things" mantra to embrace adaptability and foresight.

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Trend 7: Value chain responsibility

In recent years, the focus has been on Scope 1-2 emissions, the low-hanging fruit. This focus will shift to the comprehensive 'Scope 3 – Value Chain Responsibility'. Real estate companies, which have traditionally been exempt from environmental considerations in their value chains need to reassess their practices. This trend transcends the prevailing carbon tunnel vision and recognizes climate change as a symptom of a broader problem: the predatory relationship between the global economy and nature. In 2024, navigating the complexities of Scope 3 means embracing circular economy principles, bioregional considerations, low-carbon design, and more biobased products and nature-based solutions. This transformative perspective requires a holistic understanding of sustainability, encompassing the entire spectrum of Earth's systems. Focusing on emissions over the life cycles of materials, Whole Life Carbon addresses the most significant impacts, particularly the emissions attributed to steel and concrete in construction. The European Carbon Border Adjustment Mechanism (CBAM) will be a key tool being previewed in 2024. Designed to fairly price carbon emissions from imported goods, the policy aims to curb carbon leakage and encourage cleaner industrial (construction) production worldwide. With a phased implementation, the CBAM will enter a transitional phase to become operational on 1 January 2026.

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Trend 8: Less is more

It has been realized that the relentless pursuit of endless growth through production/ consumption, comparable to the 'Hungry Caterpillar', has caused great damage to the environment. Shareholder-driven practice is giving way to sustainability as the industry evaluates its priorities. In 2024, the real estate sector will be guided by the mantra that 'zero' is no longer enough; it aims to be net positive, especially in terms of nature recovery. 'Less is More' symbolizes the industry's evolution towards a more sustainable, balanced and environmentally friendly built environment. The concept of 'function-free and zoning-free and multi-use (I don’t mean not mixed-use)' promotes responsiveness to social needs and optimal use. The economic landscape, marked by increasing housing affordability challenges, has paved the way for the adoption of minimalist, tiny homes, reflecting a shift toward simpler living. Architecture and design projects now prioritize harmony with nature, while social housing organizations promote the sharing of communities and resources. This development is revolutionizing construction methods to quickly build sustainable homes (watch out for the unsustainable 'fast fashion' homes). Existing real estate assets are modernized to minimize water and energy consumption and waste.

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Trend 9: Puzzling new patterns

In a changing era, 'Puzzling New Patterns' is necessary to redesign strategies. Inspired by Christopher Alexander's 'A Pattern Language' these innovative patterns are poised to revolutionize the real estate industry. It does not matter if but when these will gain traction. Departing from classical economic norms, a paradigm shift is underway that emphasises holistic wellbeing and sustainability. This is in line with the principles of the regeneration movement, which advocates life-centric / planet-centric environments that are crucial for the evolution of industry. Central to this trend is the decentralisation movement, which calls for a transition from isolated entities to interconnected actors and from public-private dynamics to shared synergies. This shift supports the push for local empowerment and community building, emphasizing the interconnectedness within communities. Recognizing time as a form of wealth challenges the prevailing culture of unlimited consumption in real estate practices. At the same time, the rise of decentralized autonomous organizations (DAOs) reflects a new era of collaborative decision-making, echoing Alexander's advocacy for shared patterns and collective success. Core principles, such as the commons as an organizing principle, local ownership, self-organization, and ecological freedom, guide the real estate sector toward a more sustainable future. The trend embraces a mindset of cultivating living ecosystems and encourages people to think and act less like engineers and more like gardeners. These forward-looking trends lay the foundation for a responsible, resilient, and regenerative real estate sector, where creativity and design play a crucial role in synthesizing ideas from different disciplines. The call to 'ecologize' the economy is becoming paramount, challenging the industry to prioritize regeneration over-exploitation and promote a sustainable future in harmony with the vitality of our planet.

How will these trends have an impact on PropTech for Good?

In 2023, one of our members said: "PropTech for Good is for the innovators, the early adopters. It is not a club for the masses. It's a club that wants to inspire, create movement, and push boundaries". PropTech for Good was founded on the question "What if impact is our goal, and real estate and technology are our tools?" to create positive change in the global real estate industry. The theme of previous years has been ‘Impact’. In 2024, let's push the boundaries and embrace our new theme 'Regeneration'. Sign up for our monthly newsletter on the PropTech for Good homepage and/ or contact us to schedule a discovery call to stay informed about the theme and our activities.

Survive to 2025 or thrive in a new era?

Pluto enters Aquarius in 2024. That means the beginning of a new era. A completely new era will be heralded as Pluto remains in Aquarius for good, from November 19, 2024, to March 8, 2043.

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” - Winston Churchill

The coming year is one of transitioning into a new era. The current meta-crisis is creating an uncomfortable dance in the Fourth Turning. Fortunately, we know: Pulling the grass does not make it grow faster. Some things just take time. This puts us on the cusp of transformative change. More than ever, we can shape a property sector that is better for the planet, good for business and life-changing for people. So, survive till 2025? Laying bricks in 2026? Go to heaven in 2027? Or don’t wait until 2028? Given the challenges of the Fourth Turning, we have two choices in 2024: bury our heads in the sand and survive until 2025 (red pill) or thrive until 2025 and beyond (green pill) by shaping a responsible, resilient, and regenerative environment. The choice is yours. Have a great 2024!

Author: Menno Lammers

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