May 31, 2019 by - Hana LaRock

When Big Companies Need Even Bigger Places to Operate

Over the last year or so, the real estate market has seen a gradual decline in residential housing construction. While this has been somewhat worrisome for people who work in the industry, others have gone about their business, looking for bigger fish to fry. And, speaking of bigger, while residential housing construction is going down, the construction of larger, commercial properties is rapidly increasing which could be disrupting the status quo. Whether or not you are selling this type of real estate, it could be affecting you, anyway.

The Increase in Technological Advancement

There’s no denying the fact that technology has impacted real estate in so many ways. Agents have been discussing the possibilities that technology can provide for the industry, but also, what it can do to hinder it. Whatever side of the argument you stand on, it’s clear that the rise of technology itself has led to massive real estate commercial construction.

Whether it’s Amazon, Tesla, Google, or IBM’s new $2 billion investment for an A.I. hub in New York, infrastructure that has the capacity to support these massive companies have been popping up left and right. And, as long as there’s investment around to support this kind of growth, we will continue to see this mass construction. It’s important to remember that when this happens, it can impact the surrounding neighborhoods as well, causing rent and home prices to go up, but also, by bringing more businesses and development to the area overall.

Technology has also led to the growth of tech cities and urban planning. With that, there needs to be somewhere for all this digital space to go. Due to the amount of data produced every second on the internet, data centers and server facilities are constantly being constructed to support the continuous pile-up of information. These data centers are huge, taking up an overwhelming amount of space at more than a million square feet.

Life Science Innovation

According to an article by Forbes, the increase in life science innovation has directly influenced real estate. Companies who work in this industry need to find ample space where research and development can take place. Technology, biotech, and pharmaceutical companies are all working together with startup companies and incubators to bring new discoveries and results to medical and science fields, and eventually, the people. 

While we are seeing the nearly 30% increase in biotechnology research employment rise across the entire country, this kind of growth has been more evident in some key areas. The cities in which construction for life science innovation has been seen the most is San Diego, Boston-Cambridge, Indiana, and Chicago.

In some of these cities, there are enough skilled workers, but not enough space. For instance, in the Boston-Cambridge area, over the last ten years, the demand for additional lab space has increased dramatically, while the current lab spaces have been filled to the max. This is why there is a 2.5 million square foot demand for additional lab space here alone.

Industries are Starting to Come Back to the U.S.

Finally, many company headquarters and factories that set the precedent for the American Dream are now making their way back to the U.S., such as Ford. While many warehouses and buildings stand abandoned in some of America’s major cities (or, they’ve been bought out and converted into other spaces), others are moving back in, thereby sparking the search for enough space to get the job done.

In fact, according to CNBC, Ford is investing $1 billion to add more to their plants currently based in Chicago. Of course, while this will also lead to new jobs, these imposing constructions themselves may cause a wave of influence in the surrounding area, which can be an interesting adjustment for real estate agents who work there.

The Bottom Line

Even as the world continues to prioritize convenience as people move more of their lives to the online space, physical spaces are still very much necessary to support the kind of research, development, and growth in technology that we love so much.

In terms of real estate, this can mean a lot of different things, but ultimately, even as housing construction goes down, commercial real estate will continue to rise at an alarming rate, and on impressive scales. While there are benefits to this – more discoveries, more jobs, more support for the sciences – it’s important for real estate agents to consider all the possible repercussions.


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