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[ Digital Nomads – Transitioning the Real Estate Sector? ]

#ConfidentInsight, EN 09.03.2022

 

MIPIM, the world’s largest real estate event, is back in mid-March in Cannes after a 2-year face-to-face hiatus, so we thought it timely to take a look at one aspect of the fast-changing industry, as the world slowly comes out of its prolonged hibernation. 

Remote working has transformed the way that we, as employees, as consumers, and as people have had to lead our lives. This has had profound consequences on corporate life and also the real-estate market. The term “digital nomad” is one that has increasingly come into corporate phraseology over the last decade. Described as someone who earns a living and performs work remotely, the term has moved rapidly into the mainstream, being a way of life for entrepreneurs looking for a better work-life balance, Due to the ongoing global situation, it is also a priority for corporations in managing the most effective means of employee productivity, and has led to a rush for companies to accelerate their digitisation infrastructure. In the US alone, nearly 11 million people count themselves as corporate nomads (approx. 7% of the working population), a rise of 50% since 2019. 

Covid-19 has dramatically changed the attitude towards remote working, and how practical it can be for employees. There are now pros and cons towards the idea, partly because companies have seen that it can be effective. However, after two years of forced retirement into homes, there is also a great desire for personal contact as we accept that social interaction is so important, not only externally towards clients, but also internally for effective engagement. 

It is predicted that almost half of all US & UK workers will be working remotely in a few years, and even pre-pandemic, 30% of all workers across Sweden, Finland and The Netherlands were working remotely. 

With Eastern Europe in three of the four most popular destinations globally for digital nomads (Singapore being the other), the region is recognised as a great destination, due to good wifi, few internal borders, and affordable accommodation. 

Now that Covid-19 restrictions are slowly easing, the trend appears to be continuing as Europeans reject a traditional office routine after a year and a half of remote work, where everyday life has transformed and adapted. .

Eastern Europe is picking up on the accelerated popularity of the sector, with Estonia now offering digital nomad visas to remote workers looking to relocate.The visas streamline the process of relocating, on certain conditions. Croatia and Georgia are also offering their own visas, and Romania followed suit in December.  

Belgrade is 4th overall on Best Countries to Live In for Digital Nomads. Slovenia and Hungary above them (Singapore being the other). BelgradeGetsDigital a new digital platform to attract nomads. Digital nomads bring international experience that is important for the development of local economies. Attracting digital nomads with expertise is a competitive race that countries within CEE have targeted, with know-how in local tech ecosystems. 

So how does this shift affect how the real estate market works?

2021 was a record year for European real-estate investment, with approx. $359bn flowing through commercial real estate alone. To understand how digital nomads are impacting the real-estate market, we need to take a bottom-up approach, from how a property is advertised and leased. With apartment bookings in this market coming primarily from abroad, transactions will be sight-unseen. Therefore, the leasing process is crucial, based around video tours, verified testimonials and ratings. This, of course, consequently impacts how real-estate companies need to communicate to prospective clients. 

It goes without saying that landlords and agents are increasingly having to leverage technology to facilitate the leasing process. Propertytech is a fast-growing area within the start-up scene, with companies across Europe offering innovative solutions to the real-estate market. Bright Spaces (www.brightspaces.tech) is one such company, identifying the need for technological workflows to better manage the tenant/broker relationship both in the retail  and commercial sector. 

More traditional real-estate companies have also grown from this market, with a focus on new real-estate companies creating community and experiential environments, combining work and leisure. 

Zoku, an Amsterdam-based company, has capitalised on abandoned hotel space left from the pandemic, to create a hybrid of hotel, office and apartment space within one communal area. Roam, in the US, has also leveraged this move to replace traditional hotels and apartments with co-working hubs and facilities. Flatio and NomadX, two European mid-term rental platforms which have seen considerable growth over the last 18 months, have recently joined forces to better position themselves against AirBnB, who have seen the market move into the mid-term rental market. 

There is a counter-argument to the short- and mid-term rental markets, however. Some have viewed the entry of companies like AirBnB into local economies as damaging, since these markets drive up rental prices in destinations to ridiculous levels, which cause damage to local economies, and drive natives out. Some see that the mid-term rental market will do the same, since much of the digital nomad community is from abroad, from better-off economies, and will drive prices up, without contributing much to the local economy or community. 

Whatever the opinion, it would seem that the digital nomad phenomenon is here to stay, and the mid-term rental market will accelerate rapidly. MIPIM’s lead strapline for this year’s event is “Driving Urban Change”. The digital nomad sector is one that will have a major impact on urban real estate in years to come.   

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