Deloitte FSI Predictions: What’s on the horizon for real estate?

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Jim Eckenrode, managing director, Deloitte Center for Financial Services (L), Monica O'Reilly, Vice Chair, US Financial Services Industry Leader, Deloitte & Touche LLP (R) (Credit: Deloitte)

Outlining some of the most significant emerging trends across banking and capital markets, insurance, investment management, and real estate, over the next three to five years, Deloitte has published its 2024 Financial Services Industry Predictions report.

The consultancy predicts retail investors may soon rely on Generative AI for financial investment advice and Generative AI is expected to magnify the risk of deepfakes and other fraud in banking. Providing insurance coverage for AI may be a blue ocean opportunity.

“The seismic shifts we will see in financial services as a result of emerging technology and innovation will likely be transformative and provide new opportunities for growth,” said Jim Eckenrode, managing director, Deloitte Center for Financial Services, Deloitte Services LP.

The consultancy also predicts among others that the average monthly cost of insurance for a commercial building in the US could increase from $2,726 per month in 2023 to $4,890 per month in 2030, at an 8.7% compound annual growth rate.

Another trend included in the report that is expected to shape the financial services industry, is the following: The US real estate industry workforce faces a retirement cliff. Compared to other financial services and commercial industries, there is an impending retirement cliff in the US real estate industry, which could create a leadership gap and a loss of institutional knowledge. Deloitte predicts that 59% of existing CRE executive leaders, or around 761,000 people, will reach the age of retirement over the next 10 years.

As of 2023, 13% of the total real estate industry is already age 65 or older, compared to only 7% on average across all industries, and 5% in other financial services industries. Leadership roles in real estate hold an even larger share: 25% of real estate employees who currently hold senior leadership positions or C-suite titles are already over the age of 65.

Real estate organizations should act on the impending retirement cliff now and prioritize fortifying their talent pipelines. This will likely require proactive board-level succession planning, attention to growing and developing younger leaders, and investment in the right technologies that can identify or fill in where potential control failures may exist should key stakeholders retire. Collectively, these efforts can help the industry move forward and bridge the transition to the next generation of real estate, the report said.

“As financial services firms face an ever-changing landscape, they should think about what’s on the horizon,”Monica O’Reilly, Vice Chair, US Financial Services Industry Leader, Deloitte & Touche LLP stated. “Market pressures and emerging risks as well as new growth opportunities will shape business strategies, and financial services firms should prepare for that now” she added.

(Source: Deloitte)