By J.R. Dembiec, Brand President, Reside, a Wyndham Residence
Executive Summary
For decades, commercial real estate performance has been measured through familiar indicators such as occupancy, capitalization rate (cap rate), operating income (NOI) and lease velocity. When these metrics decline, assets are often described as “underperforming.”
Yet today’s market raises a different question: what if many assets are not underperforming because demand has weakened, but because they are no longer aligned with how people live, work and travel?
Across hospitality and residential real estate, demand is becoming increasingly fluid. Hybrid work, project-based employment, corporate relocation, lifestyle mobility and extended travel have created growing demand for accommodation that falls between traditional hotels and long-term apartment leases. While customer behavior has evolved rapidly, many operating models have not.
For asset owners, this suggests that the challenge may be less about generating demand and more about aligning existing assets with changing market needs.
Rethinking “Underperformance”
Commercial real estate has continually adapted to shifts in society and the economy. Retail followed suburbanization. Industrial real estate expanded alongside e-commerce. Today, another structural shift is reshaping the way people occupy space.
Rather than anticipating a return to historical demand patterns, investors are increasingly focused on how assets can remain resilient amid changing demographic, economic and behavioral trends. PwC and the Urban Land Institute’s Emerging Trends in Real Estate® 2026 highlight a growing emphasis on resilient income streams, strategic reinvention and repositioning assets to respond to evolving market conditions. The report concludes that future growth will increasingly depend on “innovation, adaptation, efficiency and strategic reinvention.”
At the same time, JLL’s 2024 Global Future of Work Survey found that 56% of organizations are now “hybrid adopters,” operating models ranging from fully remote to at least three days a week in the office. Rather than restoring pre-pandemic workplace patterns, organizations are redesigning their real estate portfolios around utilization, workplace experience and operational efficiency. These changes are influencing not only where people work, but also how frequently they relocate, travel and seek flexible accommodation.
Taken together, these trends suggest that the challenge facing many real estate assets is not simply one of demand, but of alignment. Demand continues to evolve, while many assets remain configured for operating models developed for a very different market.
Demand Is Becoming More Dynamic
For decades, accommodation has been organized around two distinct categories: hotels for short stays and apartments for long-term residency. Increasingly, however, customer demand falls between these traditional models.
Whether relocating for work, leading project teams, renovating a home, receiving medical treatment or embracing more flexible lifestyles, many people now require professionally managed accommodation for several weeks or several months. These customers often seek the convenience and service standards associated with hospitality together with the comfort and functionality of residential living.
This evolution creates a growing gap between how assets are traditionally operated and how customers increasingly use them.
| Traditional Operating Model | Changing Customer Behaviour |
| Hotels designed primarily for nightly stays | Growing demand for stays lasting several weeks or months |
| Apartments requiring long-term leases | Increasing preference for flexible accommodation without annual commitments |
| Clearly defined guest or resident segments | Mobile professionals, relocating families, project teams and extended travelers |
| Fixed operating structures | More dynamic patterns of occupancy and length of stay |
The issue is not that demand has disappeared. Rather, demand is becoming more diverse, creating opportunities for assets capable of responding to greater flexibility.
From Performance to Alignment
When occupancy softens or revenue declines, the immediate response is often tactical: adjust pricing, increase marketing or reduce operating costs. While these measures may improve short-term performance, they may not address a more fundamental question.
Does the asset still reflect how people choose to live today?
Viewed through this lens, underperformance may often be a symptom of product-market misalignment rather than insufficient demand.
| Traditional Interpretation | Alternative Perspective |
| Occupancy is declining | Customer behavior is changing |
| Demand has weakened | Demand has shifted across accommodation formats |
| Assets require stronger marketing | Assets may require repositioning to meet evolving customer needs |
| Revenue pressure reflects market weakness | Existing operating models may no longer capture available demand |
For owners, this represents an important strategic distinction. Improving performance may require more than optimizing operations; it may require reconsidering whether an asset’s operating model still reflects market realities.
Flexibility as a Strategic Capability
Location will always remain one of real estate’s defining advantages. Increasingly, however, flexibility is becoming another.
Owners are seeking ways to diversify revenue sources, improve utilization and increase resilience against changing market conditions. Deloitte’s 2025 Commercial Real Estate Outlook notes that many organizations are placing greater emphasis on operational resilience, efficiency and portfolio optimization as they navigate a more uncertain investment environment, describing the period ahead as a “generational opportunity” for the industry to reposition itself.
Within this context, flexibility should not be viewed simply as an amenity offered to residents or guests. It is becoming an operational capability that enables assets to respond to changing demand while creating opportunities for more consistent long-term performance.
Looking Beyond Traditional Asset Categories
The next generation of successful real estate strategies may not be defined solely by asset type, but by operating model.
Residential hospitality reflects this evolution by combining professionally managed residences with hospitality-level service and flexible lengths of stay. Rather than competing directly with hotels or multifamily housing, it addresses the growing segment of demand that exists between those traditional categories.
More broadly, it illustrates an important principle: as customer behavior changes, operating models must evolve alongside it.
For developers, investors and asset owners, the question is no longer simply whether an asset is underperforming.
It is whether that asset remains aligned with the market it was built to serve.
About the Author
Walter “J.R.” Dembiec, Jr. is Brand President of Reside, a Wyndham Residence, leading the company’s growth across upscale extended stay through its 10-year strategic partnership with Wyndham Hotels & Resorts. He previously held senior roles at public and private companies, including Coldwell Banker, Century 21 Real Estate, Securitas and Cendant Corporation. Visit: partnerwithreside.com
Sources
- PwC & Urban Land Institute. Emerging Trends in Real Estate® 2026 (United States).
- JLL. Global Future of Work Survey 2024.
- CBRE. Global Living Report.
- Deloitte. 2025 Commercial Real Estate Outlook.