The universe of potential disruptions is too uncertain to provide a definitive list. Also it is too difficult to quantify such disruptors as a few years ago, Airbnb would have been an unheard of option.
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What potential industry disruptors should CRE investors be aware of when making long term investments?
We are a relatively new real estate fund that is looking to build a portfolio of income producing properties in the U.S., Asia, and Europe. We are looking for opportunities that can be long term holds and we are open to a variety of asset classes. One concern that we have is trying to identify potential industry disruptors that might be on the horizon. Whether it is the proliferation of services such as airbnb or self-driving vehicles, what industry disruptors do you think could impact, positively or negatively, the commercial real estate market in the next 10 years?
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I actually think this is a geographic specific question. In the US there are very different disruptions than which will be seen in other countries.
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I think that the gig economy will be the biggest disruptor in commercial real estate. Centrally planned and controlled, safe and secure multiuse communities will also be a big draw in the US as the government is handicapped in ways that planned communities are not.
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This is a difficult question and probably a good subject for a study by a group like ULI, since how people use real estate is affected by social, cultural, economic, technological and other factors. Co-working and co-living is one that will have at least some impact on the design and use of office and residential real estate, respectively. Airbnb has already had an impact on hospitality and residential real estate and as it grows, along with its progeny, will absorb a significant portion of transient business and recreational travelers. I have also seen a trend where small companies graduating from start up co-working environments are looking to lease office space on shorter terms and spend less capital on improvements to their space which changes economic models and financial underwriting for real estate. I recently saw a presentation at ULI Europe about the inevitable growth of driverless cars which, when combined carpooling and services like Uber, can drastically change the need for public transit, commuting patterns and where people choose to live and work. I am sure there are many more, and I think every serious investor has to constantly monitor these developments and be prepared to reconsider their previous beliefs and assumptions about real estate.
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The first thing to watch over is a potential correction in the economy as that will define what happens to real estate in the next decade. Next point is how technology has been removing retail and energizing the industrial asset properties. Just think of what happens when you buy products from Amazon that they send from their warehouses. Cryptocurrency will be very big after a recession. It became big 2008, it will come again after our next recession. As a benchmark, look at the 10-year bill for guidance of what type of return to expect from your investments.
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