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Five Reasons Why The Commercial Real Estate Future Is Made Of BS

1. We have already reached “Utopia”

Picture your ideal commercial real estate future. OK, not your ideal future, where you’re the only one with the 100% occupied  medical/retail/industrial portfolio but commercial real estate’s  ideal future. Tenants, sellers,buyers,occupiers, call them whatever  you want are all A rated, expanding and flush with cash. They happily and silently swoosh out to the suburban office parks having lattes and  planning a nutritional lunch with a Napa Almond Chicken Salad Sandwich and a side. Just thrilled that their high paying ever satisfying jobs will last forever. While we are at it. Energy is clean and limitless,the sun is shining,electric cars whisk down clean lanes of freeway,goods are plentiful and machines take care of all the dirty work. So everybody’s happy, right?

But in many ways, that future is already here?

2. We will build and develop for the new generation of worker.

Now think about how many people you know who live in apartments barely big enough to host a game of Twister. They’re not looking for a two-story house with a swimming pool and a white picket fence. What job prospects are they looking at in the next three or four years. Companies are not hiring and if they are they want to do it on a temporary basis. Certainly at a reduced rate with little or no benefits. Healthcare? ( I digress.) Maybe the new generation of workers have already realized the future that is ahead of them and are adapting to the reality….which is far ahead of commercial real estate. With a $300 netbook and a $20-a-month Internet connection they can connect with friends, get their entertainment, pursue their hobbies and stay in contact with family or co-workers. They may even work from home, if they still have one. Suburban office? Manufacturing clusters? Flex-spaces? What are we manufacturing? What are the products that are truly in demand?
3.Bricks and Mortar =Bankruptcy and Extinction?

A recent topic in the news is the” reorganization” of Borders Bookstores. I love books and hey don’t we all. But let’s look at a simple scenario. A publisher sells their book to a library so that the library can lend it out. Creating the lend/read/learn/buy cycle. That has changed and changed drastically. Why? The consumer/reader/user does not need any of the existing system to get the content. So the publishers decided to make the book destroy itself in whatever form it exists in. An ebook sold to a library will thus delete itself out of existence after a year,or after X number of times it had been lent out. This is a big source of controversy between publishers and public libraries, maybe because both of them know they’ve found the loose thread that can unravel  the system. Example:

A. Why can’t the library just buy as many digital copies as are needed for the customers, and keep them forever, if they don’t naturally degrade?

B. Wait a second. It’s just a digital file. Why not just buy one copy, and just copy and paste it for every customer who wants to read it?

C. Wait a second. Why do you need the library at all? Why can’t a customer just buy a copy from the publisher and “lend” copies to all of his friends?

D. Wait a second. If no printing and binding needs to be done, why do you need the publisher? Just buy it directly from the author.

E. Why buy it? Once the author makes one copy available, why can’t everyone just grab it for free?

Stop and think about everything that just vanished there. Skyscrapers full of publishing company employees, warehouses full of books, book stores, libraries, factories full of printing presses, paper mills. One word for this…..Amazon! Bye Bye Borders. Bye Bye Bricks and Mortar?

4.We all want to get paid.  Like a Rockstar!

We all want to get paid like Axel Rose ( Bill Bailey) from Guns n Roses and we are fighting like hell to keep it that way. Axel makes money selling his music. You make money selling your labor. At some point down the line, like his music, your skill as a human being can and will be converted to an electronic format for a fraction of the cost, rendering your skill worthless. Read that again!

Do you have GameStop as a tenant or client? The next consoles will download their games directly, no store needed. Working hard to get a video store? Same thing — Blu-ray is probably the last physical media we’ll ever see. As I sit here and write this my wife and daughter are setting up Netflix on the Wii. Working with Starbucks? What are they doing that a machine couldn’t do?  How about manufacturing?  Those jobs have already been outsourced, often to robots.

What real value does the commercial real estate industry bring to this scenario? Restriction of data? Restriction of service?  Does that really equal more value? Are clients paying for what they think is a service and data that has value? Or have they just been programmed to pay for it….to this point?

Axel’s music or his talent and skill (value) to create that music remains the same. The end user or consumer has decided that the format,vinyl,cassette,cd, dvd,mp3,didital download or free download has a different value. Your commercial real estate value or service may not have changed but the user and the value they place on it has.

5.  Only BS will save commercial real estate.

And so, are we celebrating that we don’t need to pay corporations because technology means we can get more and more of what we want for free, but at the same time, are we’re moving toward an era when corporations won’t need to pay us? Both of us are hoping that in the commercial real estate future people will, for no tangible reason, simply choose to pay. If you work with Gamestop, both you and corporate are hoping for the same thing: that people will just 1) arbitrarily choose to pay for their games, and 2) choose to get them from a human.

Hey,don’t give me that old line about, “If you do good work, society will always be happy to pay for it”! We need things,and we need other people to need the things we make and the service that we provide so they’ll be willing to give us the things we need. It’s a cycle that has been running for thousands of years, and it’s about to STOP. And so,to save society and commercial real estate we’re going to have to rely on our old friend, the invisible force that has saved humanity again and again. It’s a little thing I like to call bullshit. Bullshit is the next growth industry. People who deal in it are going to be more valuable than surgeons. As civilization advances and we build a culture where we will pay for things we can get for nothing, based purely on a vague superstition that it makes us better people. You know, the way an Apple logo will hypnotize people into paying twice as much for a product when cheaper alternatives litter the landscape. Bullshit will be the commercial real estate industry savior.

If you want to know what the commercial real estate future looks like, there it is. The future is going to hang on whether or not the commercial real estate businesses and the companies they build for/represent will be able to convince the consumer/user to pay money for things you can otherwise get for free. Thoughts?

Photo Credit:http://www.flickr.com/photos/jbrownell/

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  • Why don’t you ask residential real estate agents, mortgage brokers, financial advisors and headhunters how they do it? There are free or low cost alternatives in the respective markets for these services, and they don’t appear to be starving.

    • Chris,
      NICE! Oh but remember we are so very different!

  • How we use real estate will definitely change, but we won’t stop using it. Work is a social setting that we need – and which working from home just doesn’t satisfy. Virtual water coolers miss something we need just as much as water.

    Of course needing offices doesn’t mean we need brokers – but I’m betting that at least 50% of the decision makers want to deal with a real person. Perhaps they just want someone to BS with, but they still need a real person to tell them they are making the right decision.

    • Michael,
      There was maybe a little tongue in cheek writing going on here. Amazing what $20 Lan cable and Netflix on the Wii will do for inspiration. Am I suggesting that we in commercial real estate will not exist as a service. NO, but we need to evolve and adapt or face the reality that Borders has in front of them now.

      • Could this mean that the nature of the service that we provide changes? I think so. I believe that the movers and the shakers of CRE who are thinking outside of the box will find new ways and means. They are already those who pay attention to their online reputation, manage their social media presence, balancing online community with face to face meetings and handshakes. They are also the ones that aren’t falling for every new piece of CRE bling on the market. Their focus and passion is commercial real estate. It is continuously amazing how innovation stems from necessity. Where is your added value? You better find it…soon

  • Hey Duke,

    This is a great point, and one that Coy Davidson and myself went back and forth on a couple of months ago (http://wp.me/pO2cQ-34). Our discussion was based on the demise of the office but it is in the same vein as your post. No office space, no office brokers.

    I think the answer is what you and number of people have been alluding to for a number of years. You need to “create” to be relevant. So what is it as a broker you create that people will pay you for? If you are living off sign calls and the MLS it could get scary.

    P.S. I’ve owned an AppleTV for 3 years. I haven’t rented a video, purchased a DVD or carried a stack of DVD’s on vacation since I bought it. Things change.

    • John,
      Excellent point, and the Netflix thing was my 13 yr. old daughters idea.

  • The demand for office space is no doubt decreasing as well as retail. Retail will not retreat into a totally virtual world as there are still products one needs to buy in person.
    The BS folks are on their game already way out in front of us Duke. Just look at all the Hype especially in my area DC/Metro.
    There will always be a need for space, but that need will be far less than ever before as you correctly point out. You didn’t add in the not just the Corporate overhead for office space but the “Green” consequences which all levels of Government are creating excellent incentive’s for teleworking/telecommuting. And with current and future technology it is all becoming a reality. Add in the highly volatile gas prices which just look at what is going on today in the middle east and how oil prices have reacted, it will no longer be optional but to telework.
    But you are correct it will be how we has commercial real estate service providers adapt to rapidly changing paradigms. We as commercial brokers will need to focus on companies that will not be the dinosaurs such as Gamestop or BlockBuster. If anyone had any foresight this should have been seen coming a few miles away. Look at Walmart…why are they struggling for the last 6 quarters? They should have doing unbelievable given the economy. My answer is so many other retailers have followed their model such as Target, they are no longer unique, plus I think they cannibalized themselves. But I know I’m off topic, you won’t need BS to sustain the future, rather you will have to provide the service that is actually needed. What you are envisioning is a bit down the line, as for the time being there is still a need for expert commercial real estate people if they can bring value and service to their clients. If not see ya.