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/

Duke Long

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