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Technology. Commercial real estate market killer?

Is Technology Killing The Commercial Real Estate Market?

There are the oblivious signs of the Commercial Real Estate Crisis. Price structures on the decline, lack of overall demand, job losses or layoffs, oversupply, tight lending practices or no lending at all for that matter. But is there an underlying factor that may contribute just as much and is not readily recognized?  I think it may be Technology

There are some estimates that 137 million workers world wide Tele-commute. Companies looking to cut cost naturally look at labor savings first. Telecommuting saves on office space, supplies electricity, water usage, parking, lost productivity, ie: long lunches and checking scores (Sigh… Da White Sox) on ESPN.

How many of us have bought any number of items via Amazon, E-bay or other retailer? I realize this may also be a generational thing; some still want to go into the actual store. I personally have purchased my last two cars online site unseen. One was shipped to me, the other I flew into the dealerships city. They picked me up at the airport providing a nice lunch. I calculated thousands of dollars of savings. Yes, I still own both cars and they are in excellent shape. What about supporting local business? Hey what about creating a relationship as a customer? What Loyalty? How many old dealership buildings are up for sale in your area?

How about the instant Mobile world we live in? Texting, Instant Messaging, Video, Voice Mail, Pictures etc. We can work any where at anytime we want. I receive and probably create some of the most interesting (to me) and important business related info when I am not in my office. Can you read any business related material and not see something that says Mobile is the next ..Whatever?

What about the growth of the internet in general? Think back five or ten years. Think of the applications and online programs that exist. In Commercial Real Estate we have a product called Zip Forms. If I have access to a computer or my phone for that matter, I can create and send an offer or document from anywhere at any time. How much easier is it to do anything for work and not be at work?

Do people really need someplace to work? People do need someplace to live at least most of us do. Will people miss out on the Culture or Synergistic environments that make a “Good to Great Company?” Do we all just meet at Starbuck’s or Panera in jeans, sandals and three day beard to rule the world?

Technology advances at what some times seems a daunting rate. I think that the commercial real estate market will adapt some of this fancy tech  to not only survive but thrive. Not, I am afraid without some serious fallout.  Slow to adapt,not recognizing the simple uses of technology,sticking our head in the sand and just hoping it will all go back to the way it was!   We all know that mentality  leads to  obsolescence. What effects do you see technology having on your market? What are you doing to adapt?  What do you see as the future of technology and the commercial real estate market?

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  • Fantastic article. I bought my last car sight unseen as well. I always check Amazon, Google, etc when I want/need a new gadget and rarely visit a store like Best Buy. As a real estate appraiser, it doesn’t make much sense to have a commercial space – almost all of business is done on-line. You asked – Will people miss out on the Culture or Synergistic environments that make a “Good to Great Company?” Check out the article on the Oatmeal – Why working from home is both awesome and horrible – http://theoatmeal.com/comics/working_home

    • Bryan,
      Checked out the link and…there ya go!!! It should be interesting to see the shifts and changes coming for CRE in the next 5-10-15 years. I”m getting my popcorn and hanging on for the ride!! THX for commenting.

  • Gene

    Working from home and exercising my server at work…

    The impact of technology on commercial real estate? I can drive less than 20 minutes and find four data centers that are presently under construction here in Silicon Valley. The vacancy rate of about 5% is about to increase in this segment but probably only for a short period of time. We expect that 50 MW (megawatts) will be delivered over the next 18 months to a market that has very little Tier IV space that is in highest demand. Buy stock in Digital Realty Trust or Equinix (if you can stomach the P/E ratios).

    Gotta go, UPS is here with my shirts and I expect our Safeway.com delivery any minute.
    -Gene

  • Matt Horner

    Yes I also bought a car that was shipped from 200 miles away and personally hate the mall. But Brick and Mortar will always be with us. Much of our experience has changed for the better and taylored to our new tastes and way of life. No longer do you just go to the store, you go to the Lifestyle Center and spend all day with a picnic by the lake, an Imax movie and a dinner at the cafe. Yes all along checking email on your iphone and texting your staff. The future is here.

  • Michael Smithing

    Retail will have winners and losers from technology – it already does.

    Industrial may be a net winner if we stop storing goods in retail units and deliver them directly from warehouses. Or do we deliver directly from the factory – which means the factory has to be closer to the end user.

    I’m most interested in offices. We just took an area that had 13 pre-crisis desks in it and made it a “cafe” area where staff can meet and interact. We still need some furnishing but initial take-up has been good. It has certainly increased communication.

    I’m pretty confident that we will still use office space for decades to come – the question is what that space will look like. We need the vision and leadership to advise our clients on what type of office space to build for the next generation and we need to do it quick because the change is upon us.

  • Not to indulge in shameless promotion but this was the hardest post I ever had to write so I wanted to share it. http://wp.me/pO2cQ-34

  • John,
    I spoke at a commercial real estate conference last year and asked a room of 75 people how many had heard of Seth Godin. I think 2 raised their hands. Some of his stuff you have to admit is thought provoking. How many beeper salesmen are there out there today? Tech is making us adapt, Period. “What’s missing is #7… someplace to go. Once someone figures that part out, the office is dead.” The office or workspace will always exist in some form. The question of where that place will be…. ask Godin!!!

  • Duke,

    That is the true value of people like Seth, not that he is correct, but he makes you think.
    Did you see Coy’s comment and subsequent post? I had a lot of similar feedback to this after I wrote that post but Coy was the only one bold enough to commit it to text. You can tell from my comment to his post we don’t quite see eye-to-eye. I will say if I didn’t think office space had legs I would already be the condo conversion specialist (or something of the sort).

  • Pingback: Commercial real estate conversations | Duke Long()

  • I love working from home and being virtually connected to the world. I also schedule enough organizational meetings, face-to-face networking, and road trips (property drive-bys, drive-throughs of multifamily prospects, and “shopping” as if I were going to be a tenant ) so I don’t get cabin fever. I can work in the middle of the night if I prefer. It’s the height of “management by objectives” instead of management by time-clock.

    I also partner with other brokers both in our group and out of state (and now, even Canada) so there is a constant flow of planning and executing by phone and email as well as face time locally. If I need a nice conference room (I hate meeting at Starbucks or Wildflower Bread Company — too distracting — restaurants are for eating and relaxing), our brokerage has 3 handsome ones of various sizes and other KW brokerages make their conference rooms available to KW agents so there is always a place to “meet in the middle” anywhere in the county, if needed. My laptop goes with me.

    That being said, I give out my cell phone number only on a “need to know” basis. I have a bit of a hearing problem and using my land line with a headset helps. I don’t text, and I don’t receive or send email on my smartphone — which I wouldn’t be without. My hours at my desktop are enough intense focus on an electronic screen that any more emailing would get stale. And I don’t want to be constantly tethered to my work. I value my uninterrupted thinking time.

    As for retail space, I consider myself to be “Sally Shopper” and will always “let my fingers do the walking” on my keyboard to scope out what is available and where. Sometimes the land-based retailers do not carry items or sizes or models that are available online. Shipping is often free to the store and returns are easy. I save energy by combining a pick up with a trip to the grocery store or other errand. How anyone could order produce or meat online without seeing, feeling, and sniffing it, I don’t know. For large items, like computers, it is so much easier to compare the capacity, specifications, and prices online. Then there are retailers like Trader Joe’s where their store brands are so unique that there is no way to duplicate items and prices on the internet — unless TJ’s starts to compete with itself online.

    I comparison shopped for my car online, told a local car broker what I wanted, what I expected to pay for it, and she got me a great deal. I never set foot in a showroom or had to use sales resistance or negotiate or set boundaries with sales people. But the car came from a local land-based dealer.

    I will probably be the last one to buy a Kindle. I buy and re-sell books for pleasure at a couple of great used book stores. If I download a professional article of any length, I prefer to print it, take it to “my” living room chair, and read with pen in hand to mark it up with comments. Same thing for reading, editing and proofreading critical documents – LOIs, financial reports, contracts, etc.

    Beats all heck out of working for someone else in a structured office setting. Oh, yeah, we no longer have children at home and we have no pets so distractions are minimal.

  • George

    Duke-

    I consulted my Retail Strategy Guru regarding your premise. She’s my teenage daughter. She cut right through it with a honking sound and this reassuring counsel: “the writer (Duke) is a man, shops like a man, thinks like a man, is like the vast majority of commercial brokers– a man. …And what’s the spend-per by gender? (she’s pretty savvy). Women power-shop recreationally, you can’t do that online. Maybe not 70’s-era malls for the future, but physical shopping venues – absolutely. You gonna eat that? (we were having breakfast).” Consider yourself schooled.

    Sadly, she has no comforting words for the Death Of Office As We Know It.

    BTW, you da man; your blog features at the top of my feeder list.

    Cheers,
    -George

    • George,
      Wooord to your daughter! I have two teen-age daughters BTW!…and they are ALWAYS right. Thanks for the comment and the opinion!