Commercial Real Estate Data As A Hedgeable Commodity.
A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment. In simple language, a hedge is used to reduce any substantial losses/gains suffered by an individual or an organization.
A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, many types of over-the-counter and derivative products, and futures contracts.
Public futures markets were established in the 19th century to allow transparent, standardized, and efficient hedging of agricultural commodity prices; they have since expanded to include futures contracts for hedging the values of energy, precious metals, foreign currency, and interest rate fluctuations.
I’m not crazy.
It’s going to happen.
The market will demand it.
Transparency and standardization.
Transparency and standardization of the data available in the commercial real estate markets.
The transparency and standardization of the data available in your commercial real estate market.
Yes, your commercial real estate market.
A building owner in a major city has vacant space. Let’s use 250,000 square feet as an example. He puts that space on the market at $30 a foot. It sits and sits. He looks at numbers for the market. It’s trending down maybe. How much longer will it sit? What if he the building owner had the ability to check the stability of the market daily?
What would that take?
1. A marketplace for the futures contract to be traded.
2. Traders willing to “speculate.”
3. A defined index of the market price. ( How that is determined I will keep to myself for now.)
What does this do?
Simple stuff really.
It defines the supply and demand sides of the commercial real estate market.
It will help create a liquid and efficient market.
It also helps the marketplace bear the risk.
And so why hedging again?
Why jump this far ahead?
It’s not jumping ahead at all really.
We are now at the point that the data will actually allow it.
Ironically the systems and structure we need already exist.
Think about the NYSE, NASDAQ or The Chicago Board of Trade.
It’s all there.
Staring right at us.
We do have a few major steps to take but…… It Will Happen!
Want to know a little secret?
Someone reading this right now has already been working on it. Kinda!
So yes we will soon have…