ARE THESE OPPORTUNITIES OR THREATS?
IT’S A MATTER OF PERSPECTIVE, AND THERE WAS PLENTY OF IT AT THE UNIVERSITY OF MIAMI REAL ESTATE IMPACT CONFERENCE.
BY JENNIFER LECLAIRE

Technologies and business models are evolving at warp speed, but some see opportunity where others see threats. It’s a matter of perspective, and there was plenty of it at the University of Miami Real Estate Impact Conference.

Hosted by the School of Architecture and the School of Business Administration, the first panel at the sixth annual event was “Finding Opportunity in Disruption.” Natalia Martinez-Kalinina, general manager of the Cambridge Innovation Center, a real estate services company that bills itself as a “community of entrepreneurs,” moderated a discussion exploring how the commercial real estate industry can partner with, and profit from, firms like Amazon, Bonobos and WeWork as they continue to revolutionize their industry segments.

Panelists included: Bob Gray, partner in Rockwood Capital LLC, a real estate investment company managing more than $6.5 billion of equity commitments from investors; James Bry, executive vice president of development and construction at Seritage Growth Properties, a self-managed REIT with a portfolio of 235 properties and 31 joint ventures; and Michael Gross, vice chairman of alternative workspace provider WeWork.

When Martinez-Kalinina asked the panelists which metros are most on their radar, the answer ultimately was not surprising. The old real estate adage, “location, location, location” permeated this aspect of the discussion.

“There has always been disruption in the industry,” Bry said. “Department stores used to be in the downtowns in the 1800s. They moved to the suburbs in the ‘60s and ‘70s. There has always been bankruptcies. If you go to good centers, you see a lot of people with bags. Retail is about the entertainment as well as the shopping experience. We’re all still social. The majority of us want to get out of our house and do things. That’s not going to change no matter what generation it is.”

Gross agreed location is critical. He explained how massive societal shifts are the underlying driver of WeWork’s growth—and Millennials are largely driving that behavior. He also pointed to the movement toward urbanization as a disruptive factor impacting real estate, and noted high-IQ, high-momentum cities are attracting the modern workforce, with almost half that modern workforce classifying as Millennials.

“When you look out, by 2030 60% of the population will be in urban centers,” Gross said, noting most core cities today are expensive, which is pushing the workforce out further and further. “We look at density and access to transportation, and buildings that provide great light and energy … a lot of secondary cities, like Austin, are starting to populate and we can’t get buildings up fast enough.”

Gray sees many retail centers working to bring the supermarket and gym right to the mall. That makes location more important than ever in a retail world that’s seeing increasing e-commerce disruption. “Real estate is occupied by tenants and tenants need employees. We are focused in on areas that are conducive to growth,” Gray said. “San Francisco is a wonderful exporter of talent to other parts of the world, because it’s too expensive for people to rent apartments or buy homes. We’re focused on Boulder, for example, because Google is going from 400 to 1,500 employees right next door. Value of talent is what’s driving location today. In certain locations rent is not a factor, not when the value of the talent can change industry.”

The panel also touched on hotels, largely concluding that the hotel industry is crowded with brands trying to offer an experience. But Gross bemoaned that’s a “hard game to play” when you are just trying to be cooler than the next guy. Disruptive business models like Airbnb may offer a more personal solution for leisure travelers, but with meeting rooms and other amenities, hotels still have a leg up with traditional business travelers.

“We are looking at health and wellness from a product perspective,” Bry said. “It’s going to be a critical component of meeting the needs of this generation. That’s not a fad. It’s a permanent shift.”

Martinez-Kalinina concluded the panel with questions about technologies like self-driving cars, made visible through Google’s efforts. With infrastructure failing to keep up with density in major cities, some see self-driving cars—as well as ride-share services like Lyft and Uber—as part of the solution. In the long-term, these disruptive services could help cities like Miami, the panelists said.

 

Spring 2017
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