Are we heading towards the end of ownership? The past decade things have totally changed and this session really juxtaposed the New “Shared/Digital” Economy versus the Old Economy. New philosophy about the use of space and as owners they need to be able to adjust for these changes.
- New Economy is new real estate users. What is the vision and what are the new requirements for space?
- A Shared Economy is really about learning to consume in a new way. This includes the sharing of resources and utilizing the internet to find smarter ways to reduce overhead. There have been some push back to organizations like Airbnb from Hotel Operators for example as they feel they are competing for the same clientele. The response to that is that they need to understand the motivations of why people use the service. And the reason that this service has grown so much is because there is a need and demand and desire to “Live like a local”. Airbnb is successful because they offer a wide range of options for people. This generation wants options with everything. Uber has become so successful as well because in cities like San Francisco, there was a direct need for people to get around better.
- In terms of office space we heard over and over again that tenants want flexibility. This means landlords are going to have to shift to be able to offer the type of product that they want, and they want variety. In addition to that, landlords are going to have to be able to agree to more transparency and shorter lease terms. The types of tenants that are expanding in today’s market are primarily tech firms. The traditional heavy office users like law firms and banks are not taking on more space.
- Fred Siegel from Beacon Capital Partners outlined that we need to embrace these changes but there are some challenges. Short term lease deals make it hard for owners to get financing and to complete valuation for properties and investors. But they have started to offer spec suites for short term lease deals. He also mentioned that their firm is aware that people want to live and work in the same urban environment. These tenants bring excitement and allow other tenants to want to come to your property. More people are using public transporation so they try to purchase properties in areas that reflect this.
- Another point was that a shared economy requires trust to do that. Technology can assist with this by background checks and profiles. But with the wrong data in the wrong hands there are security concerns. Trust and transparency and flexibility is what is the most important, what we need to learn to be competitive in the future.
There has been a huge shift worldwide about how people perceive ownership. Currently is it more important to have experiences than to own things. There is a shift to experiences especially among the younger generation. Shift in the way people perceive the value of owning things. Technology and the shared economy allows us to share experience with people, which people value.
- The growth is coming from the tech companies and the shared economy. How are you going to do that? There is greater transparency – share the underwriting with the tenant. This has never happened before over 200K sq. feet. Beacon Capital knows they are in the right cities but they need to shift on the way they do deals. These tenants bring excitement and allow other tenants to want to come to your property. Net Income over time. We have to work with the tenants to make it work.
- Owners need to understand where tech tenants want to be. Community and network bring a lot of value.
- Shared economy is about unlocking potential for spaces, services or goods that are underutilized. Share the drive with you with Uberpool. Fills a need?
- How do you place trust and transparency on your model? People are looking for meaning and what we do makes it possible for them. Personal level people are looking for. Its meaningful and you go to this home and share something. Flexibility and money to our clients. The meaning comes from the sharing.
Energized the inventory – shared economy has energized and preserved old stock. The companies that were dealing with are very well capitalized which is very different than the dot com tech cycle. 3 rounds of successful funding. Take space as they need it and as they grow. Unemployment rates are high in certain. How do you fund your start ups are with renting out hteir appartments. Is this taxable? Increased the level of transparency.
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Liz Henderson is currently studying at the University of San Diego, working towards a Master’s Degree in Real Estate. Liz is also an official curator and blogger for MIPIMWorld.