New Real Estate Frontiers

The real estate industry is in a constant state of flux.  It is a cyclical business and there is constant change in who the players are, where the capital comes from, where is development taking place and what is getting built.  The forces of change reflect the large forces shaping the world economy reflected by economic activity at the local level.  Today, in the US some of the large forces include the aging of the population, the expansion of service industries, the decline of manufacturing, and the thrust toward automating life through the marriage of machines and artificial intelligence.

You can see the real estate community reacting to these forces by watching where the money is flowing.  There is capital available for any kind of development attached to an aging population, such as assisted living centers, retirement communities, condominium developments, and special purpose medical facilities (like ambulatory care centers).  Money is also flowing into new office construction, especially in more attractive urban centers, that cater to the software development and professional service firms.  There is little money flowing into manufacturing, although existing buildings are being purchased, renovated, and often repurposed.  The real estate community has yet to come to terms fully with the automation of life, although web based selling is a huge driver of new warehouse-distribution developments near urban centers.

Demand for real estate remains the same in that people want shelter, a place to work, a place to receive personal care, a place to eat and a place to shop.  What is changing is the way the demand is being met.  The demand is for new and innovative ways to meet the traditional needs.  In residential, it is a combination of ditching the home in the suburbs and downsizing to a more manageable size, becoming part of a community, and either living the life of the young and restless or gaining the support of services needed by aging bodies and minds.  In commercial space, specifically offices, it is again about becoming part of a community in a collaborative work environment where both employment and social functions are bundled together in one place.  And in dining and retail, the experience is in the extreme– it is either the impersonal experience of shopping online with food or goods delivered within minutes or days to your door (Amazon), or the very personal experience of shopping in special places that offer both the opportunity to find unique things and the experience of being among like-minded patrons, who are searching for the same special things (Whole Foods and farmers markets).

In the dining and shopping arenas there is a struggle between does it comes to us or do we go to it.  Do we order online and wait for delivery or do we go to that special place to take in the crowd and see, touch and smell what we want before we buy.  Technology is making either choice manageable. In personal services, we still tend to go to the service provider, but is that about to change, or at least come closer to where the demand is?