by Zoe Hughes
June 14, 2016

The Biggest CRE Disruptors Aren’t What You Think

Investment managers are developing deal strategies that include demographics and technology in order to exploit structural shifts in society. But those strategies could be completely wrong.

Talk about disruption within commercial real estate and most investors think of offices outfitted with slides and beer on tap, and millennials with smart phones glued to their hand.

However, widely held assumptions about the impact of demographics and technology on real estate investing might be completely wrong, according to experts on Privcap’s real estate roundtable forum taking place today in Los Angeles.

During facilitated roundtable conversations, Privcap asks whether the real estate industry has overestimated the impact millennials will have on the asset class, revealing that 18- to 34-year-olds are poorer than any generation before them, earning $3,472 a year less than previous generations and accumulating significantly more debt, not least through student loans.

 

Indeed, many millennials have little idea of their financial situation, with a Citizen Bank survey in April revealing that 45 percent do not know the percentage of salary that went to paying off their loans, 37 percent do not know the percentage rate of their loans, and 15 percent do not know how much they owe.

The roundtable forum—which also features keynote speakers including Jonathan Epstein of GreenOak, Theodore Karatz of GTIS Partners, Jeff Friedman of Mesa West, Russell Munn of Lowe Enterprises, and Mark Tronstein of Andell—also challenges the concept of the 10-year office lease, revealing that by 2020, 43 percent of the U.S. workforce could be freelancers, giving rise to a wave of co-working spaces.

 

Freelancers, though, aren’t the only users of shared workspaces, with CBRE reporting in its 2016 occupier survey that 40 percent of corporate commercial real estate executives were considering or are already using shared spaces. That same report reveals that cost escalation is the primary concern of corporate executives, who are looking at space efficiency as a way to cut costs, followed by lease negotiations and winning shorter lease terms.

Widely held assumptions about the impact of demographics and technology on commercial real estate investing could be completely wrong.

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