The "new" norm driven by technology

The new norm driven by technology

The real estate industry is grappled with the question, what will be the new norm post Covid?  When will workers return to their offices in the dense urban centers?  How would street retail survive and evolve? Are big cities like NYC or SF dead? 

The urbanization trend of human beings has been ongoing for the last 500 years.  By 2050, its estimated that roughly 2/3 of the global population will live in the cities.  It's hard to imagine that this exponential trend will cease and disappear.  The vaccine is being rolled out and people will soon remember the fun, the culture and the ideas that permeates in the cities.  With the normalcy in sight, I hope the trend will resume from its temporary pause, just as it did many times in history.

But there will be a "new" norm, and it will be driven by technology.  Technology has been a driving force that transforms the world in a way that's unseen in human's history.  We saw how Amazon changed the e-commerce, Uber did to our daily commute, and Tesla to the car industry.  If Covid has any effect on this disruptive force, it probably accelerated the adoption of technology in our lives.  

Think Zoom.  An online meeting platform that went public early last year.  Its market capitalization is over $100B now. To put this in perspective.  I work for the first and one of the largest multifamily REITs that went public in the early 90's.  Its current market cap is roughly $20B.  

Autonomous vehicles will be on city streets any day now, electric charging stations are slowly popping up in the neighborhood, prefab homes are being revamped using 3D printers, vertical farms are trickling in underutilized basements and garages, on-demand co-working pods are eyeing empty retail spaces.  As technology continues to bring disruption to the RE industry, is the world prepared to embrace the new norm?

Comments

Post a Comment

Popular posts from this blog

Case study - boutique condo development sold out during pandemic

Image
New York City was hit hard by the pandemic.  Hotels are going through foreclosure, office experiences record vacancy, street retails (sometimes block long) are still empty, rental apartment rents dropped 20-30%, and people across all ages are leaving the city.  Everything that you see on TV or on the street is quite bleak.  You wonder if the real estate industry is doomed in NYC.  As a real estate developer, I was born optimistic and here is a bright spot and great example of New York Strong, an 11-story 15-unit boutique condo development in Chelsea that was sold out in less than 12-month during the depth of the pandemic.   Total number of units 15* Sale launched February 2020 Last unit sold January 2021 Average unit size 2,570 SF Average sale PSF $2,320 Average sale price per unit $6M Total sellout (11 units only) $65M Acquisition $4M Estimated construction (soft/hard/financing) $33M Total development cost $37M Profit* $28M Equity multiple (assuming 50% le...
Read more

Real estate value-add strategy - Part 1

Image
  I remember when I first started in real estate, people talk about value-add deals all the time. It all sounds really cool but I was clueless. Well, not exactly, I know you can buy fixer-upper, renovate it and flip for profit. But I wasn’t sure how it works in the apartment business. I spent a couple of months going through value-add deals on TheRealDeal (going back two to three years). The analysis got easier once I passed the 50th deal and when I hit the 100th deal, I think I figured it out! By the way, that’s another topic I can hardly find any good articles on the web. Maybe it’s too simple, no one bothers to write it up. Here is what I came up with and hope it can help someone having the same question like I did. In a nutshell, you find a building with units that can be renovated to achieve higher rents and/or enlarged using available air rights to generate additional income. Once renovation or enlargement completes and units are leased up, you will refinance the b...
Read more

What self-driving cars mean to real estate industry

Image
Self-driving vehicles are coming sooner than you think.  Imagine you can just hop on the car, enter an address on your phone and the car will take care of the rest.  Well, that might become true very soon.  Tesla has offered electric vehicles with semi-autonomous Autopilot feature for a few years now.   Waymo opened its ridesharing program Waymo One using autonomous cars to the general public in Phoenix last October.  Driverless cars from Nuro are already on the road as delivery vehicles in the Bay area starting last December.  As it gradually turns into an inevitable reality to our life, I cannot stop thinking what all these mean to the real estate industry.    My thoughts took me back to the first class of Commercial Real Estate taught by Professor David Geltner at MIT.  The classic real estate theory about urban areas is mainly based on the Monocentric City model.  The model explains that any real estate value is the sum of three c...
Read more