Monday, November 16, 2015

Why Real Estate Must Adapt to Fast-Changing Technology

The technology sector, which tends to advance rapidly in game-changing shifts, has long provided a glaring contrast to the real estate industry, which is based on long-lived assets and evolves slowly. Full Article

But that dichotomy will soon fade, according to a panel of real estate and tech leaders at ULI’s Fall Meeting in San Francisco. Along with the rest of society, real estate inevitably will be transformed by the ascendance of e-commerce, innovations such as driverless vehicles, and the rise of a new, sharing-oriented economy in which players collaborate to improve efficiency, panelists said.

The industry needs to alter its business model in order to serve tenants whose needs are different than they were in the past, said Patrick L. Phillips, ULI global chief executive officer, who led the discussion. Real estate executives need to develop more flexible leasing arrangements, which would enable companies to scale up and down to adjust to market changes, he said. The industry also needs to look at building more flexibility into building design and land use. And given the rise of collaborative relationships in the digital economy, real estate developers should look at developing closer relationships with tenants—possibly by becoming equity partners in their businesses.