Technology: How Will It Impact Your Investment Plans?
Whether you're experienced in the world of commercial real estate investment or just getting your feet wet, you probably already know that success means you must be aware of current trends and capitalize on them.
Doing things "the way they've always been done" means more often than not that your experience will be less lucrative than you'd hope.
Technology Is the New Norm
Just as in other fields, technology plays an increasing role in real estate investing. However, it's the the way it affects your business dealings that is the important thing anymore. Connectivity has made business transactions cheaper, faster and easier, but technology is also changing the face of commercial real estate and the needs of those buyers, sellers and renters that you deal with every day.
To understand, consider the different aspects of real estate investment: Office, Retail, Industrial and Multi-family Residential. Each is relatively strong right now, but most investors specialize in one, not all, because each requires slightly different expertise.
It is the view of at least some analysts that the multi-family market will emerge stronger than ever before in coming years. Here are the reasons:
- New technology supports work-at-home careers. Nearly half of all employed Americans spend at least some time working remotely (usually at home), away from their primary office environment.
- Millennials, as a segment of the population, are more likely (at least right now) to rent in urban locations rather than buy in the suburbs.
- Baby Boomers, and those approaching retirement age, are increasingly apt to trade larger homes for more manageable rental units that offer greater flexibility for lifestyle and travel options.
A Changing World
That's not to say that opportunities in the other real estate investment markets will disappear. However, there are other factors at play as well. Online buying habits will likely contribute to less need for physical retail space. We have already seen the results in major cities like Minneapolis, Dallas, Washington DC and Boston, with former department stores being redeveloped for mixed-use occupancy. In other areas, online buying has caused a shift from retail to warehouse and distribution facilities for marketers like Amazon and catalog retailers.
As cities continue to grow, commuting and parking become less efficient and less desirable. Employees increasingly report a willingness to accept 15–20 percent lower compensation for work-at-home convenience. Instant communication and global reach also make job-hunting easier, eliminating the need to limit job searches to a specific location. Across-the-country commutes, teleconferencing, and instant information-sharing have transformed the world of business.
Finally, automation is another factor that has changed the face of industry for many of the same reasons.
A 2016 Gallup survey not only reported an increase in remote work habits since 2012, but also an increase in the amount of time spent working remotely. Now, nearly 31 percent report working at home four to five days a week, up from 24 percent only four years earlier. The number who previously said they worked remotely only one day a week or less also shrank by about the same percentage.
The future seems clear. The survey also makes it clear that, while not all industry and business is on board just yet with remote work opportunities, the pool is expanding. In addition, the employees who work remotely are the ones most likely to feel "engaged" with their work, and to believe that their firms encourage their development, care about their progress and offer professional growth opportunities.
The Demand for Rental Property
It is true that much of the new multi-family development falls into the luxury category, especially in world-class cities and in urban centers throughout the country. But, if you're just entering the multi-family investment market, there is no shortage of smaller-scale opportunity. You can start small, with 2–4 unit buildings, and move to larger buildings. In some locales, there is a good supply of smaller apartment buildings ripe for renovation. Investors with a creative talent and the financial wherewithal to accomplish it might see potential in creating apartments from former factories, warehouses, churches, and other commercial buildings.
The possibilities are enormous, and with the current rental market stronger than it has been in decades, this might just be the prime time to concentrate your investment efforts in this area. The best course of action, of course, is to arm yourself with the facts, investigate the different types of commercial investment thoroughly, and decide the best ways to accomplish your personal goals based on individual circumstances.
No matter what your decision, it's an exciting time to be an investor, and technology will play an increasingly vital role not only in the type of investments you choose, but also in the ways in which you manage your investments.