NAREIM: Uncertainty, Innovation, and The Future of Real Estate Investing

National Association of Real Estate Investment Managers (NAREIM): Uncertainty, Innovation, and The Future of Real Estate Investing
In times of disruptive change, new winners and new losers are often revealed. The question often becomes, how can I make sure I’m in the first category but not the second? Anticipating, understanding and responding to change was a passionate core of the discussion at NAREIM’s Asset Management & Acquisitions Winter Meeting in Dallas on January 15 and 16.
Evolving Strategies
Everything in commercial real estate seems to be changing—investor needs, employee values, capital markets expectations, and real estate market demands—and the pressure on leaders in this business is not letting up. The need to learn, evolve and connect with others in the business is greater than ever. In today’s real estate, leaders need to understand the emerging and evolving social, financial, geopolitical, and environmental trends are affecting risk and return. Changes in the past were often slow enough for forward-looking real estate investment managers (REIMs) to mitigate risks and seize opportunities. But to many, the pace of change is
allowing far less lead-time. So what can be done? How can someone be strong enough or smart enough to thrive in this environment? According to Charles Darwin “It is not the strongest of the species that survive, nor the most intelligent, but the most responsive to change,” Perhaps in today’s environment, as NAREIM President Gunnar Branson pointed out, “The ability to change
is more important than being the smartest or strongest. Perhaps we need to approach
our challenges in a different way than many did in the past.”
What are we facing, exactly?
Tenants may need less space. For example, law firm lease renewals are typically for
one-third less space than the leases they replace, due to electronic file storage, the
elimination of law libraries, and other efficiencies brought on by technology. Internet sales
are expanding faster than store sales, and as this trend continues, malls and shopping
centers may need to re-think their approach to space. Are we ready for higher density
of use and perhaps a lower gross demand for space on a per person basis?
People are acting different than before. Social and demographic shifts are in high gear.
Millennials, which make up the 18-to-34 age cohort that drives apartment and retail
markets, have tended to make different life choices than preceding generations—living in
cities, renting apartments and putting off marriage and children longer, driving less, and
acquiring fewer physical assets. Business people of all ages work outside the traditional
office more, and consumers are buying more and more online. All these fairly recent
shifts have a direct impact on office, retail, industrial and multifamily residential markets.
Are the assets in our portfolio flexible enough to allow for the changing uses of space?
Capital is changing. It’s not just about the defined benefit pension plans anymore. Global
capital, defined contribution plans, family offices and other investors of capital are looking
for different things from private real estate. Are we providing the right kinds of structures,
risks and returns for a changing client base?
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By: NAIREM Winter Edition (Acquisitions & Assets Management)
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