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The Dawn of a New Market

April 4, 2016

There seems to be near universal agreement among investors that there is a dearth of suitable commercial property available to buy. 2015 has been a year when increasing numbers of investors have run after ever fewer opportunities. As many investors seem to forget the old investment adage to be fearful when others are greedy and be greedy when others are fearful,they have worked against each other (and their own self-interest) by pushing down returns across all markets. Some observers explain such competition as a natural consequence of a healthy economy and a buoyant capital market.  With more investors expected to enter the market over the next year, it will be interesting to see if 2016 will be when the sheer drive for growth thumps rational investment decision-making.
 
As market activity continues, those on the sidelines ask where to put money to hedge against short- to medium-term cyclical volatility. Our bet is technology. Technological advancements have already swept across the market and brought huge change to the property industry. The potential for the commercial sector is vast. Examples are many and varied:

  • Machine learning and big data can, and probably will, replace much of today’s investment underwriting practice: most due diligence can be automated though artificial intelligence (AI).

  • The ‘cloud’ is revolutionising the way sellers and buyers interact, putting into question the role of agencies in future.

  • Crowdfunding is disrupting the traditional concept of debt and equity financing.

  • E-commerce is blurring the line between storage (logistics) and sales (retail).

  • Virtual reality, tactile feedback wearables and other immersive technologies are allowing people to virtually inspect a property without doing a costly and time consuming trip to the real location.

  • Collaborative work environments and the modern approach to work are challenging concepts of office space.

Technology may soon start to cause havoc in the commercial property industry – just as we complete another investment cycle. The fantasist is no longer the techie visionary, talking of possibilities in the distant future, but the commercial investor or property professional who doesn’t face up to the reality of these global changes.

 

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