We live in a time of disruptive innovation. Tech giants such as Amazon, Netflix, Apple and Google have redefined such seemingly well-entrenched fields as retail, entertainment, personal computing and advertising—and newcomers such as Airbnb and Uber have already transformed their industries.
So far, the impact on commercial real estate of these disruptive innovators has varied from sector to sector. For instance, Netflix’s success drove Blockbuster into bankruptcy, which in turn flooded the real estate market with millions of square feet of retail space. In other cases, the effect has not been as dramatic.
During his keynote address at this year’s ULI Washington Real Estate Trends Conference, James Chung described three enablers of disruptive innovation that provide a context to understand fundamental shifts already underway in commercial real estate. Chung is president of Reach Advisors, a New York-based strategy, research, and predictive analytics firm. The three enablers he identified are the shared economy, the assortive economy and the data economy. He describes them as follows:
- The shared economy: Dominance today is driven by coordination of community assets rather than control of private ones.
- The assortive economy: Dramatic demographic clustering is replacing predictable longstanding demographic patterns, redefining consumer behavior.
- The data economy: Data is now a differentiator rather than a by-product.
The shared economy: Work/live/play in one community
The concept of the shared economy is intertwined with the values of the Millennials who are its chief exponents. As Chung pointed out, Millennials embrace the kind of peer-to-peer, shared relationships embodied by Uber and Airbnb. But there are other characteristics that we can fold into Chung’s shared economy. Millennials would rather rent—whether it’s music, bicycles, or an apartment—rather than own. They also embody contradictions. They desire community, preferring to live, work, and play in a single neighborhood. At the same time, they hesitate to put down roots, valuing the flexibility that enables to switch jobs when a better opportunity arises.
Source: CP Executive and Capital One Bank Real Estate
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