User Experience, Data Centers, Co-Working Drive CRE Evolution
With advances in technology, evolving expectations and changing consumption patterns – largely spurred by Millennials – commercial real estate is changing rapidly. But when it comes to providing what consumers want, one thing is clear:
User experience matters. Maybe more than ever before.
That was a primary takeaway from a panel at DLA Piper's Global Real Estate Summit on September 26, 2017, in Chicago. Chaired by Cynthia Foster, president of Colliers International's national office brokerage, the panel, "Real Estate in a Changing World," included world-class investors and developers involved in some of the nation's biggest CRE projects.
"My kids will spend more money on a moment, whether it's going to see a concert or going for a great meal, than they will on buying a physical something," said David R. Weinreb, CEO of The Howard Hughes Corporation. "Our belief is that the younger set are going to continue to spend money in this area."
The emphasis on experience undergirds much of the work Weinreb's company is doing across the country, whether it's at The Woodlands, a master-planned community of more than 100,000 people north of Houston, Manhattan's Seaport District , a redevelopment of New York's original commercial hub, or Ward Village, a 60-acre master-planned community in Honolulu.
The importance of user experience was also emphasized by Michael D. Fascitelli, co-founder and managing partner of Imperial Companies. Fascitelli also is co-owner of the NBA's Milwaukee Bucks, and he discussed efforts to build that team's new home in downtown Milwaukee, a US$524 million multi-purpose arena set to open next year.
Fascitelli, noting that he believes the project will help with Milwaukee's ongoing revitalization, said new sports arenas are now filled with technology, including wifi access, to ensure that attendees, specifically kids, can be online and continue activities like texting even during games.
"If they lose that, they go into meltdown mode," Fascitelli said, drawing laughter from the crowd.
CRE in the Digital Age
The panel also discussed a variety of other trends, including the growing popularity of smaller housing units and the importance of maintaining strong ratings on social media. "If someone goes in and says something negative, everyone knows about it. You go on Yelp and see a bad review … forget Zagat's," Fascitelli said.
With the continuing growth of e-commerce and other online activities, data centers are a popular spot for CRE investment, with 31 percent picking it as the most attractive in DLA Piper's 2017 State of the Market Survey report. The growing need for data centers is not restricted to the US, said Adam S. Metz, head of international real estate for The Carlyle Group.
"In China, the amount of data center space is 20 percent that of the US, but they have (several) times as many people," Metz said, explaining his company's investments in data centers in that country. "We see that as a huge mismatch as far as supply and demand."
Co-Working Seen as a Positive
The panel also discussed the growth of co-working spaces, noting that they allow greater flexibility for small businesses and entrepreneurs. Co-working companies also use technology effectively – even if most of the panelists said they don't consider them to be technology companies.
"It's a little bit (about) the point of sale," Foster said. "Millennials are buying everything on their handhelds. Why wouldn't you shop for your office space?"
Modern co-working spaces, which also emphasize experience and community, attract not just technology companies but lawyers, architects and consultants, the panelists said. Owen D. Thomas, CEO of Boston Properties, one of the largest administrators of Class A properties in the United States, called the overall trend "an enormously positive force for office properties."
"It helps create energy," he said. "It creates another offering that we have in a major complex that we didn't have before."