Family Office Real Estate

Real estate, the future, and family offices

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The long-term real estate strategies beloved of family offices rely on keeping an eye on the future.  Real estate is ultimately a service driven by human behaviour, and if people no longer want to live or work in your building or the area its located its value will fall.

Reports such as Cushman Wakefield’s Will Robots Take Over CRE?  provide family offices with vital intelligence on how technology will change how we live, work and play. Focusing on transformative technologies suggests that ridesharing, electric vehicles and drones will have the biggest impact on real estate in the short term.

Cushman’s believe that ridesharing through platforms such as Uber and Lyft will increasingly substitute public transport, but also complement it in some areas.  This will lead to an increase in the value of development sites with good access to uncongested roadways but limited current access to public transport.

Autonomous vehicles will add to this trend significantly, but not immediately.  Currently, they are some years off, with safety concerns hindering development along with a requirement to re-design road networks and ensure uninterrupted peer-to-peer car signalling capability.

The use of drones will impact on real estate in a variety of ways

Meanwhile, electric vehicles (EVs) are already having an impact on petrol/gas station ownership.   In Manhattan, the number of stations declined by one-third between 2004 and 2014 with most being redeveloped into condominiums or offices.   This impact will accelerate alongside increases in the number of charging stations, better battery capability and falling prices.  

London is leading the way in this field, with the rollout of electric buses and taxis and the installation of 104 rapid charging points since 2016, more than half of which are for taxis and can charge a vehicle in just 30 minutes instead of the standard eight hours.

Separately, the use of drones will impact on real estate in a variety of ways.  They will make it easier to monitor large portfolios, including landed estates and sizeable commercial sites, in real time.  Instead of sending property managers out to buildings or fields to manually inspect them and log the findings, the job can now be done by these smart robots.  The drones can also analyse the data, pre-empting any maintenance requirements and saving significant costs.

In the logistic space, major retailers have already announced plans to delivering shipments via drones within the near future.   Amazon is testing its drone delivery service, known as Prime Air, to get goods to customers in 30 minutes or less.  Meanwhile, UPS is testing drone deliveries, using the top of its vans as a mini-helipad, and Domino’s delivered the first pizza by drone in 2016.

It is not too difficult to envision a future where drones fill city skies with deliveries, drop packages off on the top of towers, and dramatically change the landscape. But today there remain significant regulatory, safety and legal issues, including ownership and control of airspace.

According to Cornell University, one of the most intriguing, and possibly disruptive, technologies now emerging is 3D printing. This innovative approach to manufacturing may even “print” the real estate itself.  There have already been numerous examples of homes being built by a 3D printer, including one by engineer Alex Le Roux, who designed a concrete 3D printer that built a small house in under 24 hours.

Certain asset classes, such as industrial and retail real estate, are likely to see significant changes in demand and necessity driven by 3D printing.  The current global methods of manufacturing means printing or producing very sophisticated objects on the other side of the world, then putting them on ships and transporting them across oceans.  

But 3D printers will allow manufacturers to do that in small and medium-sized warehouses near population facilities. Well located manufacturing spaces, such as those underneath railway arches, may be a good bet for the future.

Some consumer items will not need to be shipped or stored at all, and massive industrial facilities may no longer be needed and ports may not be as active. These smaller industrial properties will take on a new role as quasi-manufacturing plants, as well as fulfilment and storage facilities, allowing consumers, or more likely drones, to pick up their orders swiftly.

Cushman predicts that the real estate most at risk from technological changes are non-experiential retail such as bank branches, and garages – both those in single family homes and in commercial parking decks–as well as non-amenitized commodity offices. Those real estate categories likely to see growth include data centres, manufacturing centres for new technologies, remote-parking, and recharging stations.

As such successful real estate offerings are likely to be those that offer multiple or diverse uses.  These might include office-hospitality hybrids which offer concierge services, single-family rentals, and conversions of retail and car parks into office and industrial.

In real estate, you need to keep moving to stand still.  As the Greek philosopher, Heraclitus put it over two thousand years ago: “The only thing that is constant is change”.

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