Real Estate Markets & Demographics - Technology and the Internet Effect on Real Estate

On a macro level, RE execs are not calculating the affect of technology and the internet on the asset class. Included are a few examples i.e.;

1) Turmoil in the selling of books. When Amazon started selling books over the internet it was a switch from pricey retail real estate in urban/suburban areas to industrial warehouses in semi-rural areas. A net decline in SF I am sure also occurred. When they introduced the Kindle - their e-reader - no longer need as much warehouses to store the books or industrial space to print the books (printers, binders, etc;)

2) The media industry – Newspapers and magazines are being delivered on the web and on the Kindle – the needs of office space, printing plants, warehouse distribution are significantly reduced. Demand for retail space will also be reduced - i.e; the magazine stands.

3) The recording music industry –Like book publishing has made a similar transition - from expensive retail locations to websites to electronic delivery of the music i.e.; Apple Itunes,

4) The distribution of event admission tickets – Broadway shows, baseball tickets, concerts are all being delivered electronically.

5) Cloud computing and the creation of virtual data centers. From corporation's office space and back office space to massive data centers, some of it outsourced. Will also result in a negative decline in total RE utilized.

6) Record Storage - the paperless office - i.e; Many medical offices are scanning in their documents which takes up signficant amounts of space in their office. This is freeing up space for more examining rooms or they are reducing their needs.

For these companies and other industries it will be necessary for the real estate executives to parse the growth in these companies' real estate needs vs their business on the web-based or what they can deliver electronically.

Demographics - Unemployment & Income - the Real Estate Unknown !

National unemployment statistics of today approximates 9.8%. However it does not include the disenfranchised worker, the one who is no longer w0rking. In real estate it is typical to estimate that each user of an office building will take up 200 - 300 per sf. These absolute numbers total a very large amount of SF no longer being utilized.

Hidden from these statistics are also the new worker, those coming out of high school and college and are looking for work. These two groups are not counted in first time claims because typically they have never worked to begin with.

Also, for those on a commission or bonus basis, with the economy faltering these economic groups are making less, significantly less. While still employed they too have curtailed their spending.

Thus all of real estate is affected, some property types more directly than others. Pundits have called this phase of "the recovery" a jobless recovery... so far. However, no jobs, no sales and no one to take up 250 per SF.

America's GDP relies upon the consumer to spend in order to grow. Lower sales lower rents and increases vacancies at the retail property. Financial service sectors losses have left large amounts of office space available for rent. Fewer goods shipped less of a need for industrial space. etc;

Real demand for space in real estate is based upon the number of jobs in the market, not just the sales of a property. No jobs, No Sales and hopefully no building during this period.