LOS ANGELES – Sept. 12, 2017 – Emile Haddad, newly-appointed chairman of the USC Lusk Center for Real Estate, believes that the real estate industry is too focused on the top-level impacts of the Millennial generation including its mindset when it comes to homeownership. As a result, the industry is ignoring not only the impact of technology on the overall industry, but also the deeper impact of Millennials’ desire to blend career and home life into a singular lifestyle choice.
These factors, Haddad contends, comprise a number of top real estate game-changers that real estate practitioners and commercial owners must consider in their planning, but are currently overlooking. Technology advances and demographic shifts are among the most important factors to consider, he says. In the following, Haddad, speaks directly in his own words to the opportunities and challenges facing the real estate industry today:
1. Government regulations will fall well behind the technology evolution
Now more than ever, we need government to be nimble. The world is moving in nanoseconds and we can’t wait 15 years for regulation to catch up. For example, the combination of driverless cars and the current age of ride-sharing will make current government regulation obsolete. Government moves slowly, which is evidenced by the fact that rules governing development approvals are determined by a 1990s view of transportation. We are still developing and designing with a mind toward making parking available for every tenant in a new housing unit. Yet, within 20 years, most renters will no longer own a vehicle. As a result, we are developing for an outdated world and are not being forward-thinking.
2. Housing availability will increase once regulation catches up with technology
We live in a time when light rail and ride sharing are growing, and driverless cars are on the verge of becoming commonplace. Now consider that an 800-square-foot apartment is actually a 1200-sf apartment when you consider parking. If the need for vehicle ownership becomes obsolete, that’s a 50 percent increase in multifamily living space. In essence, transportation technology is a key factor in solving the affordability riddle.
3. Companies must balance commercial real estate costs of their headquarters with the lifestyle interests of prospective employees
When a company launches, its needs are relatively clear: generate brand recognition and revenue. In Silicon Valley, this is the only concern of a start-up tech company and they enjoy relatively affordable office space in San Jose. But what happens when that company experiences rapid growth and needs thousands of employees? Suddenly, the need to recruit employees will change how successful start-ups choose a location for their headquarters. A cost per square foot analysis will give way to the need to attract employees who expect a certain lifestyle. For tech companies, this could mean that a move to higher costs of a San Francisco location pays for itself with the ability to attract staff who desire the San Francisco lifestyle over San Jose. This means that companies will have to make a more qualitative assessment of their spaces – one that goes beyond price per square foot and interior design.
4. Real estate companies and regulators alike must replace – or complement – their 5-year plans with 15-, 20-, and 30-year plans
Things are changing rapidly and we must anticipate what real estate will look like 15 years from now. In other words, we do ourselves, our economy and our industry a disservice by waiting 15 years to assess where were are. Regulatory and legislative bodies, as well as real estate leaders, must forecast future needs and adjust their practices and policies with an urgency. The result will be true leadership in how the private and public sectors can partner to support everyone from start-ups to major corporations to employees. We can use this period of great technological innovation to shape and adopt real estate policy for the future.
This discussion is part of the USC Lusk Center’s ongoing effort to advance knowledge and inform business practices of industry practitioners, companies and policymakers working in commercial and residential real estate globally.
To schedule a time to speak with Haddad, contact Kent Barrett (firstname.lastname@example.org) or Alicia Mistry (email@example.com) at (310) 373-0103. For more information on the USC Lusk Center for Real Estate, visit www.lusk.usc.edu.
About The USC Lusk Center
The University of Southern California Lusk Center for Real Estate seeks to advance real estate knowledge, inform business practice, and address timely issues that affect the real estate industry, the urban economy, and public policy. The Lusk Center produces relevant and timely real estate research, supports educational programs for students and executives, and convenes professional forums that bring together academics, students, business executives, and community leaders. For more information, please visit www.usc.edu/lusk.