The University of Miami's annual Real Estate Impact Conference, was held last month at Brickell's Four Seasons Tower, where topics revolved around trends in the commercial and retail and markets, the rise of the Millennial generation and their impact on real estate, and technology's increasing dominance in this cycle and the future.
The conference began with a group of non-millennial discussing how Millennials (those who spent their youths on the cusp of the Millenium) are reshaping sectors of the Miami real estate market as they are also nationally. The irony of their age gap was admitted by the panel pretty much immediately, and shrugged off as immaterial, because after all sometimes it is easier to observe and analyze from the outside. There was a sense that this group saw Millennials as doing things differently, but also more frugally, in an economy that doesn't give them the wealth their parents, the baby boomers, did, but with the openminded, principled freedom their parents fought for in the '60s.
Garrick Brown, Vice-President of Retail Research of the Americas at Cushman and Wakefield, described Millennials as "leprechauns, they're unicorns, and they have skinny jeans." before diving into rich data that only began to outline the behaviors of the generation. Millennials don't spend money, he said, while also being the most coveted demographic to marketers. Marketers love baby boomer money, but would rather lavish attention on their kids. A city has to appeal to a Millennials worker, meaning it has to be cool in a world when choices about where to live depend as much on lifestyle as it does work prospects. It's an increasingly familiar idea, as work and leisure become ever more blurred. But Millennials do surprise. After all, as Brown found by looking at retail and demographic trends, skinny jean sales "sucked" this holiday season. His theory is that the oldest Millennials are 35 and are getting too fat for skinny jeans, or more likely they just won't, or can't spend the money.
Millennials are the most wired generation ever. 60% comparison shop online while in a store, erasing retail margins. Census growth in urban areas has skyrocketed, mostly driven by Millennials. Ever heard of the "The rent is too damn high" political party? Yep. Market rents for urban apartments have gone up hugely in the past five years, by 50% in San Francisco and 30% in Miami for example. Millennials are also leading the trend toward less parking. Real estate companies have to adapt to the sharing economy, which Millennials are embracing. In the sharing economy, the company that controls the largest number of overnight rental units in the world is Air BnB. There are more Air BnB units in Paris than hotel rooms in Paris, and it's only going to rock the real estate world more from there.
Prices in surging real estate may go down in the next few years (as signs are beginning to show in Miami), though, but by modest percentages. And looking beyond Millennials, the middle class is doing generally somewhat better now than even five years ago, although by now we've trained consumers to be frugal. That's impacting the retail real estate market. So, it's just not a good time to be in the middle if you're a retailer. Some retailers are returning to more traditional standbys. Amazon is, for example, making an investment in hundreds brick and mortar locations. They're building 'Amazon' bookstores across the country, but these are as much billboards as they are points of sale, and a place to interact with a real live customer service representative in person. The physical store is by now an embassy for the brand, sometimes more importantly so than as a place to buy things.
Somewhat continuing the discussion on retail begun previously, Steve Witkoff, CEO of the Witkoff Group, and Donald C. Wood of Federated Realty Investment Trust explored recent retail trends from the perspective of their latest 'shopping mall' purchases, Cocowalk in Coconut Grove and Sunset Place in South Miami. Unsurprisingly they agreed that the ability to get information so quickly changes every consumer's point of view and behavior, as well as expectations. With changing retail landscape, they look for iconic locations, like those two malls, that need a bit of work. Finding a local partner is also important.
Technology is also reshaping the real estate industry, Miami, and cities (oh and by the way, real estate positioned with tMillennials in mind is full of tech, like never before). The Smart Cities panel looked at new progress made in real estate data analytics An international organization, The World Council on City Data, has created an ISO standard for measuring the performance of cities that is being adopted by major municipalities across the world. The Council's data looks hundreds of metrics, including everything from the environment, energy consumption, disposal of city waste, sustainability, and mass transit ridership, and their standard allows side-by-side comparisons, which was previously much harder. Without good comparisons, learning from your neighbors' innovations becomes much more limited. Jodi Botifoll, who presented for the World Council on City Data, quoted the Mayor of Los Angeles when she said "a culture of data is a culture of innovation."
Jeff Frieden, the Chairman of Ten-X, the world's largest online real estate marketplace, emphasized Ten-X's three driving ideas, of the global distribution of real estate, bringing transparency to a very nontransparent industry, and most importantly 'data,' of course. His platform, previously known as auction.com, has handled massive and global real estate transactions online, and prioritizes an unusual empowerment of data to all parties in a real estate transaction through extensive transparency. Companies that provide advanced real estate data services often sit in silos, while Ten-X emphatically does not.
The keynote session featured Jon Gray, global head of real estate for Blackstone Group, the world's largest private equity manager. Blackstone's real estate business alone has $94 billion under management, an absolutely massive figure. That includes at least hundreds of single family homes in Miami purchased during the recession, which became a lucrative investment for them. Gray said in his view Miami's real estate outlook is strong. Although the key to Blackstone's success often is to "buy it, fix it, and sell it," and is a slogan of theirs, Gray says that in the current situation the real key is have the staying power. Their Miami portfolio is solid and he believes in Miami's resiliency. Although the stock market is not doing well, he doesn't expect another global recession, but suggested the possibility that it may create "interesting opportunities."