This year’s Forum was held virtually with presenters and participants from Asia, Europe, and the United States. There were a wide range of future-focused topics that came at the right time. The Forum opened many new doors for exploration and research. My favorite sessions addressed ESG, Wellness, New Cities, Pricing Metrics, and Virtual Worlds.
There is a global acceptance to promote Environmental, Social, and Governance goals in all business investments. Corporations, institutions, and major landlords are economically motivated to create a “triple bottom line”. ESG was a conference theme that was widely repeated. ESG is both business strategy and lens that global corporations use to make real estate decisions. Because of its impact on major investment decisions, SIORs need to be conversant in basic ESG values and implementation.
It is easy to understand why Wellness was another conference theme. To get employees back to work and to improve working conditions generally, building owners and tenants are taking major steps to make their buildings safer and more livable. Testing, monitoring, and sensoring are common techniques to create healthy buildings. Fresh air, hygiene and daylight are essential parts of every new development. Buildings, and real estate generally, will have a purpose to contribute holistically to the mind, body, and spirit to all employees. From a property perspective, healthy buildings will increase rents and Net Operating Income.
New Cities are being built in Asia, Africa, India, and parts of Europe. Many new cities are focused around different key industry clusters to create growth. Aerospace, medical, science, technology, electronics, and apparel industrial clusters are a few examples of how cities can leverage industry to create growth. The presenters contrasted development in centrally planned countries to laissez-faire. Keys to success include letting government carry the land, partnering with private developers to encourage creativity, keeping debt to a minimum, including wealthier demographics, sustainability, and recreation. The PPP platform of Public Private Partnerships is the predominant structure with many examples. Some of the best examples are Lianghzhou in China; Bundang and New Songdo in South Korea; Cyberjaya and Iskander Puteri in Malaysia; and Suzhou Industrial Park in Singapore.
The MIT Center for Real Estate Price Dynamics Platform (“PDP”) showed their model to predict pricing of commercial real estate in major U.S. markets. Using data from Real Capital Analytics, the PDP measures liquidity in the market. By using the Great Financial Crisis as a reference point, the PDP is able to anticipate market conditions. Most prices for commercial real estate will be heading down, although industrial and multi-family will suffer the least decline. Price drops will be significant if not yet apparent. The severity is dependent on getting Covid-19 behind us.
I did not know that virtual worlds like Second Life, IMVU, Decenrtaland, and software applications like Unreal Engine and Unity have created large ecommerce platforms to sell millions of dollars of both virtual and physical products and services. Sales are predicted to increase to the billions of dollars in online worlds. Users have also developed ways to monetize virtual real estate by developing spaces and lands. One example is a virtual rave I attended with live music performances and social interaction with other avatars. Many have known each other for years. There was a donation box and “merch” for sale that rewarded the developer for content creation and experience. Similar to the physical, in virtual worlds you earn or pay for access, privilege, and power. Unreal Engine is a popular tool to create a Digital Twin of a physical building for purposes of design and marketing. Soon it will be common to merge the physical and the virtual into seamless social and economic transactions.
There were several other sessions including nano-technology; common uses of robots in logistics and real estate; the future of housing, post-pandemic; and how Occupiers address tenancies and space needs. I particularly appreciated the remarks of JLL’s Ben Breaslau regarding their visualization tool, Blackbird, and the importance of data integration in the brokerage business. Special thanks to SIOR’s New England Chapter for sponsoring the Forum and for introducing the MIT Center of Real Estate to SIOR, now in our sixth year of joint programs.