Moving Up, or Moving Out: Connective Technology & Real Estate

Technological progress is exponential, not linear. The past decade, more than any before it (and less than any to come!), has seen an explosion of mobile and connective technologies that have allowed for business models to develop in unforeseen ways. For example, increased demand for and acceptance of eCommerce products eventually developed into the automated-warehouse model used today. In response, underperforming shopping centers have shifted to focus more on providing services rather than offering retail.

Similarly, the connectivity boom has begun to cause significant change in the way businesses and individuals interact with real estate. Case in point: when business is conducted online, who needs a full time office? Even though many of the benefits of face-to-face time have not disappeared, modern businesses no longer need the sort of space that traditional businesses have historically relied upon.

Increasingly, many companies are opting into an office rotation model in which smaller office spaces are leased, but not all employees are present at one time. Instead, employees rotate in and out of working remotely from home and visiting the office when needed, thus cutting down on overhead and lessening the need for leased space. Some businesses have even begun moving towards shared office spaces, wherein multiple companies use a single space as their physical address.

Uber and other similar ride-sharing programs have also significantly affected the way real estate is being used. Many Millennials are now opting out of buying cars, instead relying on Uber and public transportation to get around.

A particularly interesting ramification of Uber (that I had in no way anticipated!) came up recently in a conversation I had with an executive of a major multifamily REIT. He mentioned that they were seeing softness in the high end of the rental market in Uptown in Dallas. One of the major drivers of this softness was the increasingly easy (and inexpensive) mobility available to affluent Millennials. Uber enables Millennials to move across I-75 from Uptown and lease space for far lower rates while still maintaining their ability to easily and cheaply access the amenities of the bars/restaurants in Uptown.

Why pay a premium when you can Uber to premium amenities?

The through line in these major trends, in my opinion, is democratization of access.  Whether access to space or information is desired, the internet has made that access drastically easier and less expensive. Business models that do not change and accept the democratization of access will be faced with increasing challenges in the coming years. As user-friendly, adaptive services have streamlined many markets, Door is looking to do the same for the home buying and selling processes.

For further reading, check out Pi Online’s article here.