Business Trends

Are Current RE Trends Due to “Known Unknowns”? by CBRE

File Type: Free Content, Article
Release Date: September 2013
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“Are today’s low levels of demand due to cyclical forces — the recession and weak recovery — or to the long-term effects of ‘known unknowns’?” asked Arthur Jones, senior managing economist, CBRE, in the September 16 issue of the firm’s About Real Estate newsletter.

Jones described “known unknowns” as trends whose impact on real estate remain unknown. Examples include the effects of social media, mobile devices, cloud computing and other technological developments.

The report continued: “The internet is clearly affecting the way the consumer shops, and retailers today have to deliver to the shopper via multiple channels. Once upon a time, a retailer with a desired product in a high-traffic location had the competitive advantage. Shoppers would buy the product and — very importantly — would have it immediately to consume or take home. Today's consumer can use the internet to comparison shop and order products to be delivered; for consumers, the only drawback is not receiving their purchases immediately.

“As retailers attack this ‘last mile’ issue, the trend in technology is affecting the demand for warehouse space — not only in the amount of such space, but also in its location. Amazon's strategy of placing warehouses nearer to the top 20 U.S. metro areas is one solution to the problem: the company can reach nearly half of the U.S. population with same-day delivery. If this strategy were to become a trend, it would have wide-ranging implications for commercial real estate demand. It would pose a significant threat to brick-and-mortar retailers in major markets, but it also blurs the line between stores and warehouses, and carries strong potential to shift demand toward industrial/warehouse space.”

Jones concluded that demand for commercial real estate will continue to grow, albeit more slowly than it has in the past, and that structural factors — the effects of those known unknowns — will be the major influence.