Sands Anderson’s Commercial Real Estate Law practice group was again pleased to participate in the annual VCU Real Estate Trends Conference in Richmond, Virginia. This preeminent conference brings together real estate practitioners from throughout the Commonwealth and beyond to discuss both the current state of the real estate industry and forecasts from industry leaders on its direction in the years to come.
This year’s presenters were particularly focused on the future, providing illuminating and exciting insights from economic and technological perspectives: Elliot Eisenberg, Ph.D, the “Bow-Tie Economist” and Chief Economist for GraphsandLaughs, gave a dynamic presentation on the current and projected economics of the real estate industry; and Steve Weikal, Head of Industry Relations at the MIT Center for Real Estate and Founder of the MIT Real Disruption Conferences, discussed the myriad ways in which new technologies would soon dramatically change the real estate industry.
However, before these presentations got underway, the VCU Kornblau Real Estate Program gave its own introduction, surveying local practitioners for their thoughts on the state of our local real estate market. The general consensus was that 2018 was another strong year, and the forecasts for 2019 in Richmond continued to be positive. See below for the complete video presented to conference participants, which we commend to you for your own viewing.
In the first presentation, Dr. Eisenberg offered a comprehensive economic review of the real estate industry, highlighting a variety of different topics that may be of particular interest to commercial real estate practitioners. In general, Dr. Eisenberg observed that the economic fundamentals of the real estate market are currently very strong: rates are up and most indicators have returned to normal. GDP growth continues to be strong, unemployment is at a fifty year low, consumption is up, and corporate investment, government spending, and net exports are remarkably high; all of which allow the economy to withstand the regular economic headwinds of the marketplace.
Looking further into the future, it is likely the market will slow, the deficit will grow exponentially, and the government may lack the fiscal policy tools necessary to respond, leading to the arrival of the now overdue recession. That fact notwithstanding, the current situation and projections for the near term continue to look great.
Richmond in particular exceeds national averages in many metrics: local unemployment numbers are better than the national average; labor force growth is great, ahead of the DC market; and there is widespread growth across various sectors of the local economy. Richmond and Raleigh continue to fight for second place in regional per capita income growth, behind the District. Local office vacancy rates are low, well below the national average, and office rent growth is better than the US average.
These insights and many, many more are offered by Dr. Eisenberg on his website, www.econ70.com.
Next, Mr. Weikal’s presentation brought Silicon Valley to RVA, focusing on how new innovations and technology were disrupting many sectors of the real estate industry. Mr. Weikal discussed recent trends impacting the market, each of which will bring real change to how the real estate industry does business.
Among the fascinating topics Mr. Weikal discussed were the following:
- The Great Convergence – Unprecedented breakthroughs in technology will combine with the ubiquity of connectivity, a tech-savvy commercial real estate workforce, and the continued growth of the sharing economy to create seismic shifts in the real estate market.
- Startup Tsunami – New real estate businesses are starting at a blistering rate, to both capitalize on these shifts and continue to fuel further change.
- Real Estate Fracking – For example, one of the most notable new dimensions of the real estate business involves what Mr. Weikal terms “real estate fracking,” in which technology is used to break apart large, underutilized real estate into smaller, more fungible or usable pieces, which can then be combined again with an eye towards more economic and efficient utilization. These companies are arbitrage experts, taking neglected spaces and flipping them to more productive use.
In addition to well-known examples of this practice, like WeWork and AirBnB, Mr. Weikal discussed other start-ups that are perhaps less familiar but promise a similar disruption to the real estate market. For example, he described companies like Workbar (opening coworking spaces in Staples stores to target suburban residents), Liquidspace (a “zipcar for empty board rooms”), Better Spaces (providing pop-up amenities in unused office building space, like yoga and pet care), and Why Hotel (a pop-up hotel operating in new multifamily buildings during lease-up). Expect continued growth in these types of new engagements with the real estate industry in the years to come.
Taken together, the information and insights provided by Dr. Eisenberg and Mr. Weikal will help local real estate practitioners to assess the current economic landscape of their industry and utilize emerging technologies to increase their productivity and profitability in an increasingly competitive marketplace. As you do so, Sands Anderson can assist and support your legal needs. To speak with someone from our Commercial Real Estate Team, please feel free to contact us.
Read more insights from Chris Mackenzie on Commercial Real Estate: