Commercial Investment Real Estate September/October 2019 | Page 50
CONNECTIONS
Innovation with
an Eye on Capital
Capital appetite for disruptive technology is reshaping
every commercial market, from industrial to retail.
W
hatever the next big thing in technology will be, it
always promises to change life in the blink of an
eye. But rarely do such transformations happen
instantaneously. Flying cars might be the stuff of
1960s science fiction, but the electric vehicle has only recently
penetrated the market after decades of hype that they’d extinguish
the combustible engine industry.
Still, across markets in commercial real estate, technology is
and will continue to produce major changes. Office sharing, food
delivery, and e-commerce are game-changing trends enabled by
technology. But obstacles, including government regulations and
industry pushback, can delay major dis-
ruption to commercial real estate.
Norm Miller, the Hahn Chair of Real
Estate Finance at the University of San
Diego, has built an impressive career
specializing in automated valuation
models, data mining, market forecast-
ing, and mortgage risk analysis. Long
story short, he needs to know what’s
changing and when. “This is the most
dynamic time in commercial real estate
Norm Miller
that I’ve seen in my lifetime,” he says.
“But these changes take time. It might
take 10 or 20 years before we get shakeout on office sharing, for
instance. The market takes time to figure it out.”
Looking at self-driving cars and trucks, collectively known as
autonomous vehicles, for instance, Miller believes the technology
is almost ready to revolutionize commercial real estate, but many
optimists fail to understand real-world problems. “In a case like
this, regulation will be a major consideration,” he says. “Hurdles
48
September | October 2019
aren’t even across technologies. In the case of autonomous vehicles,
for instance, experts like Elon Musk have said they have to be 10
times safer than people.”
In addition to government and industrial regulation, poten-
tial disruptors are also reliant on capital markets to some degree.
Investors in the U.S. have an enormous appetite for innovation,
Miller said, so capital can flow toward paradigm-shifting tech-
nologies, which can skew commercial real estate markets.
Miller points to office-sharing as an example where outside
money has pushed specific companies or models when they may
not be the most effective or efficient. “Traditionally, we’ve seen
capital-pushed supply of real estate primarily in retail,” he says.
“But we might now have it in office and other sectors. And if it’s
capital-pushed, it’s not solely based on fundamentals of demand
and supply, which instructors at CCIM Institute teach in their
market analysis course.”
In the search for the next Amazon, investors may overlook
fundamental realities in a specific sector of commercial real estate.
The best data analyst with the best software can still misunder-
stand a regulatory environment or the influence of capital. For
this, Miller says, experienced real estate professionals can help
bridge the gap from theoretical models to real-world experiences.
Hear more about the disruptive potential of self-driving vehicles
at the 2019 CCIM Global Conference, Oct. 13-14, in San Diego,
where Miller will lead a breakout session entitled, “A Closer Look:
The Impact of Autonomous Vehicles,” which explores how the
technology could transform commercial real estate development
and urban infrastructure.
Nicholas Leider is senior content editor of Commercial
Investment Real Estate. Contact him at [email protected].
COMMERCIAL INVESTMENT REAL ESTATE
by Nicholas Leider