Some private observations regarding the commercial real estate crisis
Yesterday I had a very interesting conversation with a friend of mine who is – ironically – a real estate lawyer in America. We had a video call on Skype and he was doing some contract work sitting on the porch of his beach home. He is planning to abandon his office downtown soon – why would he want to pay the fixed cost of something he has no use for?
I do have a similar story. I always thought about moving my stock operations into a nice shiny loft downtown. It would feel good. And it would be of no use at all. I guess I’ll stay in my study and have my people working for me from wherever they choose to. I also do have no dedicated office as a lawyer – which I also happen to be.
The next big crisis in the US is the commercial real estate bubble. Why am I not surprised?
Commercial real estate is in the midst of changing dramatically. I am not saying that in the future there won’t be big corporations with real estate needs. They will be there. But at the same time the workforce in Europe and most parts of the US is shrinking and a lot of people seem to enjoy working in corner cafes much more than sitting in a cubicle.
And then, well, there is the 21th century. Technology has, finally, caught up with the needs of people who want to do business, but at the same time there is also a cultural change going on. People simply do not longer expect me to work from nine to five (or from ten to ten since I am an attorney) in my office. They are very comfortable instead with reaching me on my mobile phone or via Skype somewhere on this planet. They do not care where I am because they know we can stay connected.
What we see right now is not just a short slip of the marked but the turn of the tide: a paradigm shift. Anybody want my REIT shares?
Tags: beach home, crisis, property, Real estate, REIT
