When Americans are increasingly growing accustomed to ordering paper towels on Amazon Prime instead of going to Costco and summoning Uber rides on their phones rather than hailing cabs, on-demand services and instant gratification are quickly becoming the new normal. As panelists at ULI’s Spring Meeting in Philadelphia agreed, the magnitude of that cultural shift is certain to cause big changes in the real estate industry—from what developers build to how transactions are conducted.
The instant-gratification, on-demand society could alter downtowns and reduce or even eliminate the need for certain types of commercial buildings, such as big-box stores. But it also is creating markets for new types of services, such as Ten-X, an online platform that since 2007 has facilitated sales of more than 200,000 residential and commercial properties with a value of $35 billion.
“There’s an attitude that time kills deals, so we think speed can make deals,” explained Kyle Ladewig, senior manager for Ten-X’s commercial division. To that end, he said, Ten-X, formerly Auction.com, tries to minimize transaction time and allow users to monitor the process in real time, with features such as an online dashboard where they can see who is coming into their properties.
“We’re out to shorten the time that buyers and sellers have to go back and forth and increase deal flow,” Ladewig said. In traditional real estate practice, a broker might need three months to get a legitimate offer and up to six months to close a deal. With Ten-X’s online auctions, in contrast, a property typically is live on the site for just 45 days, and a deal usually closes 30 days after that.
In commercial real estate, speeding up transactions and deal flow means that sellers have more freedom to shift strategy and make moves quickly. “You don’t have to decide six months in advance when you want to sell a property,” Ladewig said. “You can respond quickly to the market” and reduce risk in the process.
Ladewig noted that such online services won’t cause the extinction of conventional commercial real estate brokers, any more than Uber necessarily will make car dealerships vanish. High-value, complex transactions will still require local market makers, he said. “We augment what the broker provides,”
Clare DeBriere, chief operating officer and executive vice president of the Ratkovich Company, a Los Angeles–based real estate development firm, said the industry needs to adjust its communication methods to a culture in which people have grown accustomed to time-shifting their favorite TV programs and getting a continuous stream of stimulation from social media.
When Ratkovich recently gave a presentation at a community meeting in San Pedro, California, for example, it was recorded and reposted in its entirety on the developer’s website the next day. “Information is so much more accessible that way, and the expectation is that something like a town hall meeting should be available to you, even if you can’t actually make it to the meeting,” she said.
And on a recent renovation of a downtown project, Ratkovich posted photos of the construction progress each day on Instagram, she said.
DeBriere said that the shift to instant gratification poses challenges for commercial real estate developers. Having a successful project may mean recruiting retailers who are attuned to the new rules of selling, in which people accustomed to shopping online go to stores to have “experiential opportunities” and get information from store clerks, rather than roam the aisles in search of bargains.
DeBriere said that future of retail can be glimpsed by looking at upstarts such as Warby Parker, the online prescription eyeglasses retailer that now is transitioning from clicks to bricks with small physical locations where customers can handle the merchandise. “I have a 250-square-foot [23 sq m] store of theirs,” she noted. “They will sell $1 million a month from that store, even though it’s basically just an advertisement to their website.”
Despite the rise of e-commerce and mobile communication, “I don’t think that interactions between people will ever actually end,” she explained. “People who are used to using the technological environment to keep themselves apart from other people would do that anyway.” She noted that Ratkovich is bucking trends by building a large shopping mall, out of a conviction that people still have a need and desire to go to such spaces to interact. “People like to be with people, to dine with other people,” she said. “And you can’t feel whether this sweater is scratchy online.”
Other business opportunities may arise because creating the capacity to provide instant gratification tends to require an elaborate infrastructure. Julian Mann, an entrepreneur who operates a livery service in the Bronx, New York, noted that he has branched out into renting vehicles to people who want to work with online ride-providing platforms such as Uber or Lyft but can’t yet afford to buy their own wheels.