Written by Thomas C. Gibson, Former Holladay employee (Nashville, TN)
If it's not broke, don't fix it.
This is a cliché that is familiar to everybody and often quoted. Recently an acquaintance made that comment and it caused me to think about this statement as it relates to the real estate industry.
Our industry has historically seen a strong group of regional developers and entrepreneurs who have local market knowledge and ambition to succeed. I attended a recent National NAIOP meeting with executives from of a number of national and regional real estate companies. The keynote speaker was Christopher Lee, a futurist who made comments related to the state of the real estate industry. Some of his main points were as follows:
- The industry leaders are aging and the next generation is ill prepared to take over these companies. Many companies do not have a clearly defined succession strategy.
- The demographic drivers of the real estate business are changing and many companies are ill prepared to capitalize on this changing demographic.
- There will be tremendous consolidation in both the development and real estate services arena. There will be 30% fewer companies and the industry will be dominated by larger companies in the future.
- There will be a shortage of 15,000 professionals by 2015.
Change is inevitable in today’s economy and technological growth is occurring at an exponential rate. This technological growth impacts all industries including real estate and the tenants that use our real estate. Through the years we have seen many companies fail to adapt to change and recognize threats and opportunities, which had a major impact on their businesses. The list includes such familiar names as Lotus, Kodak, Polaroid, and Gateway. Jim Collins, in his book Good To Great wrote about the firms he considered truly great companies. Two of the companies he cited, Circuit City and Fannie Mae, failed to adapt to a changing economy and the impact of technology. This inability to adapt to change can be disastrous in any industry, including our own.
Some interesting predictions that will impact real estate were cited by Mr. Lee:
- e-bay will be the #1 source for selling real estate
- Congress will pass National Building Codes Standards making it unlawful to sell a noncompliant building
- The First Apartment Building will be leased up using Social Media
- Marriott and Starbucks will announce International Zip Space for Next Gen Occupants
- The first high rise farm will be built at 12 stories or 600 enclosed acres
These predictions may or may not come true. However, we do know that we are in a rapidly changing business environment that will require a high degree of adaptability.
I believe that Real Estate companies will be forced to increase efficiencies by leveraging technology in a competitive market place where fees for services will be reduced due to pressure by larger providers. The continual surge in available market information will allow developers to locate opportunities with a higher level of accuracy and hit the market at the peak time in the economic cycle. Access to quality Market Analytics will be increasingly important as our industry continues to mature. This will be enhanced by those real estate companies that have strong customer relationships and corporate transparency. Corporate strategic thinking and strategic initiatives will become increasingly relevant to real estate companies. Those firms who embrace this philosophy and have a culture that adapts to change will continue to succeed and grow.
It will be increasingly important to understand what is truly working well. It will be equally important to identify threats and seek innovative solutions to management and development problems. A spirit of cooperation, good team members and company-wide collaboration will allow successful companies to achieve success, but this success and growth can only be achieved with strong leadership, a solid strategic mission and a commitment to excellence.