So-called ‘disruptive technologies’ is impacting the way landlords and investors approach real estate investing and determine things like the ideal size, usage, layout and general amenities of their buildings.
At PERE’s annual real estate conference in Hong Kong today, Mark Gabbay, chief investment officer and chief executive for Asia at the Chicago-based investment manager LaSalle Investment Management, piqued the audience’s attention when he said the logistics sector is effectively becoming more hotel-like in its attributes.
Gabbay’s comment was in response to global logistics specialist GLP’s co-founder and chief executive Ming Mei, who spoke on stage about how technology and the growing trend of shared economy will change the revenue model in the logistics sector. He said sensor technology, for example, is helping landlords track how and when tenants use warehouses and logistics facilities.
“We used to charge rent on a per month or yearly basis, but now you can charge, as per use or per hour,” Mei said. Talking about how GLP has incorporated technology in its investment thesis, Mei pointed to the $1.6 billion private equity fund launched by the firm last May. The capital raised through the Hidden Hill Modern Logistics Private Equity Fund is being deployed in “companies that use technology to enhance efficiency in the logistics sector”, as PERE reported at the time.
“Understanding this [technological] change has helped us to plan and design facilities to meet new future. Automation, robotics has become a norm,” he added. “Change in technology will be much faster in the next five years as compared to the previous five years, purely from a cost perspective.”
Changing consumer behaviour brought about by the shared economy trend and urbanization has also impacted how products are being tailored in other sectors. Goodwin Gaw, chairman and managing principal at Hong Kong-based private equity real estate firm Gaw Capital Partners, said he expects to see a lot of innovation in the co-living space landscape in China, for instance, which he described as “China’s version of a rental apartment”.
“We are only seeing the beginning of disruption in real estate. And it will happen a lot faster than we think,” commented Sonny Kalsi, co-founder and partner, GreenOak Real Estate, who added much of the disruption will be technology-led. He warned: “You can put up a short-term barricade, but ultimately technology will win.” As Gabbay noted, these disruptions will bring about a lot of volatility in the market too. “Technology will disrupt, but it is going to make our jobs harder,” he said. “Investment returns are going to get a lot more volatile.”