Technology is one of commercial real estate’s greatest expenses, but it’s also one of its greatest assets, said panelists at last night’s 2014 Orange County Executive Forum here, hosted by the USC Lusk Center for Real Estate and Allen Matkins. The impact of technology on their business was one subject the panelists tackled during the evening as members took the industry’s pulse and discussed their greatest opportunities and challenges in the current environment.
When moderator Gary S. McKitterick, a partners with Allen Matkins, asked Patrick S. Donahue, chairman and CEO of Donahue Schriber, “Is the shopping center dead?” now that e-commerce has taken off, Donahue responded, “Heavens, no! The scale of the Internet represents only 6% of retail sales. Catalog sales have always been between 1.5% and 3% of retail sales, and the Internet doubled that. The Internet is big because of its breadth of inventory, not because of customer service. We think of it as tremendously additive to our business.” He added that providing services to people, which cannot be done over the Internet, will always be important for brick-and-mortar stores.
“Technology has allowed us to significantly reduce our advertising expenses, but our selling expense is significant—with the addition of brokers—that it’s offsetting that,” said Scott D. Stowell, CEO and president of Standard Pacific Homes. He said that technology has helped his area of the industry enormously with measuring, tracking leads and design. “It enhances the customer experience. Customers want constant information [on the progress of the construction of their home], and it’s easy to give it to them.”
That’s not to say that CRE isn’t spending an increasingly larger percentage of its budget on technology, said Philip A Belling, managing principal of LBA Realty. But the payoff, all of the executives agreed, has been more than worth the expense.
When McKitterick asked the panelists their greatest opportunity and their greatest challenge, Michael K. Hayde, CEO of Western National Group, said, “Long-term capital is our greatest opportunity. In the pension world, I’m betting on 20-year funds. The biggest challenge is finding experienced talent.”
Belling said in an environment where there’s so little construction, he sees opportunity in discovering unique, inefficiently run properties and adding value to them, but his greatest challenge is how competitive the environment is. Stowell said in the single-family construction market, his biggest opportunity is in growing his business, but his biggest challenge is, “We need broader access to mortgage liquidity.”
Meanwhile, Donahue said his firm’s opportunity lies in increasing occupancy and driving rents, while the upheaval in the supermarket world is one of his greatest challenges.