Some real estate developers see the Internet revolution the same way an aristocrat during the French revolution might have viewed the guillotine. The reasons for their dread are easy to fathom. As more and more CEOs recognize that the Internet is here to stay, they wonder how e-commerce will affect demand for real estate. E-commerce, after all, is about moving business from physical to virtual space and replacing brick-and-mortar storefronts with digital ones. As mainstream corporate America embraces e-commerce, shouldn’t those whose revenues and profits are derived from brick-and-mortar construction fear for their lives?
Not really. Real estate developers and brokers must recognize that the coming of the Internet does not eliminate demand for real estate; it simply changes it, according to academics and industry professionals who met at a recent conference at the Wharton School’s Samuel Zell and Robert Lurie Real Estate Center. Speaker after speaker at the conference — which featured the first Max M. Farash Roundtable on E-Commerce and Real Estate — pointed out that the Internet offers more opportunities than threats to property developers and brokers. As such, real estate professionals would be better off embracing e-commerce rather than ignoring or fearing it.
How does e-commerce change demand for real estate? By way of an example, consider Amazon, the Seattle-based granddaddy of online merchants. The company, which did not exist five years ago and now claims to offer the biggest selection of products on earth, does not occupy a single square foot of space in any mall or shopping center. And yet, as its operations have grown, the company has had to build large stocks of inventory and find warehouses to house them.
“Amazon wants to build a fleet of warehouses,” says Christopher Peacock, president of Jones Lang LaSalle, a global real estate services firm. In New Jersey alone, Amazon last year was in the market for one million square feet of warehouse space.
That is just one way in which e-commerce changes demand for real estate. It also changes the skills requirements within real estate companies, which must now increasingly build expertise in technology. “We must help our clients make the right infrastructure decisions,” Peacock says. “Our challenge is not just to hire brokers but experts in telecommunications, energy, corporate finance, and logistics.”
Building such skills is crucial as real estate firms seek to redefine their roles for the digital economy. “Success does not begin and end with designing a Web page for your company,” Peacock adds. “We should use e-commerce to serve our clients.”