Tech driving change for real estate
WATERLOO REGION — Autonomous vehicles, big data and ecommerce will have big impacts on the real estate industry, but the sector appears unprepared for the shifting sands of tech change, says a senior executive at a national real estate firm.
“I recently reviewed the management teams at as many real estate companies as I could, both public and private, and I’ve got to be honest with you: I did not see a lot of tech experience in the Csuite,” said Paul Morassutti, executive vice-president and executive managing director of CBRE.
Morassutti was speaking Thursday at the commercial real estate firm’s annual Southwestern Ontario Market Outlook breakfast in Kitchener, that highlighted, among other trends, how technology is influencing commercial real estate.
Mass production of advanced autonomous vehicles is expected to begin next year and adoption will happen faster than people think, said Morassutti. It will be absurd to buy vehicles that sit idle for 95 per cent of the time, when autonomous rides can be summoned with a smartphone, he said.
“The disruption to urban mobility will be massive. If you do accept that autonomous vehicles are at some point coming, how do you prepare? How do you futureproof buildings today when the need for parking is still very real?”
Parking garages built today should have level floors, higher ceilings, modular sections and knockout panels, Morassutti said. That will make it easier to covert them into offices, shops and fitness centres, he said.
Owners of multi-unit residential buildings were told the data generated by tenants could provide valuable insights into their wants and needs. That data could also be sold to third parties, creating a new revenue stream for landlords.
And while Canada lags the rest of the developed world when it comes to online shopping, there is a slow, steady increase in ecommerce. Morassutti said that is driving demand for industrial spaces near city centres for distribution warehouses that fulfil online orders. That trend is captured in the quip: “Retail clicks drive industrial bricks.”
Leasing activity for warehouses and distribution centres in Waterloo Region has been accelerating because of online shopping, says CBRE’s national market report.
“Consider this: for every $1 million in online sales we need approximately 1.3 million square feet of distribution space,” said Morassutti.
CBRE’s report says the region’s burgeoning tech sector continues to drive demand for office space. Investment in commercial real estate last year totalled $1.8 billion, a 63.5 per cent increase over the previous year. The vacancy rate among industrial properties is at a 16-year low.
“We are currently nine years into an incredible bull run for commercial real estate,” said Morassutti. “And the question that arises more and more frequently is: Have we peaked?”
Market fundamentals and leasing activity remain strong, even as some predict the start of an economic downturn before the end of this year, he said.
Canada is among four only countries to set back-to-back records for investment in commercial real estate last year, said Peter Whatmore, CBRE’s seniorvice president, managing director and broker for Southwestern Ontario.
Locally, there are no signs things are slowing down.
“With more than 1,000 startups in our tech cluster, we are creating more momentum than ever before,” said Whatmore.