There has been plenty of talk about how the millennial generation has shaped commercial real estate as tenants.
It has been given credit for much of the creative office movement and proliferation of shared spaces offered by WeWork and others. Growing up online with e-commerce as a dominant buying pattern, millennials have intensified the experiential-retail push for shopping centers to remain vital in the face of online purchasing. And multifamily spaces have changed dramatically over the years, offering more common-area and tech amenities to satisfy this generation.
Now millennials are on track to change how commercial real estate is bought and sold.
A webinar titled “Commercial Real Estate Outlook: The Convergence of Capital, Regulation and Technology,” recently hosted by National Real Estate Investor, dug into this topic.
“Real estate has been, historically, a very opaque industry,” said Adam Hooper, chief executive officer of commercial real estate crowdfunding platform Real Crowd.
Many of the investments taking place on golf courses and through fund-manager business relationships will be replaced by real-time hands-on technology which is how millennials navigate their lifestyles.
And commercial real estate executives best take notice, speakers said. Millennials are set to receive $20 trillion to $30 trillion over the next several years from generational wealth transfers, Hooper pointed out.
Along with immediacy of information, this generation of investors will expect more transparency than prior age groups. They are also actively interested in making investments that have a positive impact on the neighborhoods surrounding assets, and grew up during the damage of the Great Recession, said Troy Merkel, a partner at accounting firm RSM, making for a higher-maintenance financial participant.
“They’re demanding much more from their advisors,” Merkel said. “That’s something that the real estate community really needs to focus on when they’re looking at this new investor class.”
And with technology at everyone’s fingertips, he said: “Being limited to what a broker can show you is insane to them.”
That means that if commercial real estate firms haven’t beefed up and streamlined their technological capabilities, they are going to be in catch-up mode. This includes software for accounting, property management, investor management and back-office automation, many of which can now be merged into one dashboard.
There will also be more use of blockchain transactions in commercial real estate, though that is still in the early stages.
As of now, millennials are inheriting a solid investment industry, thanks in no small part to a strong macroeconomic picture. GDP growth is forecast to increase 3.1 percent over the next few years, due to tax reform and other measures.
Valuations have risen for all asset classes except retail, and there is $191 billion ready to move, up 32 percent from 2016. We’ll find out if the commercial real estate industry can accommodate its investors.