What’s Next for Real Estate? Presented by ULI Senior Fellows:
Tom Murphy—where jobs might be in the future.
- Employment change 1990-2010, Boston lost 120,000 manufacturing jobs—55%
- Realized gains in professional and business services, healthcare and education
- Average space per US employee—from 1985 to 2011 dropped 150 square feet per person
- Expected to drop another 150sf by 2020. People are plugging in their computers in designated work spaces and working together.
- Educated work force is important going forward—gives you a competitive advantage-D.C. leads, San Fran, San Jose, Raleigh.
- Research $ a region attracts is critical, availability of capital—2/3 of venture capital goes to Silicon Valley, Boston and New York area.
- Necessary ingredients—low crime, leadership, infrastructure investment—how you move people around.
- We are 4 yrs. into the housing recession nationally, home prices are down this yr. and he thinks they will continue that trend next year.
- Home prices are down 30% from 2006.
- Forming 400k households/yr—New home sales of 300k or less
- Homeownership rate typically 65% and falling—we will see more renters in the future
- Since 2004—US has 4.3 million more renters, 11 million homeowners are under water—equates to 57% homeownership rate. There are far more renters living in the suburbs.
- Gen. Y—16 to 33 yr. olds—pent up demand of 4-6 million households waiting to be formed. They are poorer than any generation since the ‘30’s.
- Highly mobile, well educated, very urban—most want to be a homeowner eventually. They are in debt—projection is they will buy in their mid to late 30’s.
- Seniors (65-75) there will be 14.5 million more by 2020, they are living longer, most are active and healthy, family is important and they are deferring retirement—they are urban, diverse, and open to change. Question is do they have enough money to live for the rest of their lives? They say they will age in place—can they continue to pay for housing?
- Financing—nothing certain here—90% of all housing is financed by the Fed. Expect no changes until 2013 at the earliest.
- Energy and green building—retrofitting of existing buildings—where will our energy come from? Global energy consumption will double by 2050. $8/gal gas in 2020.
- Revitilization and redesign of suburbs—conversion of dead or dying strip commercial centers in suburbs into urban, walkable places.—Opportunities with greyfield sites—tear up parking lots and rebuild paradise.
- One less car for greater homebuying power allows people to live closer in.
- Leveraging green—Millennium Park in Chicago.
- Water is more precious than oil—San Antonio has instituted innovative water conservation techniques.
- Volatility and uncertainty will be on the rise—4 paradigm shifts
- Securitization-more jv’s, partnerships, reits’
- Globalization-public and private debt and equity will evolve, Volker rule will be implemented.
- Consolidation-size becomes prized.
- Technology-Myths/legends exposed—AIG was rated AAA.
Respondents to the book—What’s Next For Real Estate?
Rosemary Feenan—Jones Lang LaSalle
- Ebb and flow of cities—which will do well, city to city commerce
- Attitudes to risk are changing
- Transparencies are more important
- Stress on water-natural resources
- Competitiveness with cities—gen x and y, which cities do you want on your resumes?
- Riots in London—concern for real estate and unemployment.
Thomas Tooney—UDR- apartment reit –owns 60,000 apts.
- How does current environment change my business model—how do I make money in the future?
- 80% of US GDP is an urban platform
- 6 million more renters by 2015.
- Cities resources are strained. If a weak city, maybe can’t service us.
- Jobs/education attract capital
- Energy-water-living with less.
- Gen Y phones are on all the time—need bandwidth—criteria for apt. dwellers
- Seniors are larger part of the work force—how to create a market niche? Suburbs are not dead—immigration-positive trend-how does your product fit for them?
Thought Leaders—Brooke Warrick-President of American Lives, and Peter Yesawich-Chairman of Y Partnership.
It’s about lifestyle, not real estate. It’s about family, not goals.
Thomas Friedman-something’s happening here—value shifts are taking place.
Technology is changing the way we work.
Internal focus used to be making money, now more family oriented.
- Voluntarily Simplicity—they can live a simple life, family and relationships are more important.
- Cutting back-doing so in favor of family-home becomes more important—2nd home even more important now.
- Book—Encore—people our age want to create something new, search for fulfillment and meaning, not cutting out, but cutting back.
- New resourcefulness—way $ is managed in households, practical vacations. This is not a fad.
In 2008 US had 10 million millionaires, lost 3 million in 18 months. There is a pervasive degradation of trust in government and most institutions—causing us to turn more inward, more cocooning.
- Health and wellness—well established trend—not a fad. Biking and walking trails within communities is the connective tissue. Happy places in the world are characterized by 6 hours of socialization/day.
- Brooke lives in Carmel—observes strollers and older people walking daily. Health thru nature-can do art on these trails, promontory points, waterfalls, gazebos, sanctuary places.
- People our age have intellectual curiosity—dimension of wellness as it relates to lifestyle—programming-software is intriguing to people—art classes, cooking—want to learn more.
- People are looking at fulfillment thru giving—not necessarily making money. Sun City lifestyle is not what is happening—there is an opportunity here to service the boomers.
- Canyon Ranch—guests talked about the spiritual journey they got—not the great massage or spa. Miraval-talked about mindfulness and intentionality. Women are taking the lead. Neuro channel physical activities.
- Buyers of 2nd homes used to take a vacation, fell in love with the experience and bought the property. Now they are looking for a more practical investment, prices they pay are lower—takes them to shared ownership—not whole ownership.
- Need to create a multi generational experience.
- Sustainability—do it—all other industries are creating consumer monsters—Wal Mart is doing it. Look at as a system issue—local people, local food, local resources. Organizations should have a meaning and a mission, not just transactions. Need to communicate that mission.
Work life—habits changed about 1996
- Average work week is 48 hrs. We are consumed by work
- People are not willing to leave their work life behind. Work life is transforming us. Vacations are getting shorter—weekends are most popular.
Personalization—one size no longer fits all
The way people use it is important to figure out—resort developers need to figure this out—how do I want to spend my time, family. Technology piece fits in there. Worked with Texas homebuilder—had a showroom—people had choices to make—easier for consumer to choose from 6 vs. 24. Amazon.com—bought this book, might like this book.
Multigenerational—those that took a vacation—1 out of 4 is a grandparent—1 out of 3 of those took vacation with grandchildren. Hallmark sold 84,000 cards last year where people turned 100 yrs. old.
The “Girlfriend experience” 4 girls reconnect each yr at Canyon Ranch—transformational experience—75% of spa business is women.
Authenticity is in demand—fundamental in all the experiences we have.
Marti Barletta—founder of Trend Sight Group and author of Marketing to Women–helping companies get smart about women. Prime Time Women—50’s and 60’s.
Hotels tell us that women comprise 50% of the business travelers and 76% of meeting planners. Lifestyle-real estate—women are the primary decision makers.
Five stages for couples in the buying process:
- Decision to buy—woman is the budget manager-pays bills in 83% of households.
- Research the short list—she must be aware—she does the research thru referrals, pr and adv., target tightly on top prospects—magazines, direct mail and email. Looks at your website and dvd’s.
- Visit/sales consultation—man and wife go and “assess the fit”. He assesses the property, she assesses the home-livability, functionality, flexibility. Most Realtors say He can say no, but only She can Yes. Salesperson’s ability to connect with her often makes a difference—Listening-details make the difference—Aligning communication with her priorities, creating rapport, trust and confidence.
- Purchase negotiations/contract—lots of questions and what ifs. She will often defer to him. This is where husband steps forward and she steps back.
- Referrals-word of mouth is huge—“surprise and delight”—ex. of receiving bouquet of red roses from PeaPod—online grocery delivery service—told everyone about it.
- Industry issue is “Why Buy Now”?—Women’s values and priorities are family, friends, girlfriends and grandkids.
- Our focus should be on Prime Time Women—prime marketing target in the prime of their lives—not retired, exec. VP’s, work outside the home—very large growth expected.
- Looking for a hotel in mid town Manhattan under $500/night—location and price are important—she will shop around, looks at more options than men. Deciding factor was Westin—“heavenly bed”.
- When you meet expectations of women, you exceed expectations of men. To Women, people are the most important and interesting element of any situation. Ads with women on the golf course are attention grabbers.
- Women want the same things as men, and then some…..
Effective Sales and Marketing in the New Economy-
- Prospective buyers must experience it-must visit the property.
- Sales associates need to be coached and retrained.
- Website needs to be compatible with IPAD and IPHONE
- Need programs where people can stay on the property-have special events and get your prospects to attend.
- Need to understand your prospects, their likes (hiking, birthdays) and communicate with them. Know your audience, be able to tell the story. Buyers want validation, they will bring their wife, their friends and their children.
- In the Boca market—built some models and prospects bought model and interior furnishings as well. They also saw benefit in reaching out to top brokers in major markets.
Toll Brothers Golf—David Richey—Why is Toll Brothers Buying Golf Courses/Clubs without real estate?
- Wants their clubs to match the image of the homebuilding company—Toll’s brand as a luxury homebuilder.
- Clubs are in trouble today and need creative solutions.
- Opportunity to purchase at an attractive price.
- Using homebuilding company’s resources for existing membership and management talent.
- Have available capital and corporate resources.
- Restructuring/New Memberships:
- Expects more non equity will prevail at a lower price
- Will be non refundable
- Fees will come down
- Working on removing the objections to joining and removing the obstacles to resigning.
Boomer Values Realignment Study