Global Pressure, Local Compression
You've seen it on the news, read about it in various media and social media outlets, observed its merits debated in political arenas. Whether or not you realize it, we live a life heavily impacted by globalization. Whether you believe it is positive, negative or neutral, you must recognize it as reality.
No, this is not "fake news," it is the reality of our modern world. You may be reading my blog clear on the other side of the world on your computer, your iPad, iPhone or Android. Maybe you're in a coffee shop in San Francisco, at the mall in Dubai, in your office in Indianapolis or perhaps you're walking your dog on Bardstown Road in the Highlands. There's a good chance you recently purchased something on this very same device and received it within 24 hours at your front door. Yes, you probably tapped your thumb once or twice on the app that's putting retail conglomerates out of commission left and right and who now has a larger market cap than the one time king Wal-Mart (do I even need to mention the company name?). This same device just facilitated a ride to your next appointment, across town or to the airport cheaper and faster than you would've ever imagined just a couple years ago.
You get the gist. What it boils down to is that exponential technological advances have created a global economy that cannot be ignored. Real estate is experiencing the shift of these forces as well. Of course, retail and industrial real estate are changing drastically before our eyes. Successful retail owners and operators appear to be adapting to these forces by creating more experiential based services, rather than commodity products. Industrial real estate has become distribution centric for e-commerce outlets. Office spaces are becoming more shared-oriented or redeveloped into mixed or different uses since employment is being redefined. We're scratching surfaces only here, but I think you're following.
In the real estate investment world, global players are accessing local data and making many diverse acquisition or disposition decisions in markets where they otherwise could not in previous years. Tools and technologies make it easier to access demographics/psychographics/traffic/financial information, select sites, communicate and sign documents from anywhere in the world. Of course, the gateway and primary markets receive the bulk of the global attention, due to many factors. As you may imagine, this creates a domino effect to secondary and tertiary markets. With the laws supply and demand, investors looking for yield tend to look in markets where it exists. Local players in turn become national players. Other local players must become either hyperlocal or cease to exist. Whatever the individual strategy, these factors can create higher demand, which in turn creates lower cap rates and higher prices everywhere. We're certainly seeing this impact on my local market.
When will this reach a tipping point? That is the million dollar question. In the mean time, I suggest you continue to stay grounded in the fundamentals of evaluating your opportunities. Take advantage of the resources technology provides to scale your business. Focus on your goals and leverage the global economy to help you live the life you want to live. Align yourself with partners who understand and can help you capitalize on this new world. Don't allow the hysteria of these changes cause you to act against your investing principles. Think big, double your effort, and put your plan into action today.
