What’s Changed Over the Past 40 Years?
Technology
Within the commercial real estate industry and businesses of all types, technology has provided a great number of tools to increase efficiency and allow us to conduct business at a faster pace.
Gone are the days of typewriters and carbon paper or even word processors. Today, with computers, software, forms and templates, leases, contracts and correspondence now get prepared, corrected and modified in a fraction of the time it took 40 years ago. Email allows us to share ideas, negotiate deals and exchange contracts much faster than snail mail.
Hours spent completing investment analysis by hand with adding machines or calculators are now reduced to minutes with software like Excel, Planease or Argus. Databases, CRM systems, Loopnet and Xceligent all provide us tools to better measure, analyze and conduct our business in a much faster and more effective way. Forty years ago, we used to drive neighborhoods and sites or hire aerial photographers to fly over properties. Now we can just use Google Maps or one of many other mapping tool options.
The Industry
While technology has changed the way all companies conduct business, we have also experienced changes specific to the commercial real estate industry over the last 40 years.
Specialization: For the most part, agents today specialize in one sector of the real estate business. They may focus on office, retail, industrial, investment properties or other niches. This allows the agents to become experts in their specialized area of practice and provide better advice and value to their clients.
Teamwork: As we do at Investors Realty, many brokers today work in teams of agents and support staff to provide better services to their clients. This structure also allows brokers to be more proactive with clients, looking ahead for opportunities or identifying potential issues before they arise.
More Regulatory Restraints: No one paid much attention to environmental issues 40 years ago, but today nearly every sale requires an environmental study. The Clean Water Act, Wetlands designations and agency laws all require a higher level of detail for brokers and much more time and involvement from engineers, attorneys and other experts in various fields. Zoning is also much more detailed and controlling. Mixed-Use Development Plans, Area of Civic Importance (ACI) overlay districts, Urban Design Elements, traffic impacts and more must be considered when planning a new or redevelopment project.
Title Companies: Brokers used to handle all of the closing preparation and process for a sale. Now title companies collect the earnest deposits and prepare and conduct closings. Closings also used to be a meeting of clients and attorneys to review and sign documents. Today most closings occur by the parties exchanging documents via email and wiring funds.
Types of Investments and Investors: While there has always been interest in real estate investment from individual investors, over time, buyers for investment real estate have become regional or national players. In the 70s we saw a surge of limited partnership deals, which continued into the 80s as “tax shelter investments.” In the mid 2000s those deals were replaced with TIC investments. These allowed for individual investors to use 1031 exchanges and invest and become partners with other investors in specific properties. As with the limited partnership structure, however, TICs have fallen out of favor due to problems with the structure and troubled economies.
REITs are a broader form of real estate investment that allow for the public to invest in a broad pool of properties. These started in the 60s but really did not get into full swing until the early 90s and are still fairly popular today. They have become part of many people’s investment portfolios, much like stocks.
Of course, there are still institutional type investors. Investors have become much more sophisticated in their analysis of properties and in measuring their returns.
A simple 10 percent cash flow return was common 40 years ago. Today investors look at the internal rate of return (IRR), net present
value (NPV), and can use sensitivity analysis to measure how different factors affect the returns they can expect. 1031 tax deferred exchanges, and the use of TIF on redevelopment projects were nonexistent 40 years ago.
Our Market: The face of Omaha has changed dramatically over the past 40 years. Today we are redeveloping some of the neighborhoods and properties that were only being built when Investors Realty started.
Full Service Firms: Forty years ago, most commercial real estate agents were part of the larger residential real estate companies. Today the dominant commercial real estate companies are full service firms that handle sales, leasing and management of commercial real estate, much like Investors Realty. Then, firms with five to seven brokers doing commercial real estate sales or leasing was common. Today the larger companies in Omaha have 20 to 40 brokers and manage millions of square feet of commercial real estate.
Local vs National Ownership: Some Omaha commercial real estate companies are part of a network of larger national firms. Investors Realty has chosen to focus our expertise on Omaha. Our national SIOR and CCIM networks provide connections to over 10,000 of the best brokers across the country with whom we can choose to do business if needed.
We take great pride in our local ownership and our investment in the Omaha community.
This article appeared in our quarterly newsletter from June of 2015. The full newsletter is available at http://files.investorsomaha.com/download/online_newsletter_6-2015.pdf