The world is benefiting from the fastest spinning revolution in the history of mankind. It’s affecting everything from the way we socialise to the way we shop, how we work, and where we live. The rate of change means presumptions about the future are becoming redundant faster and the business and investment life-cycle is becoming much shorter.
Those who are able to pick the trends can make an unimaginable amount of money very quickly, while those who are blind to the changes will find the value of their investments eroded - and very quickly. Property investors can no longer rest assured that their investment is “as safe as houses”.
Last week the NZ Herald reported a good news story about a struggling university student from the Waikato who started an e-commerce clothing business aimed at men. Within six months he has turned over $1.5m in sales. “He puts a 50% mark-up on the clothing he buys and said the quality was comparable to menswear chain Hallensteins but he would never open a physical shop.”
His main costs are the cost of the goods he sells, and marketing on Facebook. Not a single cent is spent on rent - the landlord is shut out of the game. That is becoming an all too frequent scenario and it is now not uncommon to see windows signs in vacant retail shops saying “We have shifted to www…”
There’s something pretty attractive about buying stuff online. A vast product range is just a click of the mouse away - and you don’t even need to get changed out of your pyjamas or get the car out of the garage. Bricks and Mortar retailers are already feeling the effects of online shopping, and if retailers are then landlords are too.
Technology will also change the way real estate will be sold. The latest innovation in video marketing is wearable technology. Leading the way is Google Glass, an interactive device that is worn like a pair of spectacles that can take pictures and videos (among other things). It’s the interactive capability of the device that may be a game changer. An agent wearing the glasses can literally take a virtual guided tour of a property in Paihia while communicating with prospective buyers sitting in a café in Sydney. The glasses work by projecting a web page onto the inside of the lenses which become a screen. For example, a tourist walking through London could say, “best local attractions” and their screen would display the top attractions within walking distance, including entry costs, visitor reviews, etc. Or they could say, “Take me on a guided tour” and they would be navigated to a nearby local attraction and given a narrative of its special features. Mass production of these devices is about to begin and will be common-place within the next couple of years. Google has recently announced an alliance with Ray-Ban and Oakley, so soon the glasses will go from geeky to cool.
This concept of wearable applications is already progressing beyond Google Glass. Last week Facebook purchased Oculus for US$2b, a company that has developed a 3D goggle headset. It has been developed for virtual gaming to immerse the player into the game itself, but the technology is likely to have much wider appeal that will impact on property investors.
It’s a small step from virtual gaming to a virtual workplace. Workmates will no longer need to be in the same office – they will simply need to be connected via a headset. As soon as business people en masse realise it is technically feasible to have a virtual office (the early adopters already have) the movement away from bricks and mortar will gain momentum for the specific purpose of eliminating rental costs. It is probably only a few decades down the track that the slow and late adopters will switch and virtual offices will become the norm rather than bricks and mortar, but the impact of such a seismic change in the way we work will impact investor returns much sooner.
“But people will still need a place to live”, residential property investors will say, and that’s very true. But they will no longer need to live near their place of work. Their workplace will be virtual and someone living in idyllic Tutukaka for example can be in touch with clients in Auckland or London – the only constraint is the speed of their internet connection. It may be migration patterns in the future will reflect more where people want to live rather than where they need to live – and that will impact residential property prices over the next generation.