ULI Triangle News

Moore’s Law and Real Estate: Shrinking Demand for Physical Space Still Means Opportunity

By Archana Pyati

According to strategic marketing guru Gunnar Branson, real estate is facing a shrinking demand for physical space as a result of Moore’s Law, a prediction made in the 1960’s by Intel co-founder Gordon E. Moore that the computer power of micro-chips would improve exponentially every two years and take up less physical space as time over time.

As a result, so much of what we consider essential now fits on the smartphones or thumb drives in our pockets or on servers and databases accessed by cloud computing.  No longer do consumers require libraries and bookshelves to store their magazines, books, and CD’s. Companies no longer require as much office and storage space for documents that are now all digitized.

“This is not an opportunity to sell more square footage,” Branson said. “We want people to pay more for less square footage.”  President and CEO of the Chicago-based National Association Real Estate Investment Managers, Branson delivered his remarks as part of the ULI Carolinas’ Second Annual Meeting held in Charleston, February 9-10. Three district councils – ULI Triangle, ULI Charlotte, and ULI South Carolina – received an Urban Innovation Grant from the ULI Foundation to support the conference.

16493505666_3c30a1f45f_oAccording to Branson, the reduction in physical space presents an opportunity – rather than an obstacle – for the real estate industry. Place-making should still be the priority of real estate developers and should be pursued according to three principles: density, diversity, and shared ownership.

“The denser people are, the more money we can make,” Branson joked with the audience that seemed ready to agree with this conclusion.  Diversity doesn’t just mean ethnic and gender diversity, but diversity in retail rents, price points, services, and housing types. The more variation, the more interesting and engaging your development will be. Regarding shared ownership, Branson predicted that renting would continue on an upward trend with Millennials shy about homeownership. Car-sharing services like Zipcar, Lyft, and Uber are here to stay with fewer and fewer urban dwellers interested in owning their own vehicles.

Finally, Branson urged the industry to follow the “desire lines” of consumers – to observe consumer behavior and design product types and services that reflect what people are actually doing instead of trying to mold preferences to outdated paradigms.

 

– Archana Pyati is an impact writer on the Strategic Communications team at ULI headquarters in Washington, DC. Reach her at archana.pyati@uli.org.

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