Developers, Brokers Debate Net’s Impact
A conference in Beverly Hills on Monday was about real estate but it was the Internet that took center stage as developers and brokers debated the impact of e-commerce on everything from neighborhood shopping centers to industrial parks.
A few investors said they have radically changed the contents of their real estate portfolio in advance of the great changes they see coming as consumers and businesses flock to the Web. But most of the speakers at the first UCLA Extension Los Angeles Times Real Estate Forecast conference remained unsure or unfazed about the Internet’s ultimate impact on their industry.
“I don’t believe that e-commerce is going to substantially, negatively impact real estate,” said Jordan L. Kaplan of Los Angeles-based Douglas, Emmett & Co., one of the largest owners of Westside office buildings.
However, some developers and investors said the Internet will trigger profound changes in real estate.
W. Blake Baird, managing director and chief investment officer of San Francisco-based AMB Property Corp., said his firm has decided to sell off its $1-billion portfolio of retail properties, which may grow more vulnerable to incursions by Internet shopping. Instead, his firm has focused on building distribution centers for Internet-based retailers. Baird said his firm has taken steps to protect itself from the volatility and uncertainty surrounding e-commerce. In many cases, the central location of its distribution centers ensures they will always be in demand, he said.
“If they go out of business, we can easily lease the building,” Baird said.
But many of the panelists said they did not expect major real estate tenants--particularly retail chains--to close up shop and leave behind vacant space because of the growing popularity of Internet shopping, for example. Skeptics pointed out that demand for retail space has grown in the face of competition from mail-order catalogs and television shopping networks. In fact, many retail chains are expected to adapt to the Internet to boost their sales and protect their brick-and-mortar stores.
“Those people aren’t going to roll over,” said Harold H. Greene, managing director of the western region banking group at Bank of America. “I don’t think that there will be much of an impact on neighborhood shopping centers.”
Instead of being overwhelmed by the Internet, landlords and real estate developers are expected to harness the system to boost profits and expand their scope. In addition, many property owners have benefited from the rush of Internet start-ups to lease and buy office, research and distribution space. But many said they are concerned about the long-term viability of the new firms, many of which are expected to fail or be acquired by rivals.
“I don’t think we know yet where we will end up,” said Randall L. Hunter, vice president of GE Capital Real Estate.
