Commercial Real Estate (CRE), like every other sector of our economy, is susceptible to market disruptions caused by innovation and new technology, and these disruptions come at us on an accelerating basis due to the fact we live in the Information Age. CRE capital investors in the popular commercial real estate securities private placement offerings (mainly thru the Direct Participation Program) are particularly exposed to the impact of innovation as the investment can require extended holding periods. The question we have to ask ourselves is, “what are we going to do about it?” and of course the when.
Market disruptions are a fact of life and now we are able to switch from the practice of reacting to the outcomes to reacting to the events and innovations that have the potential to create them. By focusing on detection and early notification, CRE income-producing properties can be re-positioned, they can be re-developed into another intended-use (and we see that quite often, don’t we?) or they can be sold in an orderly sale manner. This beats the traditional “fire sale” exit scenario that occurs after everyone realizes there has been a market train wreck hands down.
Like physicians, we can deal with the symptoms or we can deal with what causes the symptoms, and the results have a tendency to play out in the same manner.
There are no villains in this world and there are no victims – there are only volunteers. Moral of the story: know what you are volunteering for.