One thing no one talks about regarding commercial real estate is that it’s a technology story.
Reporters facilely talk about older commercial structures being “obsolete” but they don’t explain what that means.
It means the cost of retrofitting the building for modern office work is prohibitive.
If you see an RJ-11 phone plug at the hotel you’re staying at, you understand. The twisted-pair cabling used 30 years ago can’t handle the volume of data defined today as broadband. Even coaxial cable installs require expensive retrofitting. Before you say “WiFi,” remember that WiFi must connect to something.
The industrial bullpen where the 1960 movie The Apartment was filmed was at 2 Broadway, which now houses the Metropolitan Transit Authority. The walls are very thick. You couldn’t build the thing today. A superficial renovation in the mid-1990s didn’t fix it. Financial firms abandoned it.
About one-third of Manhattan’s offices are like this. Technology changes fast, creating “technology debt.” This is true not just in corporate operations, where many companies are still using PC and server software, but in the buildings where they live.
It costs a lot less to build a new office building for the 2020s than to retrofit the old ones.
What Atlanta Did
What Atlanta DidI saw something similar when I first moved to Atlanta 40 years ago. The city was filled with empty factory buildings. But after they became worthless entrepreneurs turned these into “lofts,” selling them in pieces for what they could get. The new owners used imagination to get the most from available space, they found solutions for the buildings’ limitations, and they built a new city.
There’s a huge opportunity here. But the current owners of Class B buildings must go bankrupt before it can be pursued. You need to get the space for practically nothing before you can afford to rewire them, install walls separating units, and offer modern water and heating systems.
The point here is that our “real estate problems,” the lack of housing and the glut of offices, are technology problems. They will yield to investment and imagination. The guy or gal who figures out how to do this will solve two problems at once and make themselves a fortune.
