Recently, expectations in the real estate market are growing over the possibility of an interest rate cut in the second half of the year.
As transactions have decreased due to high inflation and high interest rates since March 2023, there have been many articles in various media outlets that seem to indicate a significant decline in real estate, but very few commercial real estate transactions so far have actually declined.
This shows that real estate investment is still a subject of much interest and an attractive market. However, in the future, if the existing success patterns are applied, the real estate market will be reduced to a miserable complex that only generates costs, let alone profits.
The age of maturity and the online market.
After the pandemic, people's consumption patterns shifted from the offline to the online market, and last year, online sales surpassed offline sales by exceeding 50.5% in total distribution sales. Of course, with the endemic transition in 2022, the suppressed offline market seemed to be strengthening for a while, but it has become more attractive than the offline market to consumers who have already become accustomed to the convenience and price discounts of the online market. As a result, offline stores that were competitive during the growth period are increasingly closing, meaning that they can no longer succeed using the real estate investment formula of the past.
In an era of mutual growth centered on the interests of the majority, we have rapidly entered a mature era where individual opinions become more important. Even though we have entered a transitional period in the real estate market, including changes in the consumer market, the perspectives of asset owners and real estate experts are still based on the old investment formula. It stays the same. Now, only by eliminating the boundary between online and offline through dichotomous thinking can an investment fail.
The investment formula has changed
If the law of maximum utility has been used as a real estate investment formula so far, we have now entered an era in which the incentive to commercialize can be reduced. The reason why it continued even after the era when tenants moved in if they owned real estate was over was because there was no convenience in online shopping, but now that online shopping provides convenience beyond offline shopping, there is no reason to endure the inconvenience and choose offline shopping. It's gone. Large offices and shopping malls that anticipated this changed their space by giving up the expected income generated by separating floors, raising floor heights, and increasing idle space, which changed to a public space strategy. However, small and medium-sized property owners still follow the old formula. There are many places where it applies.
Of course, even small and medium-sized buildings and stores are recognizing changes in consumption patterns, and the number of new buildings that are increasing floor heights or using voids to relieve stuffiness is increasing, and the number of buildings that use objects or provide idle space through remodeling of existing buildings is increasing. there is. However, the unfortunate reality is that there are still many buildings that do not function properly due to the lack of strategy by property owners and are used for other purposes. Even if it is not necessarily new construction or remodeling, now is the time to reorganize what strategy is needed for existing assets.
Era of tenant attraction strategy
As you walk down the street, you will see surprisingly many buildings that do not fit the characteristics of the area and are occupied by tenants who are not connected to the characteristics of the building. For example, if an investor spends excessive capital to build an expensive building out of a desire to build a landmark building, but the local level and local tenants cannot keep up with the building's standard, it can be said to be a failed strategy. In other words, buildings that do not blend in with the surrounding environment, stand out uniquely, or have a visually unique exterior can be highly volatile, so it is not easy to attract a certain level of tenants on a continuous basis, and for modern people living in the online age, there is already a lot of things to see.
If it is not possible to provide unconventional attractions in a large space, a better strategy may be to provide relaxation to tenants by focusing on scarcity and comfort. Providing a rest area or securing idle space without spending a lot of money on the interior or finishing materials of the exterior of the building can be a good strategy, and there is an urgent need for branding by wealthy people to attract tenants by studying popular spaces on social media. It can be said that
