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respondents expressed keen insights into how
technological change will both disrupt and open
new opportunities within the CRE market. “The
continued digitization of our economy will result
in additional efficiencies that are not evident today
but will have outsized effects on commercial real
estate, ” said John McKinnerney, founding principal
at Castle Hill Partners. “The continued growth in
the sharing economy, co-working, big data and
more will result in better utilization of space in
property markets. In effect, this will add additional
inventory resulting in a decline in rates and
occupancy in the worst locations and the opposite
in the best locations.”
This is consistent with sentiment from other
reports,whichshowtrendstowardlowerconfidence
and potentially declining asset values, but that also
reference 2018’s high deal volume.
THE CASCADING IMPACTS OF TECHNOLOGY
ON THE FUTURE OF REAL ESTATE
The rise of e-commerce and the disruption of retail
have been prominent themes in CRE discussions,
but the survey shows that respondents remain
concerned about ongoing industry-wide impacts.
Two forces in particular are raising questions.
First, a portion of foot traffic is being replaced
by mobile commerce, which continues to grow and
accounted for 40 percent of US retail sales in Q3
2018.
4
This may be one reason that amid a potential
wider industry slowdown, thedemand for industrial
warehousing space remains quite strong.
5
Indeed,
logistics and warehousing tied for first among
respondents’ favored categories for investing.
Second, the growth in ride-sharing and the
prospect of autonomous vehicles suggests that
much of the parking we rely on for foot traffic will
no longer be necessary. One respondent predicted
a 70 percent decline in parking, and another its
eventual elimination. The opportunity to repurpose
these spaces will prove an important element in the
future of CRE.
But disruptors and change were also embraced.
Respondents held increasingly positive views
towards theuseof blockchainandofferedcontinued
enthusiasm for urban and transit oriented mixed-
use development.
INTERNATIONAL INVESTMENT TRENDS
The survey results demonstrate there is a rise in
a new and important cohort of foreign investors
who will remain bullish on US real estate. In the
previous twoDLAPiper State of theMarket Surveys,
China topped the list of expected foreign investors.
Chinese investors have spent tens of billions of
dollars in recent years, often paying record prices
and favoring major metro areas such as New York,
Los Angeles, San Francisco and Chicago. A notable
example includes HNA’s 2017 acquisition of 245
Park Avenue in Manhattan for US$2.2 billion.
JAY EPSTIEN
PARTNER
The rise of e-commerce and
the disruption of retail have
been prominent themes in CRE
discussions, but the survey
shows that respondents remain
concerned about ongoing
industry-wide impacts.