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Tag: real estate investments

  • Should I consider Real Estate Rentals?

    One of the most common questions we get from beginner individual investors: should they invest in real estate rentals? Some want to take their first step in investing beyond stocks and bonds. Some see rentals as a source of passive income, in addition to their primary source of income. Some rent out their existing house when they buy a new house. Some are very much interested in real estate and want to take their first step. Reasons are varied and many.

    Even though there is a lot of interest, real estate investing comes across as daunting for many. The reasons are again varied and many – high capital needs, time commitment, etc. The purpose of this article is to lay out three major ways to invest in real estate, including rentals. We will look into the characteristics of the different investment options and provide an approach to answer the question. The investor can then evaluate the pros and cons and decide whether rentals make sense.

    Investing options

    Real estate investors these days have a variety of options to start investing in real estate. Many of these were not easily available to a lot of individual investors even a few years back. The major options include investing in REITs, private placements, and directly investing in rentals. The good news is that there are so many ways to invest in real estate and get started that you don’t need to have a large amount of capital which used to be a big roadblock.

    We’ll look at all three investment options through the lens of an investor, not necessarily as someone who wants to build a career in real estate. There are many ways for investors to get started with investing in real estate. Basically, it comes down to investing in the following three major ways illustrated and explained below.

    Real Estate Investing Options

    Direct Ownership of Rentals

    Direct ownership of rentals needs no introduction. Buying a rental property has been an “old school” way to invest in real estate for decades and even centuries. Almost everyone can identify with buying a rental property and having full control over the property. People buy a rental home and are responsible for everything – buying the home and managing it themselves.

    Syndication or Crowdfunding Platforms

    Investing through syndication or crowdfunding platforms has become very popular over the past few years. Someone you know may have done it through crowdfunding platforms like Fundrise, RealCrowd or CrowdStreet. The terms maybe confusing to beginners, but think of syndicates as capital pooled from tens or hundreds of investors. The property is bought, managed and sold by the sponsor. In essence, sponsor is the active landlord and you’ll be the passive investor as a limited partner.

    REITs and Stocks

    Real Estate Investment Trusts (REITs) are real estate securities that trade like stocks. REITs are run by large institutions and they typically manage a property type (e.g. office or multifamily) across a large geographic region. Some of the popular REITs are Equity Residential for Multifamily or Prologis for Industrial property types. In addition to REITs, investors can also invest in housing stocks or real estate mutual funds.

    Comparison of Various Options

    Now that we have an understanding of the major options to invest in real estate, let us look at the characteristics of each of them. We’ll look into the four key characteristics of the real estate investing options available – Ownership, Liability, Control, and Finances. The key characteristics are summarized in the illustration below:

    Comparison of the Investing Options

    Ownership, Control and Responsibility

    When an investor invests in a rental property she will be the sole owner or one of the few owners. The investor is in full control. This is the storied mom and pop landlord that many of us are familiar with. The investor will be the sole responsible party as the landlord and she is responsible for all aspects of buying the property, getting a loan on the property, managing the property, and eventually selling it.

    For private placements, the investor will most likely be a limited partner – one amongst tens or hundreds – in a given property. The investor will share the ownership with tens and possibly hundreds of other investors depending on the capital contributed. The investor will have limited or no responsibility, but she will have access to the sponsor and will get periodic distributions (usually quarterly or monthly) and reports.

    From an ownership perspective, the investor will be one of the thousands of shareholders in REITs, funds, and housing stocks. The investor will hardly have any control over the property or management. The investor’s experience is the same as buying the shares of a public company in any other sector.

    Liability and Financial Worst Case Scenario

    When someone buys a rental property directly, they are fully liable as their name is on the title and all the documents. If a tenant sues the landlord because she hurt herself, the landlord will be fully liable and responsible. The investor also needs to get the debt (i.e. loan) and guarantee it. If things go south, the investor will lose her equity in the property and in addition, will need to pay off the debt as well. This is very important to understand.

    For private placements, the investors will usually be a limited partner i.e. someone with very limited or no liability. The sponsor will be the general partner and will be responsible for all liability. The investor doesn’t even have to worry about debt financing, as the sponsor will be responsible for the loan. So, if things go terribly wrong, the worst thing that could happen is the investor will lose all their investment, but not more.

    For REITs, the company management will be liable and the investor has NO liability at all. In the worst-case scenario, if the REIT does a poor job the investor loses all her money invested, but she won’t be responsible for the debt.

    Investor Objective and Takeaways

    We have looked into the major ways to invest in real estate and their characteristics. Now, let us come to the key question – Should you consider investing in rentals? Investors have different personal objectives, motivations, and situations. There is no one answer that fits all. We’ve seen the characteristics of the major investment options. Which one do you find appealing? The following questions will help you personalize the decision to your objectives and situation:

    • What are your (a) personal and (b) real estate investment objectives?
    • How much control/ownership do you want to keep or give to others?
    • How much liability and responsibility (including time commitment) are you willing to take?
    • Are the returns worth the risk?

    Once you have understood the characteristics of the major investment options discussed earlier and answered the above questions, the choice will start crystallizing. Are you looking for passive income with minimal time commitment and headaches? Then, the options are REITs or private placements. Do you enjoy real estate or want to be more active in real estate? Then direct ownership in rentals may make more sense. After all, you know yourself the best.

  • Should I consider Real Estate Rentals?

    One of the most common questions we get from beginner individual investors: should they invest in real estate rentals? Some want to take their first step in investing beyond stocks and bonds. Some see rentals as a source of passive income, in addition to their primary source of income. Some rent out their existing house when they buy a new house. Some are very much interested in real estate and want to take their first step. Reasons are varied and many.

    Even though there is a lot of interest, real estate investing comes across as daunting for many. The reasons are again varied and many – high capital needs, time commitment, etc. The purpose of this article is to lay out three major ways to invest in real estate, including rentals. We will look into the characteristics of the different investment options and provide an approach to answer the question. The investor can then evaluate the pros and cons and decide whether rentals make sense.

    Investing options

    Real estate investors these days have a variety of options to start investing in real estate. Many of these were not easily available to a lot of individual investors even a few years back. The major options include investing in REITs, private placements, and directly investing in rentals. The good news is that there are so many ways to invest in real estate and get started that you don’t need to have a large amount of capital which used to be a big roadblock.

    We’ll look at all three investment options through the lens of an investor, not necessarily as someone who wants to build a career in real estate. There are many ways for investors to get started with investing in real estate. Basically, it comes down to investing in the following three major ways illustrated and explained below.

    Real Estate Investing Options

    Direct Ownership of Rentals

    Direct ownership of rentals needs no introduction. Buying a rental property has been an “old school” way to invest in real estate for decades and even centuries. Almost everyone can identify with buying a rental property and having full control over the property. People buy a rental home and are responsible for everything – buying the home and managing it themselves.

    Syndication or Crowdfunding Platforms

    Investing through syndication or crowdfunding platforms has become very popular over the past few years. Someone you know may have done it through crowdfunding platforms like Fundrise, RealCrowd or CrowdStreet. The terms maybe confusing to beginners, but think of syndicates as capital pooled from tens or hundreds of investors. The property is bought, managed and sold by the sponsor. In essence, sponsor is the active landlord and you’ll be the passive investor as a limited partner.

    REITs and Stocks

    Real Estate Investment Trusts (REITs) are real estate securities that trade like stocks. REITs are run by large institutions and they typically manage a property type (e.g. office or multifamily) across a large geographic region. Some of the popular REITs are Equity Residential for Multifamily or Prologis for Industrial property types. In addition to REITs, investors can also invest in housing stocks or real estate mutual funds.

    Comparison of Various Options

    Now that we have an understanding of the major options to invest in real estate, let us look at the characteristics of each of them. We’ll look into the four key characteristics of the real estate investing options available – Ownership, Liability, Control, and Finances. The key characteristics are summarized in the illustration below:

    Comparison of the Investing Options

    Ownership, Control and Responsibility

    When an investor invests in a rental property she will be the sole owner or one of the few owners. The investor is in full control. This is the storied mom and pop landlord that many of us are familiar with. The investor will be the sole responsible party as the landlord and she is responsible for all aspects of buying the property, getting a loan on the property, managing the property, and eventually selling it.

    For private placements, the investor will most likely be a limited partner – one amongst tens or hundreds – in a given property. The investor will share the ownership with tens and possibly hundreds of other investors depending on the capital contributed. The investor will have limited or no responsibility, but she will have access to the sponsor and will get periodic distributions (usually quarterly or monthly) and reports.

    From an ownership perspective, the investor will be one of the thousands of shareholders in REITs, funds, and housing stocks. The investor will hardly have any control over the property or management. The investor’s experience is the same as buying the shares of a public company in any other sector.

    Liability and Financial Worst Case Scenario

    When someone buys a rental property directly, they are fully liable as their name is on the title and all the documents. If a tenant sues the landlord because she hurt herself, the landlord will be fully liable and responsible. The investor also needs to get the debt (i.e. loan) and guarantee it. If things go south, the investor will lose her equity in the property and in addition, will need to pay off the debt as well. This is very important to understand.

    For private placements, the investors will usually be a limited partner i.e. someone with very limited or no liability. The sponsor will be the general partner and will be responsible for all liability. The investor doesn’t even have to worry about debt financing, as the sponsor will be responsible for the loan. So, if things go terribly wrong, the worst thing that could happen is the investor will lose all their investment, but not more.

    For REITs, the company management will be liable and the investor has NO liability at all. In the worst-case scenario, if the REIT does a poor job the investor loses all her money invested, but she won’t be responsible for the debt.

    Investor Objective and Takeaways

    We have looked into the major ways to invest in real estate and their characteristics. Now, let us come to the key question – Should you consider investing in rentals? Investors have different personal objectives, motivations, and situations. There is no one answer that fits all. We’ve seen the characteristics of the major investment options. Which one do you find appealing? The following questions will help you personalize the decision to your objectives and situation:

    • What are your (a) personal and (b) real estate investment objectives?
    • How much control/ownership do you want to keep or give to others?
    • How much liability and responsibility (including time commitment) are you willing to take?
    • Are the returns worth the risk?

    Once you have understood the characteristics of the major investment options discussed earlier and answered the above questions, the choice will start crystallizing. Are you looking for passive income with minimal time commitment and headaches? Then, the options are REITs or private placements. Do you enjoy real estate or want to be more active in real estate? Then direct ownership in rentals may make more sense. After all, you know yourself the best.

  • Investing based on the Real Estate Market Cycle?

    Investing based on the Real Estate Market Cycle?

    Effective Commercial Real Estate (CRE) investing has two key requirements – capital and opportunities to invest the capital. Both are equally important and one without the other doesn’t work. And hence an investor has to constantly look for opportunities to invest if they have the capital. Where does one find real estate investing ideas or opportunities? How does an investor validate their real estate investment ideas and thesis? The purpose of this article is to answer these questions.

    A Real Estate (RE) investor has to look at the right places to get RE investment ideas in today’s information overload age. Some good sources are market studies, reports, and research done by academia, government agencies, and consulting companies. We’ll look at one great source – Real Estate Market Cycle reports – to answer our questions around RE investment ideas. We will see if we can validate investment ideas at the property or portfolio level according to the investor type and their risk tolerance. We’ll summarize investor takeaways based on the three major investor types – conservative, moderate, and aggressive.

    Real Estate Market Cycle Introduction

    You may have heard about economic/business cycles or credit cycles. The Real Estate Market Cycle can be viewed as the business cycle for the real estate industry. It is based on the fundamental belief that real estate goes through sequential cycles. A given cycle also goes through multiple phases. Real Estate Market Cycles are long, like credit cycles, and can last 10-20 years and so the investor needs to think and plan long-term.

    One of the popular US real estate cycle report comes from Professor Mueller at the University of Denver. Professor Mueller publishes a quarterly Physical Market Cycle Analysis of four Property Types in 54 Metropolitan Statistical Areas (MSAs). The Real Estate Market Cycles are based on the long-term occupancy average as it is a key factor for rental growth rates, income, and thus property values. The market cycle phases or quadrants within the real estate cycle are illustrated in the graph below:

    CRE property types have different risk/reward profiles. Accordingly, Real Estate Market Cycles covers the following property types and sub-types:

    • Office – Suburban, Downtown
    • Industrial – Warehouse, R&D, Flex
    • Apartment
    • Retail – Neighborhood/Community, 3rd Tier Regional Mall, Factory Outlet, PowerCenter

    The chart below shows the National Property Type Cycle Locations in Q3 2020. In summary, Office and Industrial warehouses are in the expansion phase. Apartments, Industrial R&D and Neighborhood Retail are in the Hypersupply phase. Retail, except for neighborhood stores – is in the recession phase.

    How to leverage the Market Cycle and invest?

    How does an investor leverage the market cycle for her investment decisions – Buy, Hold, or Sell? Before we analyze this further, it is important to remind ourselves that COVID-19 has caused major dislocation in the CRE industry. CRE industry is in a state of flux and it will cloud the picture for investors in 2021-2023. The Real Estate market cycle can be one data point for investors, but not the sole data point or factor. Keeping this in mind, an investor has a couple of ways to leverage the real estate market cycle:

    Portfolio Strategy

    Portfolio strategy is the overall asset allocation amongst the major asset classes – stocks, bonds, and real estate. The Real Estate Market Cycle gives an investor the opportunity to validate or make updates to her long-term portfolio strategy. Should an investor increase or reduce her exposure to real estate? Compared to stocks and bonds what should the real estate allocation be in the years going forward? Real estate investing, in particular, takes a lot of portfolio planning and long-term thinking as the execution can run into quarters.

    New and Existing Investments

    When it comes to investing in new real estate deals, an investor can look at the Real Estate Market Cycle for the given property type and location to determine the potential risk and upside. For e.g. if the investor buys during the hyper supply phase, the returns are going to be lower than when buying during the expansion phase. On the flip side, the investor can expect more upside when she buys during recovery/expansion and sells during the hyper supply phase. The investor can follow a similar approach to see if an asset should be sold or held.

    Our opinion for all investor types

    As we saw in the last section, an investor can prepare herself and plan for her portfolio based on the Real Estate Market Cycle. It is important to keep in mind that the progression along the market curve is not always smooth and sequential. It is possible for a property type and location to fall back on the curve.

    An investor can look at the property type and location combination and see where they are in the market cycle. In the following sections, we review the Real Estate Market Cycle by property type and give our opinion for various investor types.

    Multifamily

    Multifamily property type for various locations is either in the hyper supply phase or close to it, as in the Multifamily Real Estate Market Cycle shown below. Multifamily has been resilient in 2020 with expectations for it to continue the next few years. Deal activity came to a halt for most of 2020 and it is expected to pick up in 2021. An investor will have opportunities to buy, hold, or sell but the asset prices will remain elevated in the hyper supply phase.

    Those looking to buy will be faced with high asset prices and thus low returns and cap rates. The key macro-trend to watch is the outward migration from urban and coastal areas to the sunbelt and the limited supply of housing stock.

    Our opinion: Multifamily will provide opportunities for all investor types – conservative, moderate, and aggressive. But, investors need to do due diligence at the market, company/operator, and deal level.

    Industrial

    The industrial real estate market cycle looks very similar to the multifamily market cycle. Similar to multifamily, industrial properties have been resilient in 2020 and the eCommerce acceleration has only increased industrial demand. The trends in play are not going to slow down anytime and actually can be expected to increase in the coming years.

    Our opinion: Industrial will continue to provide opportunities for all investor types – conservative, moderate, and aggressive. But, investors need to do due diligence at the market, company/operator, and deal level.

    Office

    The office property type is usually the domain for institutions, but there are some individual investors who invest in smaller suburban offices. Per the Office Market Cycle Analysis, most of the markets are in the expansion phase. This may come across as a surprise to many as offices were hardly occupied in urban areas. Most of the office leases are long-term and hence there hasn’t been a drastic impact on economic occupancy as tenants have continued to pay the rent.

    The upcoming quarters need to be carefully watched as many of the urban offices may move into hyper supply or recession. Though the Office Market Cycle looks favorable, we believe it is clouded due to the long term leases. In addition, there are major macro-trends at play like work from home and employer migration to sunbelt states, that makes it risky for conservative and moderate individual investor types.

    Our opinion: We do not recommend investing in office for conservative and moderate individual investor types. Aggressive individual investors may leverage distress, adaptive reuse, or contrarian opportunities.

    This image has an empty alt attribute; its file name is 11-25-20-table4.jpg

    Retail

    Retail Maret Cycle has been clouded with the underlying macro-trend of the retail “apocalypse” over the past few years as well as COVID-19. Simply put, investing in Retail is for professional and aggressive investors only. It is for the institutional players who can make use of the adaptive reuse opportunities (i.e. convert retail into warehouses or apartments etc.). Quality institutional investors have the scale, capital, and wherewithal to execute adaptive reuse. We can expect some breakthrough innovation and associated rewards in retail, but it is not for the faint of the heart. Retail is not for conservative or moderate investors.

    Our opinion: We do not recommend investing in retail for conservative and moderate individual investor types. Aggressive individual investors may leverage distress, adaptive reuse, or contrarian opportunities.

    Investor Takeaways

    We introduced Real Estate Market Cycle as a great resource to generate or validate CRE portfolio and investment strategy. We looked into the Market Cycle for each property type and our opinion for different types of investors. The following table captures the key takeaways based on the type of investor. Conservative and moderate investors can consider multi-family and industrial property types but stay away from office and retail. Nevertheless, all investors need to do the market, sponsor, and opportunity due diligence.

    Source: Prof Mueller’s Q3 2020 Real Estate Market Cycle Analysis; FinYork’s analysis and opinion on secular trends

  • Investing based on the Real Estate Market Cycle?

    Investing based on the Real Estate Market Cycle?

    Effective Commercial Real Estate (CRE) investing has two key requirements – capital and opportunities to invest the capital. Both are equally important and one without the other doesn’t work. And hence an investor has to constantly look for opportunities to invest if they have the capital. Where does one find real estate investing ideas or opportunities? How does an investor validate their real estate investment ideas and thesis? The purpose of this article is to answer these questions.

    A Real Estate (RE) investor has to look at the right places to get RE investment ideas in today’s information overload age. Some good sources are market studies, reports, and research done by academia, government agencies, and consulting companies. We’ll look at one great source – Real Estate Market Cycle reports – to answer our questions around RE investment ideas. We will see if we can validate investment ideas at the property or portfolio level according to the investor type and their risk tolerance. We’ll summarize investor takeaways based on the three major investor types – conservative, moderate, and aggressive.

    Real Estate Market Cycle Introduction

    You may have heard about economic/business cycles or credit cycles. The Real Estate Market Cycle can be viewed as the business cycle for the real estate industry. It is based on the fundamental belief that real estate goes through sequential cycles. A given cycle also goes through multiple phases. Real Estate Market Cycles are long, like credit cycles, and can last 10-20 years and so the investor needs to think and plan long-term.

    One of the popular US real estate cycle report comes from Professor Mueller at the University of Denver. Professor Mueller publishes a quarterly Physical Market Cycle Analysis of four Property Types in 54 Metropolitan Statistical Areas (MSAs). The Real Estate Market Cycles are based on the long-term occupancy average as it is a key factor for rental growth rates, income, and thus property values. The market cycle phases or quadrants within the real estate cycle are illustrated in the graph below:

    CRE property types have different risk/reward profiles. Accordingly, Real Estate Market Cycles covers the following property types and sub-types:

    • Office – Suburban, Downtown
    • Industrial – Warehouse, R&D, Flex
    • Apartment
    • Retail – Neighborhood/Community, 3rd Tier Regional Mall, Factory Outlet, PowerCenter

    The chart below shows the National Property Type Cycle Locations in Q3 2020. In summary, Office and Industrial warehouses are in the expansion phase. Apartments, Industrial R&D and Neighborhood Retail are in the Hypersupply phase. Retail, except for neighborhood stores – is in the recession phase.

    How to leverage the Market Cycle and invest?

    How does an investor leverage the market cycle for her investment decisions – Buy, Hold, or Sell? Before we analyze this further, it is important to remind ourselves that COVID-19 has caused major dislocation in the CRE industry. CRE industry is in a state of flux and it will cloud the picture for investors in 2021-2023. The Real Estate market cycle can be one data point for investors, but not the sole data point or factor. Keeping this in mind, an investor has a couple of ways to leverage the real estate market cycle:

    Portfolio Strategy

    Portfolio strategy is the overall asset allocation amongst the major asset classes – stocks, bonds, and real estate. The Real Estate Market Cycle gives an investor the opportunity to validate or make updates to her long-term portfolio strategy. Should an investor increase or reduce her exposure to real estate? Compared to stocks and bonds what should the real estate allocation be in the years going forward? Real estate investing, in particular, takes a lot of portfolio planning and long-term thinking as the execution can run into quarters.

    New and Existing Investments

    When it comes to investing in new real estate deals, an investor can look at the Real Estate Market Cycle for the given property type and location to determine the potential risk and upside. For e.g. if the investor buys during the hyper supply phase, the returns are going to be lower than when buying during the expansion phase. On the flip side, the investor can expect more upside when she buys during recovery/expansion and sells during the hyper supply phase. The investor can follow a similar approach to see if an asset should be sold or held.

    Our opinion for all investor types

    As we saw in the last section, an investor can prepare herself and plan for her portfolio based on the Real Estate Market Cycle. It is important to keep in mind that the progression along the market curve is not always smooth and sequential. It is possible for a property type and location to fall back on the curve.

    An investor can look at the property type and location combination and see where they are in the market cycle. In the following sections, we review the Real Estate Market Cycle by property type and give our opinion for various investor types.

    Multifamily

    Multifamily property type for various locations is either in the hyper supply phase or close to it, as in the Multifamily Real Estate Market Cycle shown below. Multifamily has been resilient in 2020 with expectations for it to continue the next few years. Deal activity came to a halt for most of 2020 and it is expected to pick up in 2021. An investor will have opportunities to buy, hold, or sell but the asset prices will remain elevated in the hyper supply phase.

    Those looking to buy will be faced with high asset prices and thus low returns and cap rates. The key macro-trend to watch is the outward migration from urban and coastal areas to the sunbelt and the limited supply of housing stock.

    Our opinion: Multifamily will provide opportunities for all investor types – conservative, moderate, and aggressive. But, investors need to do due diligence at the market, company/operator, and deal level.

    Industrial

    The industrial real estate market cycle looks very similar to the multifamily market cycle. Similar to multifamily, industrial properties have been resilient in 2020 and the eCommerce acceleration has only increased industrial demand. The trends in play are not going to slow down anytime and actually can be expected to increase in the coming years.

    Our opinion: Industrial will continue to provide opportunities for all investor types – conservative, moderate, and aggressive. But, investors need to do due diligence at the market, company/operator, and deal level.

    Office

    The office property type is usually the domain for institutions, but there are some individual investors who invest in smaller suburban offices. Per the Office Market Cycle Analysis, most of the markets are in the expansion phase. This may come across as a surprise to many as offices were hardly occupied in urban areas. Most of the office leases are long-term and hence there hasn’t been a drastic impact on economic occupancy as tenants have continued to pay the rent.

    The upcoming quarters need to be carefully watched as many of the urban offices may move into hyper supply or recession. Though the Office Market Cycle looks favorable, we believe it is clouded due to the long term leases. In addition, there are major macro-trends at play like work from home and employer migration to sunbelt states, that makes it risky for conservative and moderate individual investor types.

    Our opinion: We do not recommend investing in office for conservative and moderate individual investor types. Aggressive individual investors may leverage distress, adaptive reuse, or contrarian opportunities.

    This image has an empty alt attribute; its file name is 11-25-20-table4.jpg

    Retail

    Retail Maret Cycle has been clouded with the underlying macro-trend of the retail “apocalypse” over the past few years as well as COVID-19. Simply put, investing in Retail is for professional and aggressive investors only. It is for the institutional players who can make use of the adaptive reuse opportunities (i.e. convert retail into warehouses or apartments etc.). Quality institutional investors have the scale, capital, and wherewithal to execute adaptive reuse. We can expect some breakthrough innovation and associated rewards in retail, but it is not for the faint of the heart. Retail is not for conservative or moderate investors.

    Our opinion: We do not recommend investing in retail for conservative and moderate individual investor types. Aggressive individual investors may leverage distress, adaptive reuse, or contrarian opportunities.

    Investor Takeaways

    We introduced Real Estate Market Cycle as a great resource to generate or validate CRE portfolio and investment strategy. We looked into the Market Cycle for each property type and our opinion for different types of investors. The following table captures the key takeaways based on the type of investor. Conservative and moderate investors can consider multi-family and industrial property types but stay away from office and retail. Nevertheless, all investors need to do the market, sponsor, and opportunity due diligence.

    Source: Prof Mueller’s Q3 2020 Real Estate Market Cycle Analysis; FinYork’s analysis and opinion on secular trends

  • 30 leading tech markets in the US and Canada

    30 leading tech markets in the US and Canada

    The CBRE report gives a good lay of the land of the top 30 tech cities. We advise investors to do their own due diligence as we live in a different world in 2020 and growth data from 2018 and 2019 cannot be used as reliable indicators. But, this will give some investment ideas for investors interested in the office space and also where the coveted tech jobs are going. A lot of other property types (for e..g multifamily) also look at cities with a great tech story. For the full report, please visit CBRE 2020 Tech 30.

  • Digital Maturity of your enterprise

    Digital Maturity of your enterprise

    Even before your organization starts to invest in digital, it needs to assess where it falls in the digital spectrum. This is an important step in digital strategy. As a starting point for your organization’s digital journey, see where you place on the digital maturity scale:

    1. Do or Die – Competition or disruption has already squashed the industry, organization, or product. This is a “do or die” situation for the company to reinvent its business model.
    2. Fight and survive – The business is not in imminent danger, but it is very clear that the business needs to be transformed and there is pressure from various constituents (board, shareholders) for change.
    3. Protect the Fort – Business has some competitive advantage that will take years to disrupt, but the possibility of digital disruption remains. Organizations have a sense of security and may even be complacent.
    4. Land/Expand – These are visionary companies that see opportunities in their industry to build or acquire and add value to customers and increase their market share.
    5. Disrupt/Build and Thrive – These are businesses that go after major problems in industries and disrupt the market. Typically, these are digital natives (i.e. built with digital vision).

    Honestly evaluating your enterprise’s current digital maturity will serve as the starting point for your digital strategy. The next step will be to define where you want to be on the digital maturity scale in the future and how you can get there.

  • How can an investor conquer analysis paralysis?

    How can an investor conquer analysis paralysis?

    Have you ever been in a situation where there is no progress because things keep getting stuck in the analysis? If any of the following examples sound familiar to you, then you have witnessed analysis paralysis:

    • As an investor, you have been observing a geographical market and trying to invest there for years. But, you are still in the analysis mode without taking any action.
    • Maybe you are a sponsor who has to develop a digital presence and finalize a vendor in 3 months. It is month 6 and you’re still considering the pros and cons.
    • Your team in a large enterprise had to gather investment and related data, clean it, and load it into a new system. But, the data rules and their merits are still being “validated”.
    • You are doing investment research and you should produce a final recommendation in a month. Alas, you’re still collecting and analyzing data after a couple of months.

    Why does analysis paralysis happen?

    Most investors realize that analysis paralysis can cause major delays and even make them lose deals. But then, why does it continue to happen and why do we let that happen? It usually happens due to one or more of the following:

    • Sometimes we try to gain consensus from ALL (say, business partners or family) involved. A variant of this is the pursuit of elusive perfection.
    • Unfortunately, in some cases, we are (a) afraid to make decisions or (b) don’t know how to make decisions or (c) are waiting for someone else to make the decisions.
    • There are instances when we are unable to influence, nudge, or negotiate to the outcome desired, especially with various personality types involved.
    • We “kick the can” as much as possible as there are no consequences or incentives to make timely decisions.

    How to conquer analysis paralysis?

    How do we conquer analysis paralysis then? A good part of the solution comes from changing individual or team behaviors. You can conquer analysis paralysis by following these guidelines:

    Action

    The best antidote to analysis paralysis is taking action. Be careful to work within the permissible confines of your beliefs or principles.

    Make decision making part of the process

    Adopt a work approach that has decision making embedded. For e.g. follow this common approach – define the problem statement, propose 3-4 options, evaluate the pros, and cons, and come up with a recommendation.

    Don’t aim for perfection

    Realize that there is NO perfect product or technology. Perfect quality is a myth and definitely not attainable in a given timeline. Don’t get caught up in continuous improvement to get to perfection.

    Use resources, time, or money pressure in your favor

    When we are up against time, resources, and money, it forces us to make decisions or act. We should reiterate to ourselves how lack of decisions negatively impacts the outcome. For e.g. loss of a deal.

    Takeaways

    If you are facing “analysis paralysis” in any of your endeavors, you have to first acknowledge it. It saps energy, wastes time, reduces morale, and usually benefits no one – not even the procrastinators. Only when you acknowledge it can you address it. By understanding the reasons and taking steps to resolve the analysis paralysis using some techniques outlined in this article. Time to put this into action!

  • Six design principles for digital and technology projects

    Six design principles for digital and technology projects

    Many of us are aware of the benefits of following design principles in technology and digital projects. Design principles:
    1) Provide guidelines to design solutions
    2) Help with consensus building
    3) Speed decision making

    For e.g. when different people have differing views, running against the design principles helps the team narrow the design options and choose the recommended solution.

    Here are the six design principles for technology projects based on our experience. Most principles can be applied to any digital, technology and construction project and across many industries in addition to real estate.

    1) Requirements or design should clearly demonstrate value i.e. usefulness to users
    2) Follow industry best practices – Many have walked through this path before, there is no need to “reinvent the wheel” unless it is a competitive differentiator
    3) Differentiate between business “need” and “want” and prioritize
    4) Keep it simple – Solution should be simple for users to adopt and these are usually the best solutions
    5) Leverage platform capabilities “out of the box” – Avoid customization unless it is to implement best practices; this helps to keep the solution simple and standard
    6) Don’t aim for perfection – Don’t let perfection be the enemy of good as it isn’t attainable

  • Most innovative companies of the 2010s

    Most innovative companies of the 2010s

    Yahoo Finance has come up with the list of most innovative companies of the 2010s. Worth a look for sure.

  • 10 Rules, Quotes, or Laws of Meetings!

    We have read many books, articles and blogs on meeting facilitation and management, but this still remains an area where all of us can improve. We still through those meetings where nothing gets accomplished and we feel that we’ve wasted most of our day in meetings. This is especially true if we work with teams or large organizations.

    We have concocted 10 quotes/rules/laws on meetings drawing “inspiration” from various sources – science, literature, and even divinity. Please enjoy it with your favorite beverage.

    • It is good to have a meeting with a good facilitator. It is better to have a meeting with prepared participants. It is best not to have the meeting in the first place!
    • Ignore participants who shout or speak a long time in meetings and you won’t miss much.
    • Why bother attending a meeting, when someone didn’t bother with an agenda?
    • I came across a fork, I declined the meeting and that made all the difference.
    • A meeting that starts on time is likely to end on time. A meeting that doesn’t start on time is not likely to end on time. It is that simple, folks!
    • Meeting’s success can be measured by its actual duration – the shorter the better.
    • I went around looking for the bad in other’s meetings, only to realize mine was the worst.
    • More the mass in the meeting room, the less the velocity of the meeting.
    • What is the purpose of attending a meeting, if the meeting doesn’t have a purpose?
    • The only time meetings are fun, it is called Sports.