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It is easy to predict that the internet revolution will have profound impacts upon traditional communications industries. Exactly what those impacts will be is a bit tougher question to answer but it is possible to make a range of projections that will encompass all the likely futures.

Far less foreseeable, much less predictable, are the impacts this communications revolution will have on other industries and professions. Let’s not be daunted by this misty view of the future. Let’s take a crack at some of it.

I suspect that the combination of new technologies creating new operational possibilities and the attitudes and behaviors of people to whom all this “Dick Tracy” technology is the normal state of affairs will result in very real changes in commercial real estate investment and development. Somewhere between the ages of thirty-five and forty there is a fairly well defined line of demarcation. On one side of that line are folks perfectly at ease with the use and capacity of the new technology. These folks can, almost, intuitively understand how a new electronic device or service works because they have grown up encountering new electronic devices and services on a regular, routine basis. On the other side of this line, the over forties, is a population largely unfamiliar with and uncomfortable with these devices and services.

Not that the over forties don’t use many of them. Indeed, some of these devices and services are so integral to our lives it is hard to imagine how one conducted business or social activities before they became ubiquitous. Even so, far fewer of us in this cohort have a sort of “second nature” relationship with the current and emerging technology, as do those in the first group.

For one thing our notions of privacy and security are less compatible with the technology than our younger brethren. For another, we are used to the spaces and accoutrements that have been developed for our business and professional lives and they form a comfort zone of which we are fond.

These biases are, to a large degree, not the same with the younger set. They have different notions of privacy and security and never formed the emotional attachments to the spaces of commercial real estate the older set have done.

The entire notion of the power and prestige conveyed upon the holder of the “corner office” is not so impressive to the young professional. He or she is more tuned in to the power and the prestige of the possessor of the latest and greatest technology. For that person has the power to change things, to get things done. The corner office guy is reduced to the fellow that asks for the information or allows the project. The connection between commercial real estate and emotionally satisfying prestige has been broken in the younger crowd.

Add this attitudinal change to the increasing mobility of files, records, production capacity and everything else the office itself becomes less of an essential forum for exchanging information and producing cooperative work. Many hand-held “smart phones” now have the capacity to be a station in a video conference allowing full video and audio and data communication between multiple parties. Those same devices, or others no less portable and only slightly larger, provide all the informational files, research capacity and other production applications needed to be a fully participating collaborator in almost any office function without being on the same continent as the rest of the participates.

I have to believe this combination of technology and cultural changes will have a profound impact upon the demand for office space.

In a similar vein, there are many industrial processes that do not require a centralized location to work together to build or assemble a tangible product. Not all industrial output, probably not even a large minority of such outputs, will lend themselves to decentralized manufacture and assembly. However, enough of them will to have an impact on the demand for industrial real estate.

Retail is, perhaps, the most interesting. I suspect that most retail trade will soon be conducted via the web. Increasingly, retail trade that does not involve products that must first “romance” or “seduce” the buyer are easily sold over the net. That is why internet retail sales are growing so much faster than traditional retail, which, in some instances, is shrinking.

If the “romance” theory is true, you should expect for there to be a dramatic reduction in demand for traditional retail space. Any such reduction in demand will strand enormous amounts of capital in unusable shopping centers and malls all across the country. Indeed, all across the world. Only the shopping that will still retain a primarily “social” experience will provide for healthy, traditional retail trade. High end fashion, some automobiles, high end jewelry, certain electronics, specialized recreational destination centers, think Bass Pro Shops, that sort of thing will still be enough of a social experience and enough of a romantic experience to justify a traditional, sort of, store.

Again, there is a generational, not gender, divide on this. Older, traditional shoppers enjoy the experience and will be uncomfortable and reluctant to let the mall go. Younger consumers will not be attracted to the traditional shopping experience unless there is something perceived as very special to be gained from the effort. This divide will result in an ever decreasing demand for traditional retail space as more and more shopping goes on the web and away from the store.

So, assuming we do someday emerge from the recession that is now, officially, over, what happens to space demand? My belief is that the best case will result in flat demand. This will not be so bad for the existing industry but will put a severe damper on demand for new development and construction. However, the negative impacts on demand for space could be far more pronounced. If so, we could find ourselves with an enormous amount of capital stranded in the form of buildings for which no one has any use.

Should the demand decline steeply due to technology and changing attitudes toward the shopping experience, this is, of course, really bad news for owners of existing centers. Likewise, should the same combination of factors, working in a slightly different dynamic have a similar effect on office demand, the same dire situation could impact owners of office space.

However, this isn’t just the owner’s problem. Many creditors will also feel negative effects, as will vendors, property managers and so forth. More importantly, metro areas and central cities will also be blighted. They will be blighted by unused, and unusable, buildings dotting the landscape. The internet, assuming such a scenario is close to what happens, will then be a structural change to the real estate market, not a mere cyclical one.

Of course, prosperity may soon return and everybody will go back to his or her old habits and these prognostications will prove silly. It is just a thought.

Mike Copeland

I am sixty-two years old, married with three grown children. I have a B. A. from Birmingham Southern College and a Master's in City Planning from Georgia Tech. I have worked in SC State government for over a decade leaving as the Deputy Executive Director of the State Budget and Control Board, the state's administrative agency. I have owned the Fontaine Company since 1984 and am the managing member of viscerality.com.llc (www.viscerality.com) and technology management, marketing and consulting company.

I am the author of several novels. The current project is titled Unforgivable Sin, a satire about religion and politics.

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