It’s OK to be the second-to-last buggy whip maker

October 22, 2014 admin

A recent article in The Wall Street Journal, “Pen and Pencil Makers Go Back to Drawing Board”, describes how some of these manufacturers are learning how to adapt, survive and thrive to the new age of smartphones, tablets, phablets and laptops. This includes Crayola of Crayons fame; Faber-Castell, the world’s oldest pencil maker; and Bic. Each one of these is manufacturing “digital friendly” products as a means to meet this challenge head on. On the other side, Dixon-Ticonderoga, manufacturer of the ubiquitous “Number Two” pencil, has decided to stay the course and not enter the fray.

Only time will tell who will come out on top and whether Dixon-Ticonderoga has made a sound business decision. The other firms are entering an ever-changing marketplace, and the competition will be fierce as they see how their long-term planning pans out.

This leads to an interesting dynamic in the commercial real estate industry. As an industry, real estate remains a brick-and-mortar investment vehicle no matter how many different ways and cocktail concoctions are developed around it. It is a “real asset,” and that is its true value proposition. There are many technology companies that support real estate, including portfolio, asset and property management software applications. There is also the new capital-raising structure known as “crowd funding” that utilizes technology to bring new investors to this “real asset.”

The pen and pencil manufacturers are seeking new opportunity in an ever-changing marketplace and dealing with the needs of their customer base. And as we look to find our way through this same dynamic, it is probably better to serve our customer base through making properties more adaptable and usable for tenants instead of figuring out how to merge real estate and technology. Technology is utilized to support real estate, not become real estate. It’s a fine distinction between the two, but doesn’t take much gray matter to figure it out.

In our industry, the last buggy whip manufacturers will be the ones who don’t realize soon enough who occupies the space and what their business models are evolving into. And there is still plenty of evidence that there are those in the industry that haven’t worked this through, yet.

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JS_91x119Jonathan Schein is senior vice president and managing director of business development with Institutional Real Estate, Inc.

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