Dave Hartzel and Sam Zell

Insights from real estate professionals

Dave Hartzel and Sam ZellWith UNC Kenan-Flagler’s annual real estate conference bursting at the seams with more than 400 attendees in 2017, the Leonard W. Wood Center for Real Estate Studies moved the event to the Dean E. Smith Center in 2018for the first time in conference history. The larger venue, coupled with the announcement of keynote speaker Sam Zell, founder and chairman of Equity Group Investments, attracted more than 900 leading real estate professionals from across the country – the largest turnout since the inception of the event.

The day kicked off with a fireside chat between Zell and Dave Hartzell, Steven D. Bell and Leonard W. Wood Distinguished Professor in Real Estate, followed by an interactive panel on market disruptions moderated by Glen Hiemstra of Futurist.com.

The day’s events concluded with Leonard W. Wood (MBA ’72), chairman of GLP Partners, leading a panel on capital markets outlooks. While all topics were insightful and thought provoking, below are some key takeaways of the event.

 History repeating itself

Following an engaging personal account of Sam Zell’s rise to the top of the business world, he dug into how he evaluates the U.S.’s position in the current real estate cycle. Fundamental to Zell’s evaluation process is analyzing oversupply in the market. He notes the oversupply and over commitment in the real estate sector led most recessions. Using the crisis of 2008-09 as an example, Zell says that when new supply started coming online post-crisis it was with great discipline and trepidation. Fast forward to 2018 when we see total hotel supply is up more than 20 percent, high volumes of offices under construction, e-commerce driving the rapid expansion of industrial real estate – all indicators of oversupply. It is not enough to evaluate current vacancies; we must anticipate future vacancies as well.

Making sense of shifts in key demographics

There was once a time where couples married early, moved to the suburbs, bought their first homes and started families – a trend quickly changing in today’s market.  Zell highlights the single largest shift in demographics is the deferral of marriage and its subsequent impact on real estate. In his view, the declining popularity of suburban offices is a direct result of couples deferring marriage. Attracting fresh, young talent to the suburbs is increasingly difficult, as younger generations prefer walkable, mixed-use neighborhoods. For top decision makers like Zell, change presents both challenges and opportunities. He encouraged systematically trying to identify such shifts and understand how they can position themselves to take advantage of them – change can breed opportunity.

Looking beyond the next cycle

Much of the day’s discussion leading up to Glen Hiemstra’s panel on market disruptions focused on lessons learned from historical cycles, how to identify impending oversupply across asset classes, and interpreting the impact of shifting demographics. In contrast, this panel advocated for longer-term thinking longer by asking what the real estate mega trends will be in 2030 and beyond. A growing elderly population in conjunction with the increasing emphasis on renewable energy, artificial intelligence and 3D technology illustrate why contemplating the real possibilities beyond the next cycle presents tremendous opportunity. Ultimately, the message is that real estate can be inherently conservative and requires time to change. To close that gap, we collectively need to do a better job adapting a longer-term outlook on potential possibilities.

With representation from close to 400 firms, the conference successfully fostered an environment of open dialogue among students and professionals from a variety of backgrounds.

By Areti Moustakis (MBA ’18)