AFR March 21 2000 p 41.
Net the greatest real estate story ever told
The internet has moved from property industry foe to overnight saviour.
And, as Australian Property Council chief executive Mr Peter Verwer said
yesterday, its the greatest property story ever told. People are going to
look back in a few years and see online trading as the best thing to happen
to the property industry," Mr Verwer said. Where once e-commerce was seen
as a threat to traditional retail, office and commercial properties and
their respective incomes, online business is now shaping us to be the
industry's biggest customer.
As corporate branding becomes increasingly important, internet start-up
companies are discovering the need for a physical presence is as great, if
not greater than an online presence. In one example, Cisco systems - the
internet network giant that has become the second biggest company in the
world - recently leased 22 floors of office space in North Sydney.
Worldwide, it occupies more than a million metres of space.
But that example translates to all sectors of the property industry. For
residential, it means renovations for the home office. For retail, it
means shop front presence for e-tailers to handle customer service and
distribution. For commercial, it represents the need for office space, old
and new, for e-commerce nerve centres and, in the industrial sector, space
for manufacturing and distribution. Consumption still happens in the real
world. What the web is about is creating more commerce and commerce needs
property," Mr Verwer said.
What is the most phenomenal and beneficial to the property industry, is the
rapid rate of expansion in e-commerce. Mr Todd Sunderman, director of
operations for Australian e-tailer, dstore.com.au, said space was the
biggest issue facing internet start-ups. "We started with 300 sq m of
space in city road (South Melbourne) which we expected would last us 12 to
14 months," he said. However, in five months since dstore was launched, it
has already tripled in size and has managed to secure two adjoining
buildings taking its office presence to almost 1,000 sq m of space. "The
real estate industry really needs to come to terms with the speed at which
the internet is expanding. They can't just rely on giving long-term leases
anymore," he said. "There has to be room for that expansion."
Boston Consulting Group vice president Mr Danny Dale, a guest speaker at
yesterday's PCA Corporate Real Estate 2000 conference in Melbourne, agreed
the ability for future expansion was a major headache for start-up
companies. "It's very unpredictable space. The ability to be able to
scale up quickly is a huge challenge." But, not everyone sees it as a boom
industry for property. Australia Chamber of Commerce and Industry chief
executive Mr Mark Patterson said it was too early to give a definitive
answer where the internet and its related business was headed. "What we
will probably see more of is a greater use of regional areas. We're
already seeing that in terms of call centres and communication centres," he
said. "The internet, like any level of commerce, tends to have a multiplier
effect. A lot of e-commerce businesses recognise they need customers in a
physical sense, not just an intellectual sense. I think it's too early to
call it the greatest property story."
However, if Australia continues the US example, the benefits could be
substantial. In the US, online financial services provider www.Schwab.com
introduced what it calls "high tech and high touch" - internet service
coupled with face-to-face service. That resulted in the opening of 300
branches across the States.