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.

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