You are missing your head start vis-à-vis buying opportunities.
While the vocal majority continues to convince the world (and itself) that its caution is both warranted and prudent, those prescient among us continue to plod away at outperforming the market by analyzing opportunities and buying on a 5 to 7 year horizon.
Why is the majority wrong?
Because the majority is nearly always wrong, at least when it comes to investing.
I find the following especially apropos of the topic of siding with the majority:
“Whenever you find yourself of the side of the majority, it is time to pause and reflect.” – Mark Twain
During the course of 2022, our team of brokers made nearly 25,000 sales calls to apartment owners and investors. As treasuries peaked and transactions declined mid-2022, the investor community began with its laments.
We don’t know what is going to happen.
What if people don’t return to work.
Downtown markets will never be the same.
Hogwash. All of it.
While others fear making a mistake, the following should instill confidence in your investing thesis:
- Urbanization is here to stay
- Zoom sucks as an effectiveness tool
- Human nature is slow to change
Urbanization is Here to Stay
The great suburban experiment in the United States that spanned the 1950s to 2000s failed. As a result, the United Stated joined the rest of the world in the direction of urbanization.
Then COVID-19 hit, and it all changed – sorta.
Humans generally have knee-jerk reactions to newly introduced phenomenon.
Asbestos was the miracle insulator, until it wasn’t.
Styrofoam and TV dinners were the wave of the future until mountains of unrecyclable trash and skyrocketing cholesterol/obesity resulted. Abrupt change is rarely the solution.
Global Population – Urban vs Suburban
As we’ve reversed course from American suburbanization during the last 20 years, growth in urban centers flourished, and for good reason. People want (and need) to congregate together to exchange ideas and cherish resources (natural/economic/human).
There is no more effective place to do that than dense urban centers.
COVID was not the first test of urban resilience.
The 1970s brought about a host of urban blight, yet urban centers grew. The Savings and Loan Crisis tested the entire commercial real estate industry, professionals still flocked to urban centers. The horrific events of September 11, 2001 tested the viability of the very buildings housing urban workers. Urban growth persisted.
Income Growth of Urban Office Buildings (1978 to 2020)
NCREIF
There are myriad reason why large cities make sense to accommodate the needs of a knowledge economy. We threw them all out the window two years ago for a compete reversal, one that has no more staying power than a passing fad.
Zoom Sucks as an Effectiveness Tool
Is it more efficient to ride that silly flat, horizonal “escalator” at the airport versus just walking?
Yes, of course.
Is that an effective way to move quickly?
Assuredly no! Its just better than the immediately available alternative, walking. However, it is no comparison to running.
Zoom is the horizonal escalator of our time.
During COVID it was much more efficient to hop on a Zoom call than set up a conference line and try to talk through a presentation using a telephone – or set up at-home video conference rooms. However, that is no replacement for the break-neck speed of in-person innovation.
Pre-COVID, employees collaborated around white-boards, pulled all-nighters during coding-sprints, and bumped into one another at coffee shops in downtown Seattle/Silicon Valley/San Francisco/Austin dreaming up new ideas.
What about saving time from office commutes?
Yes, we’ve established that workers can remove an hour or so of commuting to/from work in order to behave inefficiently (and ineffectively) for the following 8 to 10 hours each day.
How about onboarding new employees? Are you kidding me.
Training and mentoring? That is yet to be solved remotely.
Interactions lasting less than 30 minutes? Not in our new world of Zoom on request.
It is possible that single-contributor employees, back-office employees, and the introverts among us may work better shielded from the usuriousness of a 5-day in the office week?
Yes.
But is that the type of work style that made New York / London / Berlin / San Francisco / Seattle / Austin the meccas of innovation in the first place?
Zoom got the job done during a pandemic when face-to-face interaction was largely verboten.
And when employers were vying to lure talented employees via a laissez-faire approach to work-place mandates, Zoom worked just fine – it even enabled recruitment.
However, we will inevitably pass through a temporary economic slowdown only to produce two consequential inevitabilities:
(1) a shift in power from employee to employer; and
(2) a shift in focus from efficiency/cost-cutting to hyper-innovation
Both shifts will immediately lead to information/innovation workers back at their desks/cubes/pods/tanks/what-have-you quicker than you can mouth …your Zoom is muted!
Human Nature is Slow to Change
Work from home is today’s fad diet/exercise/investment. All quick fixes that were not the norm in the first place for a reason.
Work from home was a moment in time of epidemiological necessity, followed by the coincidence of improved work-remote technology coupled with employee empowerment over employers.
Nature changes very quickly. To wit, earthquakes, volcanic eruptions, tornados.
Humans, and their concomitant behavior, change very, very slowly.
Throughout history, the best and brightest (employers and employees alike) have by a large margin congregated together for the exchange of goods/services/ideas and access to money/power/sex/culture.
Working independently from home defies the very logic of the communal nature of humans.
The opportunity to work remotely became a reality decades ago. After September 11, 2001, the very real possibility of workers never returning to high-rise buildings in urban centers, and certainly not traveling for work, were foregone conclusions.
Just two years later, that behavioral expectation was long forgotten.
Don’t Miss Your Head Start
There is no more profitable way to invest that doing so ahead of the curve.
The majority is sitting on the sidelines telling themselves two falsehoods:
- We don’t know what is going to happen
- We are not market timers
Dealmakers know that today’s deal was struck several months prior.
Sitting on the sidelines waiting to see “if” employers and employee return to downtown Seattle and Bellevue (and similarly San Francisco and New York) to invest in the future of these cities is done at the deficit of investment returns.
Look at where the world will be in 5-7 years and that should guide how you behave today.
I’ll leave you with the most common laments I’ve heard from investors throughout the last 30 years of market shifts …
“I wish I would’ve started buying sooner.”
“They didn’t feel like good deals at the time, but I wish I would’ve bought them all!”
Don’t miss your head start!
About Dylan Simon:
I specialize in the sale of apartment buildings and apartment development land across Washington State. With my co-founder, Jerrid Anderson, we operate a team of 11 sales professionals dedicated to helping apartment owners and investors sell and buy apartment buildings and development land from $1 million to over $100 million.
CLICK HERE to contact a member of our team to learn more about how we can help you Turn Our Expertise into Your Profit ©