the Asia Factor: Two SIORs’ Impressions By Geoffrey M. Kasselman, SIOR, and Michael Flynn, CCIM, SIOR
Geoffrey M. Kasselman, SIOR In 2004, Geoffrey M. Kasselman, SIOR, of Northbrook, Illinois, founded Op2mize, LLC, a 21st century real estate services firm that bundles facility modeling and computer simulation with traditional brokerage, corporate advisory, and governmental incentives consulting. During his 18-year career, Geoff has completed more than 600 transactions with a dollar volume of more than $500 million. This year he was named to the “35 People to Watch” list by Realcomm Advisory for the 2nd year in a row. Michael Flynn, CCIM, SIOR Michael J. Flynn, CCIM, SIOR, is the Executive Vice President and Managing Director of the Office Brokerage Group of NAI Hiffman, Des Plaines, Illinois. In his career with NAI Hiffman, Michael has brokered transactions valued in excess of $650 million and has consistently been one of NAI Hiffman’s top producers.
In March 2005, 30 real estate professionals from around the world gathered to participate in Realcomm Asia, a rigorous educational tour across five Asian countries over nine days in pursuit of the world’s smartest (“next-gen”) real estate technologies, systems, people, and best practices. After meeting in San Francisco for an orientation, we visited (in order): Tokyo, Japan; Seoul, South Korea; Shanghai, China; Hong Kong; and Singapore. Attendees came from the United States, the United Kingdom, Finland, and China, and included investors, private developers, institutional owners, lighting designers, architects, economic developers, quasi-governmental technology managers, REITs, technology vendors, real estate association executives, and several real estate brokers. Among the SIORs on the trip were the two authors who provide
their overall impressions, recollections, and suggestions on how/why SIORs could do business in Asia.
Kasselman Chronicles His Second “Next-Gen” Trip This was my second “nextgen” Asia trip in the past 12 months. Last year, six of us acted on considerable research that indicated that Kasselman Asia offered forward-thinking critical mass. With a common interest in this intersection of real estate and technology, we toured strictly for personal and professional reconnaissance. This time around, I had the honor of co-leading this Realcomm Asia tour as a member of its staff. My perspectives reflect both this experience and Summer 2005
Internet access at a McDonald’s restaurant
my impressions from our initial research mission. Tokyo, Japan—Here we experienced the Japanese penchant for relentless, meticulous efficiency. Every vehicle had an advanced GPS navigation system in place; taxi drivers wore white gloves and drove immaculate cars. Given Japan’s population density and rocky, mountainous terrain, real estate utilization is at a premium. Eighty-five percent of Japan’s population lives in just 15 percent of its total land area.
Mixed uses and public transportation are now integrated into all major real estate developments. Automated, robotic parking is also used. We visited Roppongi Hills (www.roppongihills.com/jp), a new mixed-use, high-rise development featuring robotic parking, a landlord-provided converged communications network (MoriNet), and several other building automation elements. Within six months of its opening, this complex became Japan’s Number One tourist attraction. We also toured Matsushita’s new Tokyo headquarters, a working showcase for their building automation products, including photovoltaic solar generation systems, photocatalytic coating (self-cleaning) glass, and circadian LED office lighting systems (www.mew.co.jp/e/corp/ index.html). Seoul, South Korea—Seoul is simply the most digital society on the planet. From the shopping malls to the airports to the subways, digital mobility manifests itself everywhere. South Korean’s consume more high-speed broadband than any other country, and their government’s per capita
tech spending is the highest in the world. Knowing that it cannot compete on size, raw materials, or human resources, South Korea has positioned itself as the R&D capital of Asia, if not the world. We visited Samsung’s homevita Gallery (model home of the future www.samsung.com/homenetwork/WowDigitalExperience/S tandingExhibition/Seoul_Gallery. htm) and saw Bluetooth-enabled medical diagnostics, a serverdriven network controlling every conceivable IP-addressable node, and integrated biometric security. We also visited the construction site for Digital Media City (http: //dmc.seoul.go.kr/english/index.js p), a massive mixed-use community development (+/- 20 million square feet of commercial space plus 7,000 residential units on +/10 square miles) that will cater to the information and media fields. By aggregating likeminded users and equipping them with longterm infrastructure support (i.e., terabyte backbones, gigabytes to the desktop), DMC is poised to become the first truly global digital city. Shanghai, China—While the real estate technology was not as professional report
general, China is poised to dominate geo-economic discussions forever more.
In Asia, multiple buildings can be managed from one control panel
Optical Biometrics, or iris scannner
prevalent in Shanghai, the sheer energy and volume of recent/new construction activity was enough to bewilder anyone. The architecture was worldclass, and the magnitude of new space deliveries and construction cranes cannot be accurately described. One Shanghai office building boasts a 30-story digital (LED) signage display. Nearby, the world’s fastest Maglev train takes you from central Shanghai to the airport in about six minutes at 236 mph. Shanghai is a player on the world stage, and in
Hong Kong, China—Operating under China’s “two systems, one country” policy, Hong Kong continues to push the envelope at connecting real estate with technology. From Hong Kong’s new all-digital airport (rated the world’s Number One airport by Skytrax), to the airport train into the city (each seat has a 12-channel digital video terminal), to the developments we toured, we found comprehensive strategies for advanced connectivity, digital signage, building automation, building operations centers (BOCs), and energy efficiency. At IFC II, another mixed-use megacomplex, we toured perhaps the most accomplished BOC in the world today (www.ifc.com.hk/ english/onetwo.aspx). At Cyberport, another massive mixed-use complex, we saw the most complete integration of real estate and technology anywhere, designed to enhance both the user and the ownership experience (www.cyberport.hk/cyber port/en/home/home_flash.html). Upon departing Hong Kong, we checked our bags through to Singapore at IFC’s transportation hub; then we went to the airport and on to Singapore without hassle or luggage! Singapore—Singapore has just displaced the United States (now fifth) as the top economy in information technology competitiveness, according to the World Economic Forum’s Global Information Technology Report (www.weforum.org/gitr). We
found that innovation was mainstream, from the Dial-a-Coke vending machine (use your cell phone to purchase) to the world-class architecture to the BOCs, to the custom-programmed tenant applications. Once again, we saw massive mixed-use high-density developments, such as One North Biosphere (www.one-north.com) and
Telephone number access to purchase a Coca-Cola
Suntec City (www.sunteccity. com.sg). Both projects have used world-class resources and longrange vision to create two of the most progressive “next-gen” communities anywhere in the world. What does it all mean? Suffice it to say that the value proposition of using various “smart” building strategies and components is already being honed throughout Asia. As these ROI dynamics evolve to support domestic expectations and budgets, such “next-gen” strategies and amenities will become commonplace at all U.S. properties, regardless of size, type, or location. It is also important for us to recognize the significance and interdependence of the global economy. Lastly, we must understand that many other countries are not only capable of, but intent on, out-positioning us at some of the things we thought we did best…like developing real estate. If you are interested in being a stakeholder on any level, be proactive. Educate yourself by
reading everything you can and surfing the Web in your spare time. Consider going to Asia yourself to see and absorb. It’s the best way to communicate about it with your clients. Align yourself with other practitioners who have been there or are based there, and don’t just hand projects off. Stay involved throughout the process. Learn the cultural nuances and differences that are essential to conducting business in Asia. If you are an industrial broker, find out which of your clients is actively pursuing business in China. If you are an office broker, ask your customers about their interest in Hong Kong and Seoul. When they engage your inquiries, be ready with your plan of attack.
Flynn Sees Buildings Anchored by Multinationals The RealComm Asia trip was an eye-opener for me. Although I had read articles repeatedly noting the frenzy of Flynn development throughout the region, and although I had personally experienced the impact of construction price increases on every transaction due to the Asian appetite for steel, cement, etc., and although I had seen many of my clients’ Web sites reflecting locations in Asia—still I was not prepared for what I found. From my first impression of the density in Japan to our last stop in Singapore, where the
push of technology is in all new projects, I could never have appreciated the Asian impact had I not traveled there. I saw that most Class A office properties throughout the region were anchored by leading multi-national firms. I saw an extremely intelligent, well-schooled working population. I saw more construction cranes in Shanghai than I could count. It was a remarkable education on a number of fronts. But I am not an alarmist. Unlike some others on the trip, I do not fear falling forever behind these countries. We are simply being affected by the emerging economics of some Asian countries, or in the case of Japan and Korea, by the re-emergence from a long period of economic recession. This emergence creates opportunities for us as real estate professionals in two major ways. First, many of the technologies that are being implemented in new buildings throughout Asia will soon become more cost-effective and will therefore gain traction in a more mature U.S. market. As the inte-
grated building control systems we saw in Hong Kong and Singapore become more widely used, they will invariably follow the pricing structure of all new technology: very high for early adopters, more reasonable for the next group of users, and comFree internet access at the airport moditized for the late arrivers. It will be our job to know at what point in the cycle such advances become cost-effective (in terms of both economics and human resources) to implement. Ironically, the most captivating presentation on efficient building controls was in a second-generation building in Singapore by a company with offices in Pittsburgh and California. Their product seems to offer immediate opportunities with justifiable returns. The second professional opportunity path deals with Asian locations. If your growing corporate clients are not already in Asia, they need to consider going there. While our trip did not focus on the vast manufacturing complexes providing goods for the United States and other countries, we saw building after building with recognizable Fortune 1000 names on the top. The market is so big, and access to it growing so rapidly, that any of your clients with an international vision must consider the opportunities in Asia. In short, Asia represents a vast marketplace that has only been slightly tapped by many multi-national firms. As real estate professionals, we need to recognize which of our clients can capitalize on the opportunities and be prepared to offer them resources and solutions so we can maintain and grow such relationshipsâ€”or we risk losing them as clients to other, more capable vendors. pr