The growth of the Internet has wrought profound changes throughout Southern California's real estate industry and will produce even greater changes in the years ahead, according to one of the most comprehensive studies to date on the effect of electronic commerce on real estate.
The explosion of Internet commerce will result in far-reaching changes in the ways Southern Californians use real estate--from where they shop to what kind of office space they occupy to what kinds of apartments they prefer, according to the report by Arthur Andersen and Rosen Consulting Group, both based in New York.
Those trends in turn will require adaptations on the part of builders, owners and operators of real estate. Among these trends will be changes in the types of retailers who occupy shopping centers, differences in the types of industrial and office space that tenants demand, and shifting marketing strategies on the part of hotel operators.
In its analysis of the retail sector, the Andersen-Rosen report observes that most homeowners "have no desire to buy nails, paint or kitchen sinks over the Internet," which could have significant implications for power centers, where specialist retailers maintain giant stores.
"The majority of power center tenants sell commodity products like books, toys and sporting goods, all of which enjoy strong e-business sales," the report says. It recommends that power center developers, owners and managers who want to keep their properties leased in the future should target such tenants as home improvement chains and other businesses that don't transfer well to electronic commerce.
"What we're saying is that there is a good likelihood the power centers will host a different type of tenant, that they are going to have to evolve into different kinds of retail centers," said Roy Pineci, Los Angeles-based head of Andersen's Southern California real estate practice.
Another recent report on the effect of e-commerce on the retail sector, issued by Century City-based real estate law firm Cox, Castle & Nicholson, also suggests that there is a future for bricks and mortar.
"The rumors of the demise of traditional retail establishments at the hand of e-commerce have been greatly exaggerated," said the Cox, Castle report, written by Gary A. Glick and Scott L. Grossfeld.
The authors conclude, "Traditional retail and e-commerce will co-exist, complement each other, thrive, and, together, will create a better shopping experience for the consumer."
