Reinventing the (Real Estate) Company

Reading the Economist piece on corporate disruptors and the changing face of the American company, I was struck by the omission of any company or disruption related to the built environment, from the design, finance, construction or even ownership perspective. While the industry is innovating (from crowd funding to interactive leasing to new collaborative design tools) the general pattern of ownership and control remains fairly consistent.

Given the article’s focus on the autonomy and control that is being pulled back out of the public markets, in favor of nimbler, innovative private ownership and funding, it is worth considering where the various sectors of the real estate industry are and how they may change. One emerging trend that I am interested in is the direct public investment ownership model being driven by crowdfunding sites such as Fundrise.

Much like the alignment of interests and values that the private ownership contracts are able to create in the tech sector, the direct ownership model has a chance to dramatically impact the ownership and creation of real estate. Not only might this give ordinary investors access to a traditionally exclusive asset class, it may also change the calculus of how and why projects get built and designed.

Historically, the interaction between community members or interests and the design and development community has been adversarial, with each side suspicious of (and threatening to) the other. What if they were on the same side? How different would real estate look and feel, how much better designed for our communities might it be, if the same people who ended up living next to it were part of the ownership as well?

For one thing, the short termism that pervades the public markets and private management would most likely decline. Quarterly results and a slightly higher IRR’s might be replaced by enduring, sustainable, and inclusive developments designed for the residents and community members who end up living there (or a bunch or eager investors will bankrupt themselves building a PCC every 8 blocks). Either way, emerging ownership and funding platforms that enable individuals to take a vested interest in a project, perhaps down the street from where they work or live, will hopefully add an element of connection to a ‘place’ that it is currently lacking.

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