Real Estate Niches
I have been listening to this podcast “60 songs that explain the ‘90s”, which is fun. An episode on Alanis Morissette’s “You Oughta Know” got me thinking. “Jagged Little Pill” sold a crazy 30 million copies. Was she the “best” singer? No way, but she was very different with a very distinctive sound that you recognize immediately.
Michael Porter and other strategists have discussed this for decades. While we often try to be the “best”, that often isn’t the right target. Take a walk through the mall: Lush, Build-a-Bear and Tesla succeed by being very different from their competitors. Keep walking: Gap and Subway don’t differentiate, to say nothing of the generic toy store temporarily there for the Holiday Season.
I bet the toy store on the bottom has stuffed bears that similar in quality to Build-a-Bear, at a far lower price. But Build-a-Bear wrapped an experience around a toy, and charge a premium for it.
This got me wondering about who has really locked down this type of different positioning in real estate? Creating true differentiation in real estate is challenging, as buildings are buildings, and locations are fixed. In my experience, I have seen a few that own that immediate mindshare:
· Harrison Street — Investment manager focused on niches
· Silverpeak — GP investor
· Edens — community focused placemaking retail
· Cul-de-sac — walkable communities
· WeWork — Workspace provider
· Common — Co-living operator
· Graduate Hotels — University-focused hospitality
· SoHo House — Urban members club
There might be some out there that are actually better at doing these things within these circles. However, in my mind the groups above have successfully created the brand associated with the niche.
What are potential areas that could be created? I can think of a few but I’m sure there are infinite others.
· Technology enabled acquisitions. I know, a lot are trying to play this game.
· Software platform (Spotify for RE)
· Modular developer. Many are attacking this area and it seemed like Katerra might be the winner but alas
· Creative lender that will focus on innovative approaches like co-living and flex office. It seems like there is an opening for capital providers who are able to be open-minded.
· Crowdfunding. There are successful players such as Fundrise, Cadre and Crowdstreet, but does anybody own that mindshare?
· Education real estate. Life sciences blossomed as an investable sector in recent decades. As education evolves, is there a future Alexandria for that space?
I’m curious if people have other ideas as well!