The mission of Going Global, which appears on ePrairie on most Tuesdays, is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.
CHICAGO – In 2004, Geoffrey Kasselman founded Op2mize, a real estate services firm that bundles facility modeling and computer simulation with corporate services and governmental incentives consulting.
He is currently the president of the Association of Industrial Real Estate Brokers (AIRE) and the speaker elect for SIOR. He is also the immediate past president of the Chicago chapter of SIOR.
International expert Michael Muth sat down with Kasselman for part two of a three-part Q&A on his technology findings from conducting research trips to Asia.
Michael Muth: In terms of your trips to Asia, how did you research who to meet and where to go?
Geoffrey Kasselman: We were told that if you’re interested in seeing next-generation real estate, you’ve got to go to Asia where they’ve been building for the last three to four years. We used our network of contacts to find the projects to see. When we reached critical mass (three to five in a city), they stayed on the list.
We came up with 36 “next-gen” projects in seven cities in five countries and toured them all in 12 days.
MM: When did you make these tours?
GK: Our initial “recon” mission was in February 2004. We led the first official Realcomm Asia tour in March 2005. We ranked the communities and projects we saw and set up the next trip.
MM: Who joined you on your trips?
GK: For the initial trip, the organizer picked five guys who had different technology backgrounds in real estate but shared the vision for smart commercial buildings in the U.S.
On the Realcomm Asia trip, 30 different real estate professionals from the U.S., the United Kingdom, Finland and Asia joined us. This group included REIT executives, private developers, lenders, architects, economic development officials, real estate association executives, government technology officials and real estate brokers.
MM: What seven Asian cities did you visit?
GK: On both trips, we visited Tokyo, Seoul, Shanghai, Hong Kong and Singapore. On the first trip, we also went to Beijing and Kuala Lumpur.
MM: What companies work in Digital Media City in Seoul and Korea and Cyberjaya in Malaysia?
GK: Digital Media City is too new to have tenants. Last month, 25 to 30 buildings of 20 to 30 stories were framed but not yet ready for occupancy.
They’re targeting digital media content companies and are interested in bringing together like-minded users. They’re not interested in having multi-national corporate offices there. Cyberjaya is hosting nearly all the major tech and biopharm companies of the world.
MM: Where else have you traveled to research this?
GK: We’ve been to the United Kingdom and my partners have been to Dubai and across Canada. Dubai is very interested in the most cutting-edge technology they can acquire. Money is no object.
Singapore has just displaced the U.S. as the top economy in IT competitiveness, according to the World Economic Forum’s latest annual Global Information Technology Report (in which the U.S. dropped to fifth).
In South Korea, the per-capita tech spending is $15,000 per head. Here, it’s less than $1,000 per head. The last piece of research we collected is about the “digital divide”. We define this as digital decision makers using digital tools to make digital decisions for future digital generations.
In Asia, all the decision makers we encountered on both trips were under 40, which is the first true digital generation. By contrast in the U.S., they’re still analog-aged decision makers who haven’t embraced digital concepts, tools or know-how. We have a lot of decision makers in their 50s and 60s who grew up with analog tools and don’t, won’t or can’t use anything else.
There are still decision makers who aren’t using e-mail or PDAs and aren’t willing to accept a digital document.
They stop innovating and become conservative. Though they’re about preservation and longevity, they’re using their analog tools and mindsets to make non-digital decisions for our future digital generations (our kids). This disconnect defines the issue of the digital divide and it’s getting worse.
MM commentary: This is a new definition for the “digital divide”. While it has some merit, I don’t think it’s is universally true. There are many technology proponents who are older than 40 (myself included).
MM: Who paid for these trips?
GK: The first trip was personal reconnaissance paid for out of our own pockets. On the second trip, I was paid for by Realcomm as a trip co-leader.
MM: What else did you see aside from lightning-fast Internet connections?
GK: Energy efficiency, IP-enabled building systems and remote management, robotic parking, smart-card EFT currency, paperless operations and digital signage strategies. We never saw the fully integrated, mixed-use property that we dream of building and operating. Each site we visited seemed to excel at one thing in particular.
We plan to aggregate all of the low-risk, high-ROI best practices, systems and technologies into one comprehensive deployment at one place and time. Finding lenders who understand the product and risk has been a challenge and zoning and code compliance is another obstacle.
Chicago just completed its first rewrite since the 1950s, which offers a much better roadmap for mixed-use development than was previously the case. Meanwhile, China is creating whole new districts. They can toss out the rules and start new. We can’t.
MM commentary: It’s a bit pie in the sky to dream of implementing all the latest and greatest technologies in one project. Still, reality has a way of mitigating that optimism. I hope he’s able to install as much as he can.
MM: Who pays for Internet access if it’s free everywhere?
GK: In some instances, it’s the government. At the Coex International mall in Seoul, there were kiosks operated by the mall, by Microsoft and by Dell. There were free-use computers in McDonald’s, Starbucks and almost all the stores. While getting free Internet in China, Japan, Malaysia and Singapore wasn’t a problem, it wasn’t as prevalent mostly in the airports and hotels.
Hong Kong is a very digital society. Two of the best three smart buildings in the world are there. Residentially, the cost per megabyte is about 80 percent less than in the U.S. In Korea, 50 megabytes to your desktop costs $7 to $8 per month versus about $50 per month in the U.S. for 3 megabytes from Comcast.
MM commentary: Internet access will become a commoditized utility and the price will continue to drop. In the late 1990s, I worked with ISPs as partners. At that time, they were only concerned about “filling pipe”. Though I’m not sure they’re where they should be yet, at least now they’re getting more concerned with value-added services.
MM: Should broadband become a standard amenity for commercial, industrial and residential tenants?
GK: Absolutely. It’s already beginning to happen. If it doesn’t have Internet access, are you going to want that property?
MM commentary: I rent out one unit I own. To close the deal with my latest tenant, I threw in Internet access to close the deal.
MM: Where do you plan to duplicate the communities you saw in Asia?
GK: We’ve been studying different components and dynamics in hopes of finding the most digitally competent or driven communities in the U.S. where we think the reception to our community will be better. We study things like PC usage, broadband access and usage, educational trends and players, net population gain and loss, local government interest and stability and large employers.
Are they attracting the digital generation? We also look at the traditional real estate dynamics. Is there direct competition? Where are they in the cycle of supply and demand? We obviously want to buy low and sell high. We like places like Austin, Chicago, Boston, San Diego, Silicon Valley, Denver, Minneapolis, D.C. and Orange County, Calif.
Those communities have faired the best on our 100-field matrix of variables.
Chicago actually loses some points because of its massive market size. We’d be a small fish in a big pond. In Austin, which is smaller by major market standards, our success may be more fostered by the local community. Evanston, Ill. could be great for this. We’ve been invited to Fort Worth, Texas to investigate a parcel of land for a live, work and play urban village to be developed on site.
MM: Where does Chicago rank in terms of digital cities?
GK: Our research suggests that Chicago belongs in the top 10 to 12 communities where there’s digital critical mass on some meaningful level. The city tends to be held back by union activity, zoning laws, an intense level of politics and an aging infrastructure (roadways, electricity and sewer lines, which were all built in the 1950s with a 30-year shelf life).
Having Argonne and Fermi Lab here helps and the new DuPage National Technology Park has the infrastructure to command some national or even international attention.
MM: How can local Midwest companies take part in this growth?
GK: The opportunities are there. It starts with self-education on the language and cultural nuances plus currency and legal considerations. Partnering is a common first step once you’re comfortable assessing the risks and rewards. There’s no substitute for going there to learn via things like the Realcomm trips.
Another opportunity is consulting with other American companies that want to figure out their best angle. You must first establish a reliable network and gain a particular expertise in one area. It’s most likely going to be a service rather than a product.
MM commentary: These are good general comments that apply not just to his specific situation but also when approaching any foreign market.
MM: How can local business people benefit from Realcomm, AIRE and SIOR?
GK: I need to break them into two groups: get involved in Realcomm if you’re interested in the intersection of real estate and technology. Get familiar with the conference and the weekly newsletter (the “Realcomm Advisory”). While we branded the trips from Realcomm, it’s really a separate business.
AIRE and SIOR are very prestigious real estate associations that serve the local marketplace. The SIOR Chicago chapter is the largest chapter in the world.
SIOR has rigorous entry standards and only the top 1 percent qualify. SIOR started as an industrial real estate organization. It was founded in Chicago after World War II. The name changed in the 1980s when office brokers were invited in as members. Chicago has been the hotbed of industrial real estate since World War II.
MM commentary: If you are indeed interested in the intersection of technology and real estate, check out the Realcomm conference in Anaheim at the end of June.
Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at firstname.lastname@example.org.
Click here for Muth’s full biography.
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