New York—This year’s EXPO REAL, a B2B tradeshow held in October in Munich, Germany, for commercial real estate in Europe, provided a global view of the multifamily industry.
Rosemary Carucci Goss, Ph.D., RPM advisory board professor, Virginia Tech, attended the trade show. She speaks to MHN on her key take-aways of EXPO REAL, including the importance of a global view in the multifamily industry and why the United States is lagging behind Europe in terms of green practices.
MHN: Why do you think EXPO REAL was important, and why do real estate companies need to have a global perspective?
Goss: Some of our companies in this country are looking to develop internationally, and there are companies that do have a presence in European countries, particularly Germany, so I think for those people who want to broaden their base, it certainly is not only an interesting place to be, but it would be an important place to be. Everybody who was there [at EXPO REAL] is a believer that there is a need for an understanding and a presence in the international market. We can’t just completely ignore what’s going on in other countries.
MHN: What are some of the emerging international markets for multifamily?
Goss: A market that I saw quite a bit of interest in was the Asian market. I attended one of the sessions on the Asian market that was certainly interesting, and I think one of the take-aways from that—and what people were really interested in—were what some of the challenges are.
MHN: What countries were represented at the trade show, and how did the show differ from U.S. shows?
Goss: There were lots of countries represented. The way the trade show was set up was in six huge halls. The EXPO REAL trade show exhibitor tends to be different [from U.S. trade shows]. They do have some of the service industry there, then they have some of the large companies, more in the retail office sector, although they do have some multifamily, and there were a lot of financial institutions. What makes this so unique was that many of the exhibitors were either countries or regions or cities. So we had the Czech Republic, we had Budapest, all the different regions of Germany… A lot of them would be two-story exhibits, so the first level would be maps of the city, or of the region, or of the country, and there would be people there to talk about opportunities to invest in those areas, and they might have a place upstairs where you could sit down and talk, to really do business. That’s different than in this country. And they were actually doing the deals. They had some property management companies there. One of the observations that was made by the people in my group was that, just like in the United States, the management part seems to be an afterthought. Everybody [at EXPO REAL] was into the financing, everybody was into doing the deal, building the project, but there wasn’t much visibility of the property management side. I would say that’s true in this country, until we hit a recession like we’ve just hit and there’s no sexy development going on, and so everyone wants the management branch of their companies to be making money for them. But it was extremely interesting. One of the things that was somewhat obvious, even to an outsider who didn’t speak German, was there was a nervousness about what was happening in the European Union. That’s true here, that’s true there. So that was always an underlying theme when people were talking about investing.
MHN: What take-aways did you bring back for your students?
Goss: I think from the perspective of a 22 year old, I would encourage them to keep their eyes and ears open for opportunities internationally, because we’re becoming so much more of a global society. One of the take-aways for me personally is that we do not require a foreign language for the students. I mean, they have to have a year of high school foreign language, but we do not require them to have a foreign language. Now I’m going to recommend to our curriculum committee to add a foreign language to our controlled electives.
MHN: Which language would be the most helpful?
Goss: Well I think it depends. For many of our students, it’s going to be Spanish. They’re going to be working in this country and Spanish is going to be very important. But for those who want to be involved in the Asian market, they should do something with Chinese or even Korean. I think there are some opportunities there. Also, German is a great language. I think if you have an interest and take that language, then it might open up doors you might not have thought about.
MHN: Do you think people in the U.S. multifamily industry will start looking to develop internationally?
I don’t really think we’re quite there yet. It’s not of a critical mass. I think that we’re just now opening the doors and starting to really think about this. Some forward-thinking companies are looking into it, but not many. But I think those that are looking in that direction are a little bit ahead of the game. And it really depends on your business model and what works for you. But I think there are companies here that will become more involved. We’re starting to increase our awareness that there is a need for good property management, not just in this country, and I think we’re just on the beginning threshold of that.
MHN: Are there differences between the U.S. multifamily industry and international markets?
Goss: The country that I’m most familiar with is Germany, and one of the people in our group commented that the thought process in making a decision about a replacement product in Germany is so different than it is in the United States because the German culture says you’re going to replace it with something that is going to last 15-20 years. You replace it and it’s going to last. Here, you replace it with something that’s going to get the job done for a while, but we’re not going to worry about too far down the road. People who rent apartments in Germany tend to live there for 15-20 years. They have to put in their own kitchens. They don’t have closets—they have to bring wardrobes. So you move in there, you don’t just move out tomorrow. Customer service is very different here than it is in Germany. They take good care of the property, but they don’t give you a lot of frills, they’re not really worried about making you feel good about living there, but they’re going to be efficient. You have a problem, they’re going to fix it, but they’re not going to do a lot of bells and whistles and amenities. It’s going to be a very good clean, quality place to live where everything works. They don’t do a lot for resident retention because they don’t have to. People are expecting it to be kept clean, safe and sanitary, but you don’t have big leasing offices, and you don’t have big recreation centers. It’s just very different, and the expectation is very different.
MHN: Would our philosophy of providing lots of amenities ever catch on there?
Goss: That’s something we talked about. I think somebody is going to say, “If we did this, we may not have any better retention, but we maybe could charge a little bit more.” I have no idea if that would come to pass, but I think we’re really at the infancy of dealing internationally.
MHN: Let’s talk about green practices. Why do you think countries are greener in Europe than in the United States?
Goss: Partially because they have rules and regulations that require it. And that’s it. I don’t know if they’re reaching their goals yet, but I can tell you this: they’re doing a lot better than we are.
MHN: Do you think we should have stricter guidelines here?
Goss: I think with anything like that it comes with a cost. We’ve seen it with our automobiles in terms of what’s happened with gas prices. If we see electric prices and natural gas prices continue to go up, there’ll be more of an incentive for us to do it, either with or without mandates. It’s always where that tipping point is—where the consumer is willing to pay for it or where we’re required to do it, and I don’t think in today’s economic world that there’s a lot of push to do some of the types of things that would really reduce energy consumption just because of the economic situation.