Nature Abhors a Vacuum – Real Estate Trends

Real Estate Trends.     I seem to remember being taught this simple concept in high school science class. I’m told the original comment came from Aristotle:

 

Nature Abhors a Vacuum:   If there is a vacuum, nature will try to fill it.  If there is an empty space, it will not be empty for long.  If there is more of something on one side of a fence, the other side of the fence will be a more attractive place.  Nature likes to see balance and fights imbalance. Mountains want to be low, valleys want to be high.

 

This is the case with people. Five  years ago Gail and I were on vacation for two and a half weeks and we spent most of that the time in the Czech Republic, birthplace of my grandparents. We stayed in Prague and toured churches, castles, museums, outlying towns, apartment buildings, restaurants, old buildings and talked to many people. The Czech Republic has been way on the “other side of the fence” from the rest of the world since World War II. Only since 1989  and the “Velvet Revolution” has capitalism been permitted and communism defeated. In my opinion it still has a long way to go to recover.  But indeed it is recovering and it is recovering rapidly.

 

My real estate “take” on the principal of Nature Abhors a Vacuum is this: present information and transportation technology will increase cultural homogeneity, lower or remove fences or barriers and have a tendency to make all markets and people more similar to one another than more different from one another.  From this principal we can learn and profit by identifying leading trend that will come here or leave here and go elsewhere.

 

This means to me that what I see as a general long term trend (in real estate trends, for example) in one area will tend to occur in other areas. What is happening in the US will happen in the Czech Republic. What happened in California will happen in Florida. What happened on the east coast of Florida, will happen in Fort Myers. All this will happen to varying degrees and in varying time frames, but the real estate world is moving to “fill the vacuum”, to sameness and into balance. That is until there is a disruptor event, like an war, a political  upheaval, a weather catastrophe, or some other force that moves things into imbalance again.

Friction that prevents homogeneity is becoming more and more non existant.  As recently as 100 years ago fashions that started, for example, in France, could take as long as thirty years to reach parts of the U.S. Now it may be only 30 minutes.

 

Thirty years ago I was a salesman that traveled all over the United States.  When in Cincinnati  I could eat Chile served over Spaghetti with Cheddar Cheese; In Buffalo: Wings: In New York: Pizza.  In Chicago I read the Tribune; in New York , The Times, and in Cleveland, The Plain Dealer. Now I can eat Skyline Chile in Fort Myers, while reading a newspaper that is published all over the United States. If you knocked me out and woke me up one morning on a major shopping boulevard in almost any city – I would not be able to tell what city I was in.  They are becoming all too much the same.

 

When I talk about removing friction I am talking about communications, technology and transportation, and centralized manufacturing. These things speed the spread of homogeneity. Information sharing on the internet lets us know, often in real time, what’s happening across the other side of the world. Restrict communication and you increase the friction that slows homogeneity.

 

One of the key for us is in real estate trends is to be able identify the trends that will stay and spread and to identify the markets that will be affected next.  We can learn from the east coast of Florida. We can learn from California. The center of the State of Florida can learn from our own area here.

As you look for opportunities for real estate investing, especially in retirement, it to  look for the “vacuums” and for the trends that will eventually flow into those vacuums. This is where opportunity lies.

Top of my list for trends to watch:

  1. Smaller, better built homes
  2. Smart Homes
  3. Water conservation  (Blue the new Green)
  4. Building In-Fill Homes – not in gated communities.
  5. Buying to rent not to flip 
  6. Revival of Downtowns
  7. Micro apartments

 

In The Commercial market

  1. Move down town near services and amenities and employee bases
  2. Revival of well placed but run down commercial centers.
  3. Reduction in redundant services.
  4. Emphasis on the consumer, not the product.
  5. Work where you live.

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