29 May 2008  HBS Centennial Colloquia Reports

Global Change in the Built Environment

The globalization of the real estate business was the theme of a recent Harvard Business School Centennial colloquium organized by professor Arthur Segel. He provides a summary of the three-day event.

 

Date: May 5-7, 2008
Faculty Chair: Arthur Segel

Faculty Summary Report:

Colloquium: Global Change in the Built Environment

What were the overall goals of the colloquium?

The goals of the colloquium were to celebrate Harvard Business School's 100 years and its significant contribution to the leadership of the real estate industry around the world. I also was able to share what we are trying to teach in our real estate MBA curriculum and get feedback on what we now teach or might teach in the future. Several alumni proposed areas for further research and new case leads. I also asked for help in career advice and placement for our students.

Our core Real Property survey course is in the fall of the second year. We also have two new winter courses on Emerging Real Estate Markets and Design, Development and Construction. In addition, we have worked with other faculty to develop new case materials for the first year MBA core curriculum and created three programs for executive education both here and off campus.

What did your participants identify as some of the major trends or issues influencing the real estate environment today?

Real estate has emerged as a legitimate asset class unto itself in recent years among institutional investors, partly because of the collapse of the stock market in 2001 and partly because of the high returns for over a decade relative to stocks and bonds. Because of graying populations in the West and Japan, real estate has become a more important asset class because of its large component of current income and cash flow.

The three big trends in the industry are securitization, globalization, and environmentalism. The securitization markets on both the debt and equity sides are being stress tested at this moment.

What did your participants identify as a research agenda or needed areas for study for the coming years in this area?

Everyone is intrigued with the sudden globalization of our business. Real estate is a people business, and whether developers can compete in more than a few markets at a time is unclear.

Another issue is that real estate investment trusts (REITs) are now in countries all over the world with total capitalization five times more than only five years ago.

Whether real estate lends itself to being corporatized without losing its entrepreneurial spirit also remains to be seen.

What insights or surprises did you walk away with?

We had sessions on innovation, real estate derivatives, the history of housing crises, trade deficits, the global economy, business ethics, stem cell research, and China's role in the new world economy.

The link between them is that we need to broaden our knowledge in all of these areas to understand the relationships to our industry. Clearly our trade relationship with China is having a profound impact on where and how we do our business. The new real estate derivatives business, which is just emerging, could completely change our strategies on how to invest.

The speed of innovation, especially in the life sciences in areas such as stem cell research, requires buildings that must be flexible and readily converted to new and different uses.

What will be published or other output from the colloquium?

The most important output may well be 175 new advisers to help our students figure out how to get into the real estate industry and succeed. I have several new case leads from alumni all over the world that we will work into our future curriculum.