1) How Taylor Swift and Experiential Events are Driving Foot Traffic

This has been the Year of Taylor Swift.

Swift’s Eras Tour has generated an estimated $10B to the economy in 2023. The Taylor Swift concert movie is also breaking records. It is the first and only concert documentary to generate $100M, and it did so in just 5 days.

And Swifties aren’t the only consumers out in full force.

The Barbie movie was another example of a cultural, experiential phenomenon. The movie not only set records at the box office, but it also drove retail traffic and revenue with over 100 brand collaborations.

These experiential events has shown us that post-pandemic, people will pay for experiences. Concerts are back, movies are back, travel is back, and in-person shopping is back.

Here are some key stats that highlight the economic and real estate impact of these experiential events:

• Movie theaters saw a 50% YoY increase in foot traffic with the release of Barbie and Oppenheimer

• Chicago broke hotel occupancy records the weekend of Taylor Swift’s concert

• Kansas City hosted more than 100,000 fans in town the weekend of Taylor Swift’s concert, generating an estimated $46M on hotels, restaurants, and other travel costs.

Key Insight→

Consumers crave experiences. While our lives are increasingly turning more digital, these shared cultural experiences will continue to drive foot traffic in the real world. Retail, restaurants, hospitality, and other asset classes can benefit from these experiential events.

2) The Rise of Multistory Warehouses and Urban Logistics

When you can’t build out, you build up.

With the rise of e-commerce and the growth of storage and logistics, warehouses in urban areas are now facing land constraints and recognizing the need for multi-story warehouses.

In urban areas, there is a strong demand for more storage, and there is less available land.

Instead of sprawling, one story facilities, opportunities exist to build up.

While the first multi-story warehouse in the US was first built only five years ago, dense urban areas in Asia and parts of Europe have been developing this asset type for decades. Hong Kong is home to the Goodman Interlink, a 24 story warehouse!

While these urban logistics facilities seem like an obvious solution, a JLL report highlighted several challenges that exist in the US:

• Land cost: Industrial land costs have soared since the pandemic, rising 36% from 2020 to 2021.

• Asset competition:

• Zoning: Most local municipalities aren’t in favor of adding large, multi-story industrial buildings

Key Insight →

Look to Asia for model of urban logistics. While this product is only 5 years old in the US, Asia has been building multi-story warehouses for years. While challenges exist, there is a strong need and existing case studies for this type of asset.

3) Why WeWork is Dying While Coworking is Thriving

WeWork seemingly faces new challenges every week.

Earlier this year, WeWork’s CEO resigned. Then their CFO. This week, their COO just departed.

With all the debt and turmoil, I don’t blame those running from the fire.

Their CEO, however, is committed to continuing lease negotiations to keep the company alive.

While WeWork is feeling the pain from the interest rate hikes and long term leases, other flex office providers and coworking spaces are thriving as companies pull out of long term leases and head to more flexible options.

There are key difference between WeWork’s “grow at all costs” model and how other successful flex office providers are operating.

Here’s a look at some of the key strategies used by leading flex office providers:

• Focused on Prime Submarkets - Labs and Industrious have focused on submarkets for growth. WeWork, by contrast, had some of the most expensive leases in prime markets.

• Franchise model - IWG, formerly Regus, is the largest operator of coworking spaces and is focused on franchise partners for growth, to reduce overhead

• Partnerships - While WeWork leases its spaces and aims to profit on the spread between long term and short term rates, operators like Industrious have focused on partnerships with landlords.

• Slow Growth - Mindspace has been profitable since 2019 and doesn’t look for new spaces until the current ones are profitable. WeWork, once valued at $47B, never turned a profit.

Key Insight →

WeWork is not a failure of flex office, but a casualty of ZIRP (zero interest rate policy). While WeWork grew with access to cheap capital and imploded with rising interest rates, other operators took more strategic approaches to growth for the long term.