The Chairman's Quarterly Newsletter
Fourth Quarter, 2024
Published 3/31/25
2025 looks like it is going to be a very interesting year, politically, economically, and technologically! Today we will be looking at technology and some of the ways we hope it will change our ability to successfully source new investments.
We seem to be living through a period of great technological innovation…a period of paradigm shifts but there are some things that even paradigm shifts can’t change, at least not so easily -- and not quite yet. We humans still serve a purpose! New technology has always impacted and changed the ways in which human beings live and work…even more significantly over the last few decades. Moore’s Law has been a driving force of technological and social change, productivity and economic growth.
We are now at another inflection point in technological advancement as artificial intelligence rapidly becomes a reality, dramatically improving our ability to analyze data and process information. But AI is still only as good as the questions that are asked of it, and the old adage “garbage in, garbage out” takes on special significance when AI is applied to real estate. Let’s take a brief look at how Global Storage Partners is embracing AI to help us find new potential acquisitions, and let’s also get real about the current limitations of AI.
Location is Still King
No technology created thus far has been able to single-handedly source properties that meet the fundamental real estate criteria of “location, location, location”. Location is still king, and it still requires human intuition to make a correct determination of whether the location of a property is the right one or the wrong one for investment. A major complicating factor is that the critical locational characteristics of any given piece of property, and the future value anticipated because of these locational attributes, changeover time.
Remember the song “Video Killed the Radio Star”? Well, technology has been having a major impact on real estate as well, just like those poor old radio stars. Large floor plate office buildings in prime major “gateway city”urban locations were once the darlings of institutional investors and lenders. But this is no longer the case. Covid-19 and the move to hybrid work, bolstered byZoom meetings and productivity software, changed all that. Department stores in large regional malls were the retail magnets that allowed these malls to thrive since the 1950’s. But Amazon changed all that as well, with only the best department stores in the highest-end locations still doing well…at least for now. We have first-hand insight into this change, given that we have acquired former department stores to convert to self-storage. What happens to the rest of these department stores remains to be seen. So, the importance of “location” in “location, location, location” is often a moving target, and this is where human insight is still irreplaceable by technology.
Science and Art
A wise former partner taught me that real estate has no value, that only the “use” of real estate has value.This is why we must always try to foresee how viable any particular use will be for a particular property in the future. Investing in real estate has always included a necessary combination of “science” and “art” to scout and source good investment opportunities. AI will be providing us with amazing new tools to bolster this scouting and sourcing effort. By providing the right inputs, these tools should be capable of doing much of the work that was previously performed manually, in a fraction of the time.
We believe AI will allow us to:
+ Identify supply constrained regions for self-storage
+ Quickly determine the zoning status of properties and determine the zoning is suitable for self-storage
+ Rapidly analyze great numbers of vacant buildings for adaptive reuse potential
+ Project the potential future value of properties in expedited timeframes
+ Rapidly identify potential distressed situations involving existing self-storage properties
Staying Current
We have recently been vigorously researching and analyzing different AI platforms to achieve these objectives, some of which are being built from scratch, and some that are being built on the backbones of existing “proptech” programs and online engines. Our plan is to incorporate the most suitable platforms for AI use into our acquisition’s arsenal in the first half of 2025.
We are very fortunate to have an experienced and seasoned real estate team at Global Storage Partners, because no matter how good the AI tools are, the inputs will be critical in achieving successful implementation of these tools. AI relies on asking the right questions to achieve the best answers, and it takes wisdom and experience to be able to formulate the questions in a way that will optimize the capabilities of AI. We believe as we gain proficiency and experience in combining the breadth and depth of our team’s knowledge with the power of AI, we will significantly increase our capability to source the best investment opportunities.
I am hopeful we can achieve these goals and truly make 2025 an interesting year!
Sincerely,
Tucker Lewis
