The following is an excerpt from an article written by Diane Danielson, COO of SVN International Corp., as featured in NREI’s 2019 MidYear Outlook.
Stephen Covey defines the abundance mentality in The 7 Habits of Highly Effective People as:
“[T]he paradigm that there is plenty out there and enough to spare for everybody. It results in sharing of prestige, of recognition, of profits, of decision making. It opens possibilities, options, alternatives, and creativity.”
Covey was speaking to the individual mindset. But what happens when abundance invades an industry? For taxis, abundance came in the form of Uber. For hotels, it was AirBnB. The music industry was hit with subscription models. And Amazon has created a platform disruptive of multiple industries. In all cases, technology was used to decimate scarcity.
In scarcity economies, supply is limited. If you control supply, you control pricing. In abundant economies, pricing is driven not only by supply but also by demand because presumably there is adequate supply to meet all demands. Economist Barbara Gray of Brady Capital Research, Inc. describes it as “The Long Tail meets The Blue Ocean.” If you want it, you can find it.
Artificial scarcity occurs when stakeholders place limitations on supply. In CRE, artificial scarcity exists through legacy systems of data/client hoarding, pocket listings, zoning and geographic licensing limitations. All are systems designed to keep competition out. However, abundance is still coming to CRE. How will this play out? CLICK HERE to read Diane Danielson’s full Midyear Outlook in NREIonline.com.