>Here in Australia I'm quite bullish about commercial property. The residential market is garbage because people buy emotionally, and the market is therefore full of irrational actors. But the commercial market is boring and therefore full of investors who logically value any potential assets and don't pay too much for them (meaning you can still find decent returns).
I think there are irrational folks in both camps; Here in silicon valley, in 2007? clearly residential housing was overpriced. I really haven't been paying attention to the commercial market until quite recently, but I do know that recently, residential rents have been going up pretty dramatically, and sale prices of houses have been falling dramatically; There was a point a few years back where buying was a ridiculously better deal than renting (prices are coming back up, especially towards mountain view.) But yeah; as they say, real-estate is intensely local.
I mean, I wasn't paying attention to commercial real-estate at the time, but certainly businesspeople can be irrational too. I kind of get the feeling that most people here were still in school or something during the first dot-com, but I remember it well.
Really, I think it has to do with the ratio of rent to purchase price (and the cost of capital)
>And by the same token, your business customers no doubt pay you for a service and at the end of each month have nothing tangible to keep, which is kind of the same deal.
Yeah. And that's the thing to think about. I mean, a whole lot of what I'm selling is that I sell you servers in smaller chunks, and nobody has yet figured out a reasonable 'server condo' business model, (I've thought a lot about this, and I think it's mostly because the condo model doesn't cope well with rapid depreciation, and nothing depreciates like servers.)
But the other thing customers are paying for is me maintaining the equipment, which is significant. I mean, don't get me wrong, if the customer was using a whole server to themselves (I mean, a real whole server, you know, 128G ram on up) it'd probably be cheaper in the long term for them to own even if they have to buy hardware help at $100/hr (you can usually get hardware help for rather less) But, that requires, you know, knowing someone who is good, and evaluating people outside of your skillset is difficult.
Those same problems also apply to real-estate (well, except the condo model seems to be workable in real-estate. Not perfect, but it seems to work.) If I owned the building, especially if I owned the datacenter, I'd have to learn a whole lot (which I'm cool with; considering that I pour more money into this that I pay myself, it's worth the effort... but there will be a significant cost, measured in years.)
Of course, with plain old warehouse space, the landlord seems to do almost no work at all, so next time one of the industrial condos down the road goes up for sale, I'm probably gonna go for it.
I think there are irrational folks in both camps; Here in silicon valley, in 2007? clearly residential housing was overpriced. I really haven't been paying attention to the commercial market until quite recently, but I do know that recently, residential rents have been going up pretty dramatically, and sale prices of houses have been falling dramatically; There was a point a few years back where buying was a ridiculously better deal than renting (prices are coming back up, especially towards mountain view.) But yeah; as they say, real-estate is intensely local.
I mean, I wasn't paying attention to commercial real-estate at the time, but certainly businesspeople can be irrational too. I kind of get the feeling that most people here were still in school or something during the first dot-com, but I remember it well.
Really, I think it has to do with the ratio of rent to purchase price (and the cost of capital)
>And by the same token, your business customers no doubt pay you for a service and at the end of each month have nothing tangible to keep, which is kind of the same deal.
Yeah. And that's the thing to think about. I mean, a whole lot of what I'm selling is that I sell you servers in smaller chunks, and nobody has yet figured out a reasonable 'server condo' business model, (I've thought a lot about this, and I think it's mostly because the condo model doesn't cope well with rapid depreciation, and nothing depreciates like servers.)
But the other thing customers are paying for is me maintaining the equipment, which is significant. I mean, don't get me wrong, if the customer was using a whole server to themselves (I mean, a real whole server, you know, 128G ram on up) it'd probably be cheaper in the long term for them to own even if they have to buy hardware help at $100/hr (you can usually get hardware help for rather less) But, that requires, you know, knowing someone who is good, and evaluating people outside of your skillset is difficult.
Those same problems also apply to real-estate (well, except the condo model seems to be workable in real-estate. Not perfect, but it seems to work.) If I owned the building, especially if I owned the datacenter, I'd have to learn a whole lot (which I'm cool with; considering that I pour more money into this that I pay myself, it's worth the effort... but there will be a significant cost, measured in years.)
Of course, with plain old warehouse space, the landlord seems to do almost no work at all, so next time one of the industrial condos down the road goes up for sale, I'm probably gonna go for it.