Real estate specialist Barry D. Libert says the information age is causing a long-term decline in a core bank asset: commercial real estate.
He's using this unpopular theory as the basis for a new consulting practice at the accounting firm Arthur Andersen & Co.
Mr. Libert's argument is that as more people shop by telephone and computer, and also use these technologies to work from home, use of office space will decline. He also sees rapid obsolescence of many industrial warehouses, as new techniques help companies manage their inventories and distribution more efficiently.
The upshot, according to Mr. Libert, is that use of commercial real estate nationwide could drop by as much as 20% over the next decade or two, potentially causing a 20% drop in property values. His goal is to help investors and property managers cope with the change.
As in the banking industry, "there is going to be huge change and disintermediation by technology in the real estate industry," he predicted.
But many in the real estate industry scoff at his views, citing factors they say will stabilize real estate values.
"We don't agree with Barry Libert's doom-and-gloom assessment of the commercial real estate industry," said Audra Capas, a spokeswoman for the National Realty Committee, a trade association for real estate developers, investors, and financiers.
"Technology will inevitably have an affect on how people use office space. But to say that it will significantly decline in value due solely to technological advances we believe is an overstatement," she added.
Mr. Libert came to Arthur Andersen last year when the accounting firm bought his small consulting practice. It now forms the basis for what is called the Real Estate Transformation Group in Boston.
Mr. Libert maintained that the tough market ahead will make it harder for private investors that own limited amounts of property to make a profit. He also sees hard times for banks that make loans to small developers.
Those who will prosper, he maintained, will be publicly traded, real estate investment trusts, which can benefit from economies of scale and access to public markets.
The trusts now have only $120 billion of the estimated $3.3 trillion of commercial real estate in this country. But Mr. Libert predicted strong growth in their market share at other players' expense. The biggest reductions will be among the biggest players, he said, including nonfinancial corporations, which own $1.7 trillion of commercial real estate, and private investment partnerships, which own another $1 trillion.
Financial institutions own $114 billion of commercial real estate, either for their own offices, or through loan foreclosures, Mr. Libert figured.
Many experts said they agree with Mr. Libert about the future success of real estate investment trusts. But they disagree with him on other points.
Carl Kane, national director for real estate at the accounting firm KPMG Peat Marwick, said Mr. Libert ignores factors that look bullish for real estate, such as a reduction in building.
Dennis P. Yeskey, managing director of real estate service practice at Deloitte & Touche, also said real estate values are being buoyed by the successes developers are having in converting office space into other uses, such as apartment buildings.