Theory & Practice
The MBA Real Estate Program is one of the most popular at Columbia Business School, drawing more than 800 enrollments in its classes each year (many students avail themselves of multiple courses) and preparing many students for a career in the industry.
The hub of real estate activity at CBS is the Paul Milstein Center for Real Estate. Co-directed by Chris Mayer, the Paul Milstein Professor of Real Estate, and David Sherman '82, co-founder of Metropolitan Real Estate, the center offers more than 50 programs, such as conferences and roundtables, annually to connect students, faculty, alumni, and industry professionals with one another.
Over the last year, real estate activities at CBS have adapted to meet the new realities and address the major questions brought about by the global pandemic. The Milstein Center has been offering numerous events online that are proving extremely popular, says Sherman, who has welcomed alumni and other real estate experts from around the world to participate. Mayer and Sherman designed a new course on distressed real estate, teaching students to identify investment opportunities that may arise from the closure of hotels, retail, or other businesses. Other professors have updated their courses to explore real-world cases of COVID's impact on real estate, and faculty continue to conduct research that has an impact on the way we understand a third of the world's capital assets.
Below, learn more about faculty research and curricular innovations in real estate taking place at Columbia Business School, and meet a graduate of the real estate program who is having an impact on real estate investing in Brazil.
Inside the Classroom
The course: Proptech and Real Estate Disruption
The professor: Tomasz Piskorski, Edward S. Gordon Professor of Real Estate
Designed by Professor Tomasz Piskorski and offered for the first time in Spring 2019, Proptech and Real Estate Disruption looks at how technology has upended all facets of commercial and residential real estate. Just two years later, the pandemic has brought about sweeping changes to the real estate landscape. For instance, hundreds of thousands of hotel rooms now sit empty as demand for suburban homes explodes. With COVID-19 disrupting the ways we live, work, shop, and more, it's no surprise that it has, in many cases, also accelerated the growth of proptech.
“The class is about presenting students with the most recent innovations in real estate, so when they graduate they can contribute to the development of and investment in disruptive technologies, and also be savvy consumers of these solutions.”
Professor Tomasz Piskorski
Short for property technology, “proptech” refers to everything from apps such as Quicken Loans, which allows homeowners to refinance their mortgages in seconds, to platforms that increase the efficiency of financing construction projects. Another example is smart technology that turns buildings into giant robots that know when to turn off lights or send the elevator down to the lobby.
“The class is about presenting students with the most recent innovations in real estate, so when they graduate, they can contribute to the development of and investment in disruptive technologies, and also be savvy consumers of these solutions,” Piskorski says.
Despite the current economic uncertainty, the foreseeable future holds ample opportunity for students interested in real estate technology; a Deloitte study found that the amount investors sank into proptech companies climbed from $1 billion to $18 billion in the last decade. And while that number is likely to be revised, recent studies show that even amidst economic decline, a third of proptech companies plan to add employees this year.
Piskorski has amended the course's syllabus to include a discussion of two recent proptech innovations—one that's flourished during the pandemic and one that has all but collapsed. The first is what's known as “iBuying.” IBuying companies such as Redfin and Opendoor use algorithms to purchase homes—sight unseen—for cash, then resell them at a small profit. Sellers earn less than they might with a broker, but sell their property in a fraction of the usual time. While this automated valuation model is still in its infancy, it has seen exponential growth in some cities, as Piskorski notes in a recent study he co-authored.
Piskorski says students will also discuss smart-building companies, which he expects to fare well in the wake of COVID as commercial landlords rush to implement systems that improve health and hygiene. “Smart real estate is booming,” says Piskorski. “Now everyone wants digital sensors that measure airflow or that make sure there aren't too many people in an elevator.”
Piskorski also plans to introduce discussion of two areas of real estate hit especially hard by the pandemic—co-working and co-living. (Piskorski considers these proptech because of the digital services they offer, as well as their reliance on algorithms to maximize space use.) “Co-working, co-living, pop-up stores—anything that makes use of a physical asset—have all been significantly affected by COVID,” he says. For this lecture, Piskorski plans to welcome guest speaker Lisa Cations '17, head of enterprise sales Europe at co-working company Hana, to share firsthand Edge into the topic. The two wrote a case study that also analyzes how the pandemic may affect the co-working and shared office space model going forward.
Piskorski believes that while the future of many industries may look uncertain, there is one constant when it comes to proptech: change. When the class meets again in 2022, there will likely be new companies and technologies to study and discuss.
“This is not a class where I can create the curriculum and stick to it,” says Piskorski. “The idea is to always be on the edge, and the edge is changing every year.”
—Abigail Beshkin
Can We Solve The Affordable Housing Crisis?
Stijn Van Nieuwerburgh, Earle W. Kazis and Benjamin Schore
Professor of Real Estate
For decades, a scarcity of affordable housing has been taking a heavy toll on American cities. Rising rents have steadily priced out long-term residents, leaving municipalities struggling to address this worsening crisis. The pandemic has only made the issue more dire, forcing millions of Americans out of work.
Professor Stijn Van Nieuwerburgh, an expert on housing and asset pricing who has advised local governments on the issue, finds that part of the solution to the larger urban housing crisis can be found in addressing the means by which affordable housing is allocated.
“There is a lot more need today because of the massive economic shock we have gone through.”
Professor Stijn Van Nieuwerburgh
In his 2019 study, “Affordable Housing and City Welfare,” Van Nieuwerburgh, the Earle W. Kazis and Benjamin Schore Professor of Real Estate in the Finance Division, and his co-authors note that renters, who at one time required rent-controlled or stabilized units, tend to stay put, even as they earn more and can afford a market-rate home.
He proposes means-testing potential renters for affordable units and requiring them to requalify periodically; setting a wage threshold of 30 percent of area median income; and holding a lottery to determine who may apply for units when they become available. In New York, where about 1 million apartments are rent stabilized but available to anyone, one solution could be to make those units income restricted, suggests Van Nieuwerburgh.
Van Nieuwerburgh explains that the study takes a “finance angle” to examine the issue through the lens of risk. For individuals, affordable housing programs serve as a kind of insurance against wage fluctuations in the job market. “You cannot go to Geico and ask, 'Can I buy labor insurance?'” he says. “You could think of affordable housing as a substitute for that.”
Now is the time for municipalities to look at expanding affordable housing and thinking of it as a communal hedge against wage fluctuations, says Van Nieuwerburgh. “There is a lot more need today because of the massive economic shock we have gone through.”
Many states, including New York, have forced landlords to freeze rents and issued a moratorium on evictions. Yet, those fixes are only temporary, and in high-rent cities, where people spend as much as half of their income on rent, these measures may only postpone the pain. “If you owe three months of rent, you're owing one and a half times your monthly salary, which is an enormous amount of money,” he says.
—Stephen Chupaska
Developing a Global Career
Marcela Drigo '02
From her office (a home office since March 2020) in São Paulo, Brazil, Marcela Drigo '02 oversees real estate investment in Latin America for the Canada Pension Plan (CPP) Investment Board, the investment management arm of Canada's largest pension plan. Drigo and her team source investment opportunities throughout the region, though most—C$1.5 billion worth—are in Brazil.
Forty percent of that C$1.5 billion is in retail, mostly shopping malls. In March 2020, with the pandemic forcing widespread global shutdowns for unknown lengths of time, Drigo's team hurried to project cashflow and conduct sensitivity studies, including a downturn analysis on the whole portfolio. “What would happen if the malls closed for one month, three months, or six months? We had no visibility,” she says.
“Are people going back to the office? Is work-from-home going to be temporary, or for good?”
Marcela Drigo '02
CPP and its partner investor, also the mall operator, granted stores and other lease-holders a temporary freeze on rent and a portion of common charges. “We worked very hard with our partners to reduce those common charges so it's not a huge financial burden to the tenants,” recalls Drigo. Malls and other businesses began opening in July, and operations across the country have pretty much returned to normal, though Brazil remains especially hard hit by the virus.
Like so many other real estate professionals, Drigo notes the uncertainty in the real estate sector, particularly surrounding the future of office space, which accounts for about 17 percent of CPP's investment in Brazil. “Are people going back to the office? Is work-from-home going to be temporary, or for good?” Drigo says she and her colleagues have been watching China for clues about post-pandemic society. China, which has largely gained control of the pandemic, has reopened many aspects of society and allowed people to return to work. One recent success: despite the pandemic, Drigo and her team finalized a partnership with Greystar Real Estate Partners to develop a multi-family residential project in São Paulo, the first foray into Brazil for the property developer.
A São Paulo native, Drigo has worked for CPP since 2016. She earned her undergraduate degree in engineering and began her career with Tishman Speyer, working on multi-year developments in her home city. After three years, she decided to focus on the investing side of real estate, and knew that New York was the place to learn how.
At Columbia, Drigo focused her studies in real estate and took courses with, among others, Lynne Sagalyn, the Earle W. Kazis and Benjamin Schore Professor Emerita of Real Estate and founding director of the Paul Milstein Center for Real Estate, whom Drigo credits with being especially impactful on her career. In classes, Drigo often met practitioners, “inspirational people who talked about things that made you want to be part of the real estate world.” She stayed in New York after graduation, working first for AIG Global Real Estate and then Capital Trust (now Blackstone Mortgage Trust).
In 2009, Drigo returned home for a job with real estate investment managers Clarion Partners; a role she landed in large part, she says, because of her New York experience. “I had all of this institutional real estate expertise, which I wouldn't have been able to get in Brazil,” says Drigo. “Having that translates into trust, and it allowed me to differentiate myself. Studying at Columbia Business School and staying in New York was a game changer.”
—Abigail Beshkin