What Is Real Estate Fracking?

Marcia Cuenca
September 25, 2021
"Imagine the asset, not so much the physical asset, but the use of the asset, if we could identify all of the down time, all of the times that it's underutilized, and somehow break the use up, reconfigure it into higher value combinations, which is Dennis' description, and unlock the value."

Adam Hooper - All right, let's switch gears a little bit to real estate fracking. You've talked on that before. What is that?

Steve Weikal - I love this topic. This was a term coined by Professor Dennis Frenchman, my colleague and good friend Dennis Frenchman here at MIT. It is a perfect description of one of the trends that's going on. If you think of oil fracking, it's where water and sand and some chemicals get pumped back into the ground to break up the shale or the other rock, and release the extra oil, and unlock the value of that stranded oil and gas that's left in the ground. Apply that, excuse me, apply that to real estate. Imagine the asset, not so much the physical asset, but the use of the asset, if we could identify all of the down time, all of the times that it's underutilized, and somehow break the use up, reconfigure it into higher value combinations, which is Dennis' description, and unlock the value. That would be like fracking real estate. What's an example of fracking in cars? Well, that's Uber and Zipcar, two sort of different models. Zipcar, where they own the vehicle, and they book it out and they dramatically increase the utilization, and Uber, which increases the utilization of somebody's personal car, and Uber enables that with the technology. Two good real estate examples of that, WeWork. WeWork signs master leases, or any coworking, actually, sign a master lease, reconfigure the space and sell smaller spaces out at much higher dollar per square foot, anywhere from two x to three x to four x or higher. That's, the WeWork, that's the office version. Then, of course, you have Airbnb. You've got empty rooms in your house. It started as empty rooms in your house, and you're able to, through the technology and the platform, sell those out on a per-night basis and monetize that otherwise empty space with a bunch of dusty stuff in it. That's this idea of real estate fracking.

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