Comparing the Commercial Real Estate and Software Businesses

For years I had wanted to buy a building for my company but it never made sense. Owning a building for a startup is like buying a fish tank for a goldfish — it’ll grow to the optimal size for the tank and no more. Startups, by their very nature, are growth-focused (see PG’s essay Startup = Growth), thus size and lease terms need to be as flexible as possible.

Now that I’ve been in the commercial real estate business for six months with the Atlanta Tech Village, I have a few initial thoughts on how it differs from the software business. Here goes:

• Software has infinite inventory and little marginal cost for each additional sale while commercial real estate is extremely fixed both in available space and costs
• Real estate has many more nuances and opportunities related to depreciation, tax credits, and other items that you can tell lobbyists help put in place (e.g. put in cheap and expensive lights in the same room as a workaround so you can depreciate the more expensive ones significantly faster)
• People-wise, commercial real estate is more fun due to the in-person customer relationships compared to software, which is mostly virtual
• Software is much riskier with the opportunity to go out of business or go big much more likely than commercial real estate

Overall, commercial real estate has been more fun than I expected, but in the end, I enjoy software more.

What else? What are some other thoughts comparing the commercial real estate and software businesses?