Steve Jobs once said of Dropbox that it was a feature, not a product. Which, multi billion dollar valuation aside is probably correct. Great software that it is, ultimately it will end up as part of something bigger. Because it addresses just a small part of a wider need.
PropTech, as of today, is much the same, though without the heft of Dropbox. Much, most, perhaps everything that is vaunted right now is just addressing small inefficiencies, and minor quirks of a marketplace that is largely digitising the past. Lease management, virtual viewings, listing services, comps, data services etc are all addressing the needs of the industry as it is now. Not surprisingly, as one needs a customer. What happens though if that customer is going the way of the Dodo? No point in skating to where the puck is, if the ice is melting.
And melting it is, as the real PropTech revolution will be in what we build, how we build it and what we do in it. And that will upend the entire real estate ecosystem, to the detriment of some but the greater good of a whole lot more.
Last year there was much talk of ‘Stranded assets’ within the oil industry; headlines such as “How fossil fuel firms risk destroying investor returns” and talk of “The $2 trillion assets danger zone”. This was all predicated on the idea that the oil industry was sitting on what they considered long term assets, but that were in reality worthless as they would never be extracted and used, because of the continuing fight against climate change. Societal change will turn their assets to dust!
What if this applies equally to real estate, as the way we work, and the work we do renders old ideas of what occupiers want, redundant? What if 40% of the workforce really do operate as freelancers by 2020, as has been predicted? What if 45% of all tasks currently performed in offices are taken over by technology, as McKinsey say is possible today? What if 5G does become widely available in 4-8 years and we all have devices with us at all times that can communicate at 10G a second? What if Magic Leap (Google them) do create their augmented reality technology that allows us to conjure up holographically real entities, on demand, anywhere we want? What if AI continues this years astonishing progress, skips the high priced limited market stage and jumps straight to being an everyday commodity that all of us can take advantage off, easily and practically for free? What if….?
None of the above is really all that contentious. As William Gibson said ‘The future is already here; it is just not evenly distributed’ These technologies are clearly going where I am suggesting, and nothing will change that. So then what?
Well, even the ‘Offices are forever’ evangelists accept that you don’t need to go to an office to do the vast majority of work today. All the hype around ‘Activity based work’ reinforces this; most of the time it is the face to face collaboration that people highlight as the point of the office. And that is, and will remain, true. But the amount of real face to face we need will reduce markedly as connectivity explodes and the tools for realtime, high definition, zero lag, but haptically enabled, communication come on line. Technology creates options, alternatives, and these often take time to be adopted, but suddenly become second nature and accepted. Think of self check out machines at supermarkets; for quite a while these were resisted, and resented, but today many of us whizz through them as it is quicker and easier that waiting to be ‘processed’ the old fashion way.
So, it seems to me, city centre offices (especially in very expensive places like London, will become rarely used but luxurious treats for employees (or tightly embedded ‘Contractors’). These will be places we go to perhaps once or twice a week, that will be of the utmost quality and that facilitate the intensely human collaborative skills that all of us will need to focus on now that the robots are doing anything that can be automated. They will be cauldrons of social intelligence, imagination, innovation, design, empathy and creativity. Interaction hubs. And if they do not enable this type of ‘work’, what will become of them? They will be stranded assets.
Where will we spend the rest of our time? Nearer to home. Who wouldn’t want to commute less IF the right spaces were available closer to home, with all the right technologies to make them as productive as possible. So the market for transforming urban villages and current commuter belt towns has to be a strong one for quite some time to come. Combined with the above, we have of course the continued rise of online shopping, on demand delivery, and ‘sharing economy’ services. As people slowly realise that trying to revive the High Street as retail nirvana’s is a dead end, they will slowly transform into culturally rich, very human centric, mixed use live/work/play places. The Agora, redux.
And how will we build new spaces and places? With robots, of course. Four drivers will ensure this; first off, the technology either already exists or is easy to fathom out. Secondly, the construction industry currently substitutes labour for technology (and thus impedes progress and suffers low productivity) but as labour becomes more costly, and scarce, not least of all because of Brexit, it will have no choice but to push the button on automating itself. If the Government mandated this through regulation the whole process would move faster but the die is cast; construction is so obviously an industry ripe for automation that at some time it simply will have to happen. Thirdly, everything points to a convergence in the use of space; our homes are full of technologies we use ‘at work’ and our work places are becoming more aesthetically akin to homes, as the way we work suits softer settings. And because of this, the places we build absolutely have to be flexible in a way they’ve not needed to be to date. Usage changes, configurations need to be modified, lighting, heating, furnishings need to flex to perform different functions. Home to office, office to home, either to retail will become commonplace and our idea of what constitutes modular will explode. Obviously this will require work on use class legislation but more importantly it will require construction models, processes, and technologies that allow for extreme flexibility. And fourthly it will become ever more important to be extremely sustainable and energy efficient. These trends, which are strengthening by the day, all point towards the necessity, and desirability, of robotic construction.
And finally, on top of this new type of space, and new usage, will be applied the burgeoning AI mentioned above. Kevin Kelly, the co founder of Wired magazine, has a great way to think about AI. Think back to when farmers had nothing but horses and wooden ploughs. Then think how their lives improved when ‘Artificial Power’ became available, in the shape of engines. Suddenly they had dozens of artificial horses they could call upon for help, that didn’t tire, and didn’t need sleep. And that is how it will be with Artificial intelligence; once we stop worrying about what it means for society we will realise each of us will have dozens, hundreds, thousands of artificial brains to assist us. Instead of thinking how many jobs will be lost, we will start to think of all the things we can now do that were previously impossible. With better hardware, more connectivity, and an infinite number of sensors, AI will enable all of us to ‘do more with more’, make better use of our time, and improve the places and spaces in which we choose to spend it.
All of which is something to look forward to, but to return to the original point; does this mean the ice is melting under the real estate industry as it is today? In my humble opinion it clearly does, but the upside is huge. The future is predictable in many ways, and it is incumbent on all of us to see that, seize an extraordinary opportunity, look beyond rearranging the deckchairs and embrace the big picture.