52 (+1) Pointers
The Hunters in the Snow Pieter Bruegel the Elder.- 1565 - Kunsthistorisches Museum- Vienna
What do you need to know to succeed in the real estate industry?
The Real Estate industry is no longer about real estate. Well actually, of course it is. But while real estate knowledge is still necessary, it is no longer sufficient.
We’re not just in the business of providing four walls and a roof. As the places and spaces where people spend 90% of their time inside, and as the source of 40% of all the worlds carbon emissions, and consumer of some 30% of total global energy, real estate IS the most important industry in the world. Nothing happens without real estate. As such we have a responsibility, and an opportunity, to live up to the implications of this. What we do has real impact. On individuals, communities, wider society and the planet.
So, we need to know a lot, about a lot.
As we prepare for what looks set to be a very trying 2023, here are 52 pointers to what to learn, ways to think, and things to do.
The days of tech businesses being predicated on world domination are over. Easy and abundant money is no longer available. Designing business models focussed on filling one’s niche and making a healthy profit is the new ‘sexy’. Ignore this at your peril.
PropTech needs to stop apeing FinTech. Spend less time thinking how to financialise everything and more on building a better built environment. The actualité of real estate is that almost everything could be much better. Concentrate on that.
Globalisation is not dead, but ‘Chimerica’ is. A great decoupling is underway, and this will have huge implications for real estate. As supply chains are reconfigured so will be real estate needs. What we build where is in flux.
Not least of all manufacturing. The ‘big one’ is computer chips - witness TSMC upping investment in new fabrication plants in Arizona from $2-40 billion. But this near shoring will be across the board. After all a robot costs the same in Shanghai as it does in Sheffield. Low labour costs are no longer the central determinant of where factories get built. Learn about supply chains.
Artificial intelligence is often criticised as being laden with biases. As if humans aren’t. The difference is that software can be easily recoded, whereas humans are often immune to being ‘updated’. Don’t let talk of bias put you off understanding what AI is capable of.
Think in terms of systems when considering how to introduce AI into real estate. Yes, many point solutions are available but applying AI to the structures of the past is self limiting. Just as factories needed to be fundamentally reconfigured before the industrial revolution saw significant productivity gains so we should be looking to new business models, workflows and methodologies in real estate. Don’t digitise the past, create the future.
It’s very hard for incumbents to do anything but adopt point solutions. Systemic change to successful models is too hard. So your competitive advantage will come from being new. You don’t have to worry about any legacy: you can design your business to leverage every new technology imaginable, and to adopt new ways of working. Maybe stop trying to steer the supertanker. Get a speedboat instead.
Think about power structures within the industry. Especially within the areas you are operating. If you can change X who does that impact? Who does it benefit but also who does it harm? For example, we have, or are getting close to, having the technologies that would enable a building to operate autonomously, based on data captured by sensors and analysed by an AI. This would benefit occupiers and owners considerably. But, at the least, change the working environment of much of the FM and PM industry. So how will it get adopted? This is where you need to think about your tactics, not just your strategy. Your strategy might be spot on but it’s your tactics that will make it happen.
Next time you encounter a reluctant adopter of technology consider point 8. Most likely their reluctance will not be because they cannot see the benefits of the technology. It’s just that they aren’t the ones benefiting. How do you get around this? Map out the territory; find the pain points and then the pain killers.
Dismiss thoughts of AI destroying jobs. Given the above it’s clear that individual tasks are far more likely to be impacted by AI than entire jobs. Take radiologists for example. A few years ago it was assumed that AI (which can interpret scans better than any human) would be their nemesis. But it turns out that AI only impacts 1 of 30 key tasks a radiologist performs. So a human+machine future seems far more likely. How to leverage technology to augment a human. Systems still need to be redesigned but don’t assume you can remove all the wetware and replace it with software. Think holistically.
‘Show me the incentives and I’ll show you the outcome’ - famous words from Charlie Munger, Warren Buffett’s longtime partner. This needs to be deeply internalised. Just about every decision made reflects the incentives of the person making it. Every value chain is made up of chains of decisions and each of these reflects chains of incentives. Obsess about the ‘chains’ of your stakeholders. Understand them and you’ll know what levers to pull.
“it is difficult to get a man to understand something, when his salary depends on his not understanding it.” - so wrote Upton Sinclair. Once again, context matters. Understand the context. Plan accordingly.
‘Don’t aggregate me’ - averages seldom tell us much. In real estate though they traditionally have done. We all tended to rise or fall together. In a bull market we are all geniuses, in a bear market idiots. Those days have passed, or are passing. The right asset, operated in the right way, will massively outperform even the right asset, operated in the wrong way. The UX, or user experience of an asset is now a major differentiator. The underlying real estate is an input, not the output. Necessary but no longer sufficient.
‘You won’t see much innovation in a downturn’ - you will hear this often. Ignore it and be thankful that your competitor has decided not to compete. Bull markets are when innovation dies. Especially in real estate. When demand outstrips supply you can get away with ignoring innovation. And many do (looking at you residential industry!). Going in to this downturn the real estate industry, particularly the office sector, is facing a customer base that has realised it doesn’t NEED what the industry has to sell. Innovation is the only thing that will persuade them that they WANT it anyway. Surround yourself with innovators.
Investigate ChatGPT, the question and answer large language model AI developed by OpenAI. This is the latest product to be built on GPT-3 which is imminently going to be superseded by GPT-4. Think of a chatbot on steroids, for everything. There are huge downsides (around privacy, copyright, trust etc) with these models but they will be utilised to help us operate real estate in the future. A human + ChatGPT will beat a comparable human without it. Gem up.
Read Nouriel Roubini’s book Megathreats, where he explains how vulnerable we are to 10 different vectors of disruption. ‘For four decades after World War II, climate change and job-displacing artificial intelligence were not on anyone’s mind, and terms like "deglobalization" and "trade war" had no purchase. But now we are entering a new era that will more closely resemble the tumultuous and dark decades between 1914 and 1945.’ Again, context matters. Real estate is especially influenced by macroeconomics, and global geopolitics: It’s wise to understand key trends.
Think about the merging of asset classes. What’s an office, a home, a hotel? These worlds are beginning to overlap in a fundamental way. Work, rest and play has segregated our modern cities. Do this here, and this here. In the future everything might revert to coexisting. Especially if ‘the 15 minute city’ idea gathers momentum. Either way, what you build where is changing. Think about what you would personally like to see, and then wonder why if you want it why wouldn’t others?
Commuting matters. As travel times increase the desire to visit an office each day diminishes. Which explains, beyond anything else, why ‘return to the office’ is occurring to different degrees in different cities. It’s maybe the biggest ‘bug’ about large cities. Do we fight resistance to commute, make it better (and cheaper) or roll with it and lean in to a post commuting world? How does that impact where to build or invest? One way or another this is something which needs to be ‘fixed’.
Dig deep into the concept of converting offices to residential. Where is it feasible, or desirable, and what needs to happen to enable it. At scale. And what’s the aim? More ‘money deposit boxes in the sky’ or the key to revitalising city centres with 50% less office workers? It’s just one option to deal with office buildings that are no longer fit for purpose, but is it the best option. Or just the easy answer?
Invest in management training. We take people who are good in their field, and have great skill, and make them managers. Without training them for what is an entirely different skill set. So why are we surprised when the Peter principle kicks in? We’ve institutionalised incompetence, and need to stop.
The chaos around hybrid working is the perfect example of this. Asking managers who are used to office centric environments to successfully develop strategies for hybrid working, without any training, is proving to be the #fail many anticipated. You cannot run a company designed for office centricity successfully in hybrid mode. We need to understand how managing a remote team efficiently and effectively is a source of great competitive advantage. But that requires understanding new ways to communicate, write, mentor, meet and innovate. It won’t just happen. But the answers are a known known. Take the free Coursera online course offered by Gitlab. And work from there.
Never go a day without learning something. Education does not stop when you leave school, or university. That is just the foundations being put in place. Lifelong learning is a prerequisite to success in the 2020’s, and beyond. Make it a habit. And surround yourself with other learners.
Learn how to use technology to automate away tedium. Tools like Zapier enable you to easily set up ‘if this then that’ processes for your business. Think about, and write down, rote processes you do repeatedly and those done across your company. And then automate them away. Never even dream about rekeying anything. Anything structured, repeatable or predictable should be done by a machine. And sooner or later will be. Spend your time doing what humans are good at, not what machines are.
Learn how to innovate, and how to build an innovative company. Again this is largely a known known. Not necessarily easy to achieve but the processes and actions needed are easy to work out. Here’s a crib sheet - https://www.antonyslumbers.com/theblog/2022/5/21/innovation-if-not-now-then-when
Learn about Design Thinking. A methodology popularised by design agency IDEO ‘Design thinking has a human-centered core. It encourages organizations to focus on the people they're creating for, which leads to better products, services, and processes. When you sit down to create a solution for a business need, the first question should always be what's the human need behind it?’ Tom Kelley, the founder of IDEO and creator of the Stanford d.school wrote a great book about it called ‘Creative Confidence’. It should be essential reading for anyone in real estate. If we don’t understand our customers how can we create great real estate?
Who’s the Landlord? A question worth posing to anyone in real estate, but especially to anyone in PropTech. Take any asset and work out who owns what about it? Who owns the equity, the debt, the mortgage, the land, the air rights? And what are their incentives (see above)? Are they short, medium or long term players? Are they ‘flippers’ or are they looking to asset manage their way to a superior product or service? Then don’t bother trying to sell a technology with a 10 year payback to a ‘Landlord’ who has to exit the asset within 3 years. We waste far too much time trying to sell things to people who are never going to buy. Save yourself the stress by understanding ‘Who’s the Landlord’.
In a world of hybrid and remote working companies are going to invest more, and be keener on, getting their teams all together in high quality offsite, or retreats. Spending an immersive week together every 2 or 3 months can be far more rewarding than sitting next to each other every day. But the emphasis is on ‘can be’. New businesses are going to be formed around amalgamating well designed, thoughtful real estate with engaging programming. Lots of opportunities here.
Embrace the circular economy. Arup and the Ellen Macarthur Foundation are strong sources for inspiration on this. The latter’s recent report ‘‘Realising the value of circular economy in real estate’ ’ outlines these five new business models: 1. Flexible spaces – multi-use spaces to unlock the potential of underutilised space in buildings / 2. Adaptable assets – creating buildings which are resilient to both changing market conditions and social expectations by being able to adapt to alternative uses / 3. Relocatable buildings – moving across sites for temporary uses using modular, deconstructable buildings / 4. Residual value – tradable futures contracts related to the value of building materials at deconstruction / 5. Performance procurement – product-as-a-service business model scaled up to whole building systems
‘The most sustainable building is the one already built’ - what’s the point of building net zero in operation buildings when their construction creates 60 years worth of emissions? This attitude feels somewhat ‘out there’ today but give it a few more years and it will be the default. Unless we can massively reduce the embodied carbon involved with construction we really need to be setting the default position as refurbishment first. This is an area where deep knowledge is a valuable asset. The whole topic is nascent and there aren’t many people who really know their stuff. If you wanted to specialise this would be a good space to build a personal Brand.
We all need good and strong networks. To mentor, advise, consult, assist, support and generally enrich our lives, both personal and in business. But beware of too much depth and not enough breadth. A network of like minded and similar people is very comforting, and useful, but a network of varied and dissimilar people even more so. Sandy Pentland, the MIT based author of ‘Social Physics’ explained how the best performing teams are ones who communicate amongst themselves deeply and liberally but who also communicate with many others outside their organisation. You need diversity of thought to build a powerful network. And for that you need to spend a fair amount of time away from your base. In person but also online. My Twitter feed is infinitely interesting, but you choose what suits you.
Flexibility, Flexibility, Flexibility is the new Location, Location, Location. We want flexibility of time; to work when best for us. Flexibility of location; to work where suits us best. And flexibility of space; to have available spaces that are optimised for the ‘job to be done’. And this flexibility needs to be able to also accommodate the needs of the teams we work with whilst also honouring our commitments to our employer. All of which is a complicated need. Some is cultural and operational but there is much we in the real estate industry can do to create physical flexibility in our assets. But we need to always have in mind that anything fixed needs to be flexible. And that is going to mean a lot of new form factors, fit out procedures and design updates.
A key ingredient in creating a sustainable built environment is going to be new materials. To replace the environmental horror shows that are concrete and steel, to develop glazing that performs as solar panels (these exist now but they’re not very efficient), and to appraise and potentially replace every physical item we use in our buildings. Databases of materials that specify their sustainability credentials are being built but they have a long way to go. This is another topic offering strong opportunities for growth.
For those so minded diving into the world of Space Science could be very rewarding. A fast growing, very specialist area but no doubt with very specific real estate needs. Being generic might work, but only until someone arrives who really understands this sectors needs, and knows how to provide for them.
Think about the talent around you, and in your company. Is it what’s needed for a ‘Space as a Service’ real estate industry? You’re probably strong on real estate knowledge, the quantitative stuff, but how do you fare on the human needs, qualitative questions? Do you know what questions to ask to understand customers wants, needs and desires? Do you know how to satisfy them? Who do you need in your organisation? Or your network? The real estate company of 2025 is going to look very different from the real estate company of 2015.
Dive into the world of modular technologies. More and more of the built environment is going to be designed, built and operated using digitally connected software and hardware. We’ll design in data driven digital twins then construct with robots, or 3D printers. Think Lego. A kit of parts which we can put together in a multitude of ways, and then deconstruct and use elsewhere. In the west at least we are facing a shortage of construction workers, which is unlikely to naturally correct itself. So, apart from being environmentally far superior, modular construction, in many forms, is going to become pervasive. Yet another area to differentiate oneself.
Drones and Digital Twins. Forget the Metaverse, in real estate the most exciting technologies will all feed back into Digital Twins. This will be where persistent, interoperable, 3D worlds will develop. We won’t build or operate anything without modelling it first. So much to get your teeth into. All of which will one day look commonplace but in the near term will be as close as we’ll get to science fiction. The industry needs to attract gamers and give them real environments to play with.
Be curious and only mix with curious people. They exist, from 8 to 80. Once curious, always curious. Curious people want to know more and they want to predict what’s coming next. Combine them with ‘Prediction Machines’, aka AI’s, and you have a powerful toolkit at your disposal. Slowly but surely real estate is developing a data mindset and more and more of it is becoming available, enabling us to understand the world around us like never before. So learn about data, about prediction, and how, combined with human judgement, these are skills of great power. To avoid mistakes but also to enable ‘better and best’ to be the default in everything you do.
Abstract & Critical Thinking - the critical skill for a technological age. People talk about regulating social media and the internet, and banning misinformation and worse, but in practice this is never going to be possible. ChatGPT is enabling the mass creation of plausible but often thoroughly inaccurate text. This essay reads perfectly - but nothing is true. So what do you do? The answer is that we all have to develop our abstract and critical thinking. We need to have the ability to intuit right from wrong. To ask the right questions, and to be cognisant of misleading statements. And these are skills that can be taught and learnt. The problem is we do not do so as a matter of course. If you follow only one of these pointers this is the one to dive into.
One example of using data to enable better and best is in air quality monitoring. We know that environmental conditions have direct impact on our cognitive function, and we know that really bad environmental conditions can kill us. Post Covid it is essential landlords provide, and occupiers demand, access to realtime and granular air quality data. To facilitate health and wellbeing, but also to improve productivity. It shouldn’t be but this is an area full of competitive advantage because too many in real estate either do not understand its importance or aren’t customer friendly enough to roll such services out. Near term there is much value to be created, and much to be destroyed, around air quality. Be on the right side. And name and shame those who ain’t.
Events are a key attraction for getting people back into the office. As discussed above we all need to learn, all the time. But how do you decide which events to put on, and who to invite? And how do you act as a maven, ensuring X meets Y? These are skills vital to flex operators but also within larger companies. Are they real estate skills? Maybe not, but maybe …. Why not? After all, who is creating the user experience of this space? Who’s generating the most value?
How are your statistical abilities? Particularly in an AI driven world, you need to understand probability, because we are moving from a deterministic world to a probabilistic one. AI does not give you answers. What it does is give you is predictions. X has a Y% chance of happening. Etc etc. Good books on statistics for the layman are David Spiegelhalter’s ‘The Art of Statistics Learning from Data’, and Tim Harford’s ‘The Data Detective: Ten Easy Rules to Make Sense of Statistics’. For an understanding of how AI works in real life Hannah Fry’s ‘Hello World: Being Human in the Age of Algorithms’ is brilliant.
Once you are comfortable with data, and have a lot of it, you’ll be using it to help, amongst other things, you run your assets. But how does a 3rd party know whether they can trust your data. Maybe they are buying an asset from you and you are saying it performs according to ‘this data’. But how do they know you’ve not doctored that data? The industry is going to need some form of ‘Data Regulator’ or Standards body. The RED Foundation will be able to help with this. https://www.theredfoundation.org/
Demography is Destiny. Get into demographics. Young countries will behave in different ways to old countries, and have different real estate needs. But the same applies at a micro level. Every borough, every village, every town, every city has a different demographic composition. Understanding peoples wants, needs and desires starts with simply knowing who they are, demographically.
Which leads on to migration. Given geo political upheavals, climate change and sociological drivers, we are going to see migration at a scale never before seen in the next thirty years. Within countries, within continents and from South to North. And everyone needs a home, and a place to work. The real estate implications are going to be profound. Get to grips with the fundamentals.
It barely needs saying that a deep understanding of the forces behind climate change, their consequences, and the implications for real estate should be high up on your priorities for learning.
Likewise inequality. Which has lessened between countries globally but has increased markedly within countries. To a point where we saw Donald Trump elected President and Brexit occur. In less unequal countries neither of these would likely have occurred. And they are your starter for ten. Inequality within cities and between cities will drive much change, and again the impact on real estate will be considerable.
Develop your communication skills, both verbal and written. Particularly written. As we move to a more distributed way of working, we are going to operate more asynchronously than synchronously. And this is going to require more documentation, and more written communication. The ability to write clearly, concisely and precisely will be at a premium. Not being able to do so will make you hard to work with. Emojis can be used but they’re not enough. Learn to write well.
Have a personal North Star. What is it you want out of your life? Personally and professionally. Be honest with yourself. Does your North Star align with the people, team and company you work with? If not, judge how much this matters. If they are fundamentally misaligned, move on.
Define your own success or failure. Set your own KPIs. Only you really know what you want. Or don’t want. Or maybe you’ve never really addressed the question. Do so. It’s hard to know where to go if you don’t have at least a direction of travel in mind.
Pay deep attention to the challenges and obstacles under your own control. Can you get past them? As Robert Frost wrote, sometimes ‘The only way round is through’. Can you get through? And what about those challenges and obstacles not under your control? Is there a way through, or are they dead ends? Can you, like Hamlet, ‘take arms against a sea of troubles, And by opposing end them’. As above, if not, move on.
What don’t you know that you wish someone would teach you? As discussed the real estate industry is no better than much of industry at teaching and training. Are there things you really wish you knew but no one is teaching you? If so, list them and ask your network. That’s the point of a network. Someone will have the answers. Don’t be shy. Ask.
Critically, in a highly technological age you need to, paradoxically, develop your skills at what the machines cannot do. Yes you need to know enough about technology to co-opt it as a lever but it will be your human skills that will keep you employed, and employable. To remain competitive these need to be trained and retrained. And for clarities sake these are the key human skills: Design, Imagination, Inspiration, Creation, Empathy, Intuition, Innovation, Abstract & Critical Thinking, Collaboration, Social intelligence, and Judgement.
AND THE Christmas Bonus
And finally, don’t fight the future. Respect the past but embrace the future. As Bob Dylan wrote "He not busy being born is busy dying,”
Have a great year.
Antony