Being Digital - A primer for commercial real estate. Part 1.

December 2013

Eighteen years ago Nicholas Negroponte, who founded WIRED and the Media Lab at MIT wrote Being Digital, the seminal work on what happens when we move from a world primarily of Atoms to one predominantly of Bits. A truly prophetic book, I saw him give a lecture on the subject in 1995…. and was hooked. This was a grand vista being laid out, a digital world of innovation, exploration and imagination.

Well, since then I’ve been waiting for ‘IT’ to happen. And waited, and waited. Green shoots would appear, then be dashed by the inadequacies of this or that hardware, software or digital infrastructure.

The wait though is over: we now have all the tools that are required for ‘Being Digital’ to become a reality. And with these tools the big disruption can begin, for there should be no doubt that a great divide will open up between those who embrace the digital world wholeheartedly and those who merely accommodate it.

So what does ‘Being Digital’ mean, and what implications does it have for commercial real estate?

1. It’s not about you anymore
In the analogue world we’ve become used to dealing with people on a one by one basis, and consuming information likewise. Single channels connect us with others or with information. We interact and learn on a singular basis. But in the digital world we still deal with individuals, but on a networked basis. Multiple channels of connectivity and data dissemination mean we communicate and collaborate with multiple parties, in multiple locations, all the time. As a result we have access to a wider pool of knowledge, greater access to skills and most likely a more nuanced, multi-faceted view of the world. As Bill Joy said:

‘Whoever you are, the smartest people don’t work for you’

In the digital world the smartest people don’t need to work for you for you to work with them. In the analogue world you’d most likely never know they existed.

Being Digital means one moves away from Hub and Spoke thinking, where you sit at the centre and get fed information, item by item, to collaborative thinking, where you are a node on a network, with everything connected to everything else and where the whole is greater than the sum of its parts.

A scary thought just being a node on a network. How do you possibly see the wood for the trees? Well, that is where software comes in. As we will cover in Part 2.

Antony

PS This point about Being Digital is generic to everyone and every business. However for the commercial real estate world specifically, it will mean a relentless move towards transparency. Developers, agents, suppliers and occupiers will all have access to the same information. Combined with the trend towards greater sustainability in the built environment it will de rigeur for everything to be monitored, in real time, and for the vast majority of that information to be widely shared and shareable.

4 Tech Megatrends for Commercial Real Estate

Yesterday I had the pleasure of presenting to the REALCOMM CIO Forum in London.

My talk covered what I consider to be the 4 Tech Megateends that will impact on the commercial real estate industry.

In reality these same megatends will effect everyone, and the impact on commercial real estate is really but a reflection of how we are all going to change the way we ‘work, rest and play’.

Property and Retail: high st, retail park or shopping centre - tech is your No 1 enemy... Or potential best friend

August 2013

Having been involved in the tech section of the Grimsey Review, I’ve followed responses to it’s launch assiduously. Unleashed by Bill himself in the House of Commons, media coverage has been extensive and then this last week we had the BCSC in London which prompted much comment.

I’m going to ignore the bitchfest with Mary Portas as it is a meaningless sideshow. Without Mary P the State of the High St would not be such a hot topic, but it needed the extra gravitas and commercial analysis that Bill G has brought. Praise to both of them.

Commentary has focused on the problems of the here and now: Business Rates, Parking costs, Ownership issues, Use Classes, CPO’s etc. It seems to me everyone involved in the retail or property industries largely knows what needs to be done in these areas. The challenge is that those not in these industries, especially Government, either do not ‘get it’ or don’t really care, friendly supportive words notwithstanding.

Cracking that problem will be hard. Failure though will have nasty consequences (slow death is not pretty) but maybe, like with city centre riots, no-one cares until they occur and we’ll have to wait till then for action to be taken.*

But all that aside I am interested in where tech fits into all this. The Grimsey Review has an extensive section on this subject and the full tech report is downloadable here. I get a mention in the credits so obviously it is a must read full of truth and fascination.

The BIG point though is this: In tech terms ‘you ain’t seen nothing yet’ and what’s coming will, to paraphrase Nietzche ‘either kill you or make you strong’.

The launch of 4g, widespread wifi, powerful and getting more so smartphones are enabling the development of such immersive, entertaining, personalised and great to use online services that today’s offerings will shortly look somewhat primitive. Couple incredible ease of use with same day delivery (see Shuttl, Argos & Amazon and others) and e-commerce becomes ever more attractive to shoppers (and retailers?) .

Compete with that!

Many are of course. Witness reports yesterday of John Lewis spending £85 million on e-commerce tech and infrastructure in the last half year. This is the sort of real commitment that the best in class retailers are showing. The consequences of which are covered in an earlier post.

So what does this mean for Developers and the wider Property industry?

The bottom line is that the property industry provides the Operating System, the Platform, for their tenants to build on. This used to be simple. Four walls and a roof was just about all that was required. But that was in the Analogue World. We are now deep into the Digital World and the provision of virtual services is as, if not more, important than bricks and mortar. The software needs an upgrade and the computer a reboot.

Think about a Shopping Centre or High St. In each case we have a collection of retailers, restauranteurs or providers of other services. Who does, or should , have the best overview of all these occupiers and the visitors coming to see them? The property owner of course. This is less so in most High St’s which are under multiple ownerships but that is something that has to be tackled one way or another. The prize of owning the overview is too valuable to ignore.

Now, the key to a successful retail area will be how well data from that overview is fed into the Property owners Operating System and leveraged to provide a Platform on which all occupiers can build services. Real time offers, customised product showcases, personalised services, VIP invitations to specific events, click and collect facilities, home delivery. And so on. The property owner working in collaboration with their retailers to enable the provision of spectacular service to their customers. All the benefits of e-shopping on top of a great day out.

The point is utilising technology to create an experience that is preferable to virtual shopping, however brilliantly efficient that is. Business rates and all other practical issues aside, the bottom line is ALL physical retail is doomed, in the medium term, if they cannot find a way to beat online. And the only way to do that will be to co-opt tech as an ally…. not an enemy.

The decline of the High St is by no means set in stone. Nor the success of Shopping Centres. Everyone (by and large) is playing by the old rules from the analogue age. Few have really committed to digital. Just look out online for anyone from the property owner world. Almost no one is active. And without actively engaging you’re going to have a hard time getting it right when the time comes that you have to commit to a digital future.

So, funnily enough, I think it is property people who are going to decide the fate of who wins in the retail world. Medium to long term it is not about whether the ‘place to be’ is within a Shopping Centre or on the High St. It’ll be about who can create the best user experience. And that experience will deeply meld the digital and physical worlds.

Who’s going to ‘bin the Blackberry’ and create the retail experiences that the ‘modern’ world craves?

Antony

* Maybe change might be in the air. The Sunday Times this morning launched a campaign for reform of business rates. Rather shameless piggy backing on the Grimsey Review but welcome nevertheless.

August 2013

Commercial Property and NanoTech - A glimpse into the future, available today

June 2013

In the extraordinary video above you’ll see a demonstration of the amazing properties of Ultra Ever Dry.

“Ultra-Ever Dry is a superhydrophobic (water) and oleophobic (hydrocarbons) coating that will completely repel almost any liquid. Ultra-Ever Dry uses proprietary nanotechnology to coat an object and create a barrier of air on its surface. This barrier repels water, oil and other liquids unlike any coating seen before.”

The applications within the commercial property industry are practically endless. If you can make all manner of surfaces free from dirt, grime or other defacement you not only maintain a better looking product but save the cost of repeated and ongoing cleaning. Potentially these savings are huge.

Nanotechnology is one of the most significant areas of current scientific research and will impact on our lives in a major way over the next 10/20 years. Ultra Ever Dry represents a glimpse into the future but is available today for you to make the most off.

Antony

Retail Property & the Internet: Only the Paranoid will survive

June 2013

According to a report out this week from CBRE ‘Four in five shoppers ‘prefer the high street over the internet for clothes’. Well, all I can say is that if you are in clothes retailing, or a landlord to tenants in this market, you better take this with a pinch of salt. Only the paranoid will survive the internet.

As reported in The Telegraph ‘in the UK, less than half of consumers, 38pc, think they will shop online more in the future, suggesting that a change in customer habits may not be as radical as feared.

Of the customers who shopped online, 85pc said it was still important to visit stores to see and to try on clothes.

Peter Gold at CBRE said: “The essentials of a successful retail destination – value, convenience, cleanliness and security – remain uppermost in shoppers’ minds.

“While many retailers are adapting to technological advances, consumers are telling us that they do not intend to radically change their shopping habits in the immediate future.” ‘

For any of the above to be true the underlying trends seen in the last ten years vis a vis the growth of Internet shopping must have ground to a decisive end. The chart below suggests otherwise.

The Centre for Retail Research in May opined that ‘online retail continues to grow and is predicted to account for 21.5% of all retail sales by 2018’. In addition, there could be 316,000 job losses in the same period due to what the CRR describes as the “growing retail crisis”. Read more of this here.

So take your pick: No need to worry OR where are those beads?

I am firmly in the ‘where are those beads’ camp. There is absolutely no way that the internet is not going to become an ever more important factor in retail and those who blithely believe that consumer behavior is not going to change much are in great danger. In fact they are dead men walking; the only variable being their time on death row.

Why?

1. Bandwidth continues to increase and as it does it means the consumption of online services just gets smoother and smoother. Once you have access to super fast wifi (or 4g) your browsing behavior changes and you spend more time online. Simply because it is a more pleasurable experience.

2. And as bandwidth increases retailers and other service providers start to provide new services that take advantage of that speed. So you become aware of richer, more engrossing, more engaging online experiences. Ones that offer you more information, more tailored to your desires and wishes.

3. Hardware improves relentlessly. Your smartphone just gets better; faster, better screen, better camera, better maps. And every improvement just makes sharing easier and shoppers love sharing. It’s just that they don’t necessarily need to do it face to face anymore. Add in the iPad and other tablets and virtual shopping has genuinely started to become a major hobby. Multi screening from the sofa, TV on and wine in hand is the setting for many a happy hour ‘down the shops’.

4. It’s so damn easy. Amazon is of course the king in this area with their one click and prime options making ‘frictionless capitalism’ a wondrous reality. But many others make ordering super simple, such as John Lewis who have been repaid by seeing extraordinary growth in their online sales soaring 40% in the last year.

5. The online shopping experience is improving all the time. The heavily curated, personalised experience that the likes of Net-a-Porter or Rapha provide is frankly a pleasure to challenge most offline shopping trips. Only the best stores compete. Indeed if you listen to Burberry they make it clear that the purpose of their flagship stores is to replicate the web experience and not vice versa.

6. Online one has access to all available stock (in the better stores), whereas only the biggest and best physical stores do. Online one can also read reviews, watch videos, compare, contrast products and price match.

7. Delivery and returns. By making delivery fast (increasingly next day or in urban areas coming soon same day) and returns free and easy the online merchants have neutralised a major drawback of online, namely the lack of ‘instant gratification’ one gets in physical stores. Next day does it for many.

So there are seven reasons why online sales will only increase and the internet will become increasingly part and parcel of most peoples shopping habits. Unless you can compete with all these you really do need to start worrying. And frankly not that many retailers have the scale, clout and stores to do so. The whole market is bound to bifurcate between large, experiential flagship stores and smaller boutique type outlets that know their market intimately and can curate small collections for niche markets. In the middle will be a bad place to be, as they fail to excel in any area and even the most committed shopper will go elsewhere, even online.

From a property perspective one must either hope that CBRE are right and that not much is going to change and life will return to the nirvana of the pre 2007 financial meltdown or start to get paranoid and obsess about the transformational nature of modern technology.

Over to you. I’m happy in my choice. Are you?

Antony