Real Estate: From a People to a Tech Business

March 2014

It all feels the same doesn’t it? Just like the good old days. Deals a plenty, MIPIM packed, champagne flowing and networking like crazy.

It’s not the same though. The pre-Lehman days might look like they are returning, but they’re not. This time it really is different.

A series of tech megatrends is set to have an enormous impact on society, and in turn the real estate industry.

The days of property being primarily a people business are coming to an end.

First off, smartphones and tablets have ripped computing off the desktop and made it a mobile experience. That alone will transform the workspace as the need for a fixed desk becomes redundant. Without that anchor traditional space planning dies. Perhaps even the ‘office’?

The rollout of 4g and increasingly ubiquitous WiFi means that what is now possible when out and about is transformed. When you can get 28mb downloads on the London Underground you realise anything is possible. It will soon be that where you happen to be will have no impact on the services you can use. Don’t bank on the theory that regardless of connectivity, people like to be on top of each other. That only applies up until connectivity gets fast enough to replicate the experience. Wait and see.

The Internet of Things, where everything becomes a remotely monitored node on the network is set to have an economic impact of $2.7 – 6.2 trillion over the next 12 years, according to McKinsey. And much of that involves tech enabling the built environment to operate more efficiently. Property and facilities management will be transformed. And will probably involve a lot less people, albeit much more highly skilled.

Couple the above trends with the increasing use of ‘The Cloud’ to store data and software applications and you have the ingredients of a massive shift in the way people will use real estate. Simply put, no one is anymore tied to a single location to do their work. Everyone can have, on demand, the very best, most up to date software, and access to all their data, wherever they are. In this environment what real estate is ‘fit for purpose’? This year, or in 5 or 10 years time. Does one go for maximum flexibility? Or planned obsolescence?

And if all this potential change to how we use real estate wasn’t enough, what about how technical advances are going to impact on the work we actually do?

According to Eric Schmidt, Chairman of Google, a broad range of jobs that once seemed beyond the reach of automation are in danger of being wiped out by technological advances. It used to be that computers were only really good for automating work of a 2+2 = 4 type. Repetitive, structured processes. But recently they have moved well beyond this and now have exceptional capabilities in analysing unstructured information, pattern recognition, natural language processing and machine learning.

It’s said that accounting and legal services may be particularly vulnerable in this new world of computing. The managerial desire to replace labour with capital being what it is, one can only guess at how much space these businesses will need in the future.

To cap it all, more and more data is becoming common knowledge. Governments are slowly realising the value in making the data they control publicly available. Big Data is flavour of the month. Surely it is not long until all property data has that Glasnost moment, and becomes open and transparent.

And then the data will be consumed by that self same increasingly sophisticated software and analysed to death. Automatically. Wither research departments?

Maybe this is why Google have just invested $50,000,000 in auction.com; perhaps they believe online automation is the future of broking?

As tech superstar Marc Andreessen has said ‘Software is eating the world‘. And that will include how the real estate industry works as well as how real estate is consumed.

And when that happens, property will shift from being a people business to a tech one.

Discuss:)

Antony

PS: You’ve probably heard that a computer can beat any chess Grand Master, but did you know, in what is termed freestyle chess, a Grand Master paired with a computer can beat any computer on it’s own. So, for now at least, we’re still masters of the universe!

Two messages to Planet Property from Planet Tech

February 2014

$19,000,000,000

Nineteen Billion Dollars! Even if you say it fast it still is a big big number.

50. Now that is a small number. But what is the connection between the two?

Well, 50 is the number of employees that the company behind the smartphone app WhatsApp needed to build a business that they have just sold to Facebook for $19,000,000,000.

What therefore is equally small is the amount of office space they require. And whilst they are perhaps an extreme example the message that should be screaming out to the property world is that Planet Tech does not need all that much office space. Or people.

So even when the economy really recovers, office demand, from this sector at least, is going to have different characteristics from ‘the old economy’. Even the big names aren’t big in terms of their space or people requirements. Take Google, Facebook, Twitter, Apple, Microsoft and Amazon out of the equation and the typical tech company is, relatively speaking, a tiddler.

Couple this basic characteristic with the rise of robots and software that comes close to mimicking human capabilities, and one does have to consider the effect on property demand with a degree of trepidation. The recently published ‘The Second Machine Age’ by Eric Brynjolfsson and Andrew McAfee is a worthwhile read in this context.

The second message is all about messaging itself, and the difference between old (or ‘traditional’ if you must) and new ways of communicating.

A few days ago on Twitter a billboard surrounding a new development was causing much hilarity through its use of marketing bullshit. On one panel we had ‘Vision’, ‘Destination’, ‘Landmark’, ‘Vibrant’ and (for the kids?) ‘Community Hub’. For those used to the much more ‘real’ world of social media (such as WhatsApp’s 450,000,000 users) the inherent insincerity of this old school approach piqued amusement rather than interest.

The commercial property world has to date barely engaged with social media and when it has done so the approach tends to be a bit stilted, a bit corporate. As with old school marketing the approach is very ‘Talk at’, very broadcast. Social though is ‘Talk with’; the principal is to engage with one’s audience, often on a one to one basis and in language that is real. If you can’t imagine yourself saying the words, then try again.

Remember: your audience has in their pocket a computer of astonishing power. Your message should be aimed at that device. And the message should be human, useful and enticing.

Antony

Being Digital - A primer for commercial real estate. Part 3.

December 2013

It may seem counter intuitive but IT is dead. The incarnation that so many people have to interact with, the IT Department, is about to catch a nasty bug. Within five years they will be few and far between.

How can that possibly be? This is the IT age isn’t it?

Well… no. This is the Digital Age. And ‘Being Digital’ is not about IT.

Traditionally IT has been seen as a cost to a business. We need this ‘stuff’ to operate and, try as we may, it just seems to get more and more expensive. For larger companies the tyranny of vendors has meant that, in order to receive even tolerable value, being locked in to 3,5, 10 year (or even more) contracts has become the norm. The poor embattled CIO desperately tries to become a real member of the ‘C’ Suite but is rebuffed with instructions to just ‘reduce those costs’. So those inflexible, lengthy contracts are entered into, despite it being clear that they are damaging to a business. Innovation killers in the extreme. Any change is now a cost, and any cost is resisted. So you end up with dull, process driven companies that succeed for a while simply through market indifference, but given time become out of touch, out of date zombies awaiting takeover or slow decline. Is it any wonder the short lifespan of larger companies.

Those days are coming to an end, because Being Digital fundamentally changes the IT landscape. How?

1. As more and more software is moved to the cloud, where updating, monitoring, networking and maintenance is taken care of by the supplier, the whole paraphernalia of an IT department becomes redundant. Unlike being stuck with either out of date software (go on, check how out of date yours is) or long term contracts where you have to do exactly what your supplier says, or incur the cost penalty, in the Cloud you simply buy what you need, as and when you need it.

2. And because of the cost savings, and the freeing up of staff, and the flexibility of provision, everyone in a business can be provided with ‘fit for purpose’ software. The CIO becomes an enabler, not a naysayer.

BUT …. and this is where the IT department, as is, dies, the CIO role disappears during this transformation. It is no longer appropriate for each department in a business to manage their affairs based on what IT offers. Being Digital means every department thinks about their requirements in a fully rounded, holistic manner. What do we need offline, and how does that impact on our online activities? Who do we interact with, and how can we do that offline and online in a manner where dealing with us is not determined by the method our customers choose? Retailers are charging down this route with their ‘omni-channel’ strategies but, in practice, all business units should be thinking in this way.

And once you realise Being Digital means a sea change in internal and external communication, and that collaboration is de rigeur you realise that each department needs to think about their digital requirements on a day to day basis you need help from a CHIEF DIGITAL OFFICER, rather than a traditional CIO. This person needs to understand ‘product’ as much as tech and guide each department as to what is available and achievable. And wherever possible, dismiss anything that takes a lengthy period to implement.

Changing a companies mindset from treating IT as a cost to totally co-opting tech as a digital enabler is the way to go. Whether you like it or not. But you will like it as this new structure will enable you to do more for less, and innovate like never before. The bottom line is that Being Digital is not about IT.

It’s way sexier than that:)

Antony

Being Digital - A primer for commercial real estate. Part 2.

December 2013

So, we are now nodes on a network (see Part 1), connected to just about anything and everything we might want to be connected to. How on earth do we cope with the deluge; of noise, of interruptions, of information? How is this mass connectivity better than what we had in the analogue world. At least we could control that.

Well truth be told you couldn’t could you? Just think how many times the phrase ‘Information Overload’ popped into conversation. Being Digital will put an end to this.

There really is no such thing as information overload. The problem is filter failure; the inability to filter out all the extraneous noise and return just the information you need, in the context of what you are doing and when and where you are doing it. It isn’t less information, knowledge, wisdom you need access to is it? Ideally you want access to ‘everything’. You just need what you need when you need it. Is that too much to ask?

Well, in the analogue world yes. Every time you print a brochure, or roll out research material, or publish a reference guide or white paper then you are throwing that information at a dead end. In print it may be nice to read once but thereafter it has no utility at all. If you can’t search it, if you cannot access it wherever you are, if you cannot cross reference one piece against another then what precisely is its value. Very little is the answer. A one off data dump, soon to be forgotten.

Unfortunately, much of the real estate industry remains in this analogue world. Print, print, print. Glossy, heavy paper reports, brochures and sundry are de rigeur. And don’t they look nice on the shelf. Gathering dust or leaping to the bottom of a briefcase. And best of all are the lengthy printed expositions of how desperately keen xyz company is to ‘save the planet’. This is a madness that has no value and has to stop.

Being Digital means giving up those old analogue ways and digitising everything. And if it is not worth digitising then bin it. CBRE reputedly binned 900,000 documents during the process of moving in to their new Los Angeles, deeply digital, HQ (http://lat.ms/1ePboVD).

You cannot have great filters unless you have digital material to work with. But if you do digitise your world it is remarkable what will become possible. Leaving aside what you should be able to develop using your own data (if it is digital you should be able to ask for anything), the likes of Google are developing extraordinarily powerful contextual search capabilities that are aimed at predicting what information you need just ahead of when you might ask for it. For example, by examining the diary on your smartphone they can warn you to cut short one meeting, as the traffic is bad on the way to your next one and if you do not leave now you’ll be late. In CBRE’s HQ they have a curved wall running Google Earth over which they lay all their available space data. In Burberry the sales assistants can see what a customer has purchased before and call up new season suggestions based on that data.

Ubiquitous connectivity, combined with unlimited data availability and CONTEXTUAL awareness is a recipe for extraordinary outcomes. Information overload gives way to prescient wisdom. Maybe a bit outlandish within the real estate world but someone will get it right. And I wouldn’t want to have to compete with them.

Antony

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.