AI in Real Estate - Why it matters.. a lot

A short set of slides I presented ahead of a panel I was on at the IREI VIP Conference in Copenhagen in February 2018. Click image to view on Slideshare.

In Commercial Real Estate? Forget Blockchain and Bitcoin, AI is where you should be focussing

The great Dotcom Bubble peaked in March 2000. Over the next 18 months trillions of dollars of investment capital evaporated. The Great Bitcoin/Blockchain bubble feels very much like it did in 1998-99. One cannot move without being accosted by someone screaming that you just have to get on board today. Of course such bubbles are tenacious things, and just as the smartest man ever, Sir Isaac Newton, eventually could not resist going all in with the South Sea Bubble (only to lose most of his money) today I am seeing very many smart people bowing down before the call of crypto.

If you are one of them you most likely will lose your money as well. Not because you are wrong per se, but just as in the Dotcom Bubble, you are probably a decade too early. Most of the ‘crazy’ ideas that raised hundreds of millions of dollars in the 90’s blew up not because they were bad ideas but because the technology did not exist to enable them to actually happen. There were very many 1990’s simulacrums of Netflix for example.

Blockchains will have huge utility, as will crypto currencies (the two by the way HAVE to go together - a Blockchain without a cryptocurrency IS NOT a Blockchain) but not for a while. There are real technical hurdles to cross before this happens. So my advice is to put no more than 5% of your wealth into the crypto market and forget about it. If you are lucky and invest in the winner you will do extremely well. But there will be many losers and no, you are not bright enough to know which will be which. No one is.

Put your real effort, and money, into AI, Artificial Intelligence, because this is an area whose time has come. A term first mentioned in 1956 at a conference at Dartmouth College, AI has already gone through two prolonged ‘Winters’ but over the last few years has advanced in leaps and bounds as a combination of improved algorithms, massive computing power and unprecedented access to vast quantities of data has enabled theory to move into practice. 

Sundar Pichai, CEO of Google sums up the current situation perfectly: “We are now witnessing a new shift in computing: the move from a mobile-first to an AI-first world”

Artificial Intelligence has had a storming half decade. In just five years it has gone from the world of science fiction to mainstream discourse. Autonomous vehicles, robots that can perform backflips, computers that now rule the roost at Poker and GO as well as the long since vanquished Chess; all around us we read of one new breakthrough after another. According to Gartner’s famed Hype Cycle, Machine Learning (a subset of AI) is now at ‘peak hype’, meaning that we can expect widespread adoption to be just 2-5 years away.

In three key areas AI has enabled computers to rapidly go from ‘Useless to Utility’. Computer Vision (face and image recognition), Voice recognition and NLP (natural language processing) have all moved from being 20-30 percent error prone a few years ago to now being on a par, or even surpassing in certain circumstances, human ability.

In effect computers can now see, hear and read as well as we can.

And in the commercial real estate industry that really matters. The ability to understand the build environment by pointing a camera at it, to read the voluminous quantities of paperwork that weaves its way around the industry, and to be able to interact with our customers (everyone who enters into any of our spaces and places) just by listening to what they have to say, is truly a transformational power we now have at our disposal.

For example, what if we could enable customers to search for space visually, by choosing images that appeal to them, instead of making them fill in forms and describe what it is they are after? Or understand the ‘mood’ of visitors to our shopping centres, or find potential new development sites by analysing drone footage? Or understand exactly how people are using our offices, or shops, the better to configure them for reality as opposed to hunch?

What if we could analyse all correspondence that goes out of or into our businesses in real time, to look for patterns, insights and ‘unknown unknowns’. Or prioritise work orders, deal flows, job applications automatically and route them appropriately. Or have reports collated, processed and presented in realtime that we can then spend time analysing rather than labouring over.

What if we could support our customers better by asking them to just talk to us? 24 hours a day, 7 days a week, 365 days a year we should be able to answer the needs of our customers in a way that suits them. We should be able to talk to our buildings, and have them understand us; it’s too hot, or cold, or bright or dark, or stuffy. Where is X, or who is Y? Just walk around the City and see how many people are talking into the ether, plugged in as they are to the microphone and headphones; Voice is the new computing interface. 

In an AI powered world the commercial real estate industry will be able to do three things, of huge importance, that it cannot do today:

First, we will be able to understand exactly how our buildings are working, at a very granular level, and in so doing we will be able to run them far more efficiently and effectively.

Secondly we will be able to understand exactly how everyone who uses our buildings, spaces and places really does use them. Where do they go, what do they use, when do they use it; all this will enable us to define, refine and curate the UX, the user experience, of all our customers in a way we simply cannot do now. This will be a true #SpaceAsAService world where we will be able to provide exactly the spaces and services that people need, wherever and whenever they need them.

And thirdly, we will be able to understand exactly who our customers are, what they need, desire and are pleased by in a way we’ve not been able to to date. 

As we understand how our buildings operate, how they are used, and the needs and requirements of those who use them better, we will be able to build a better built environment for them. Today, research tells us that roughly 50% of office occupiers do not find their offices help them be productive, and roughly 50% of the time these spaces are not in use anyway. With wise use of Artificial intelligence, coupled with the very best human skills we should be able to do much better than this. 

So forget about Blockchain and Bitcoin for now; concentrate on learning how AI can, and will, radically and rapidly transform what it means to be in the real estate industry.

In brief: How #PropTech will change in 2018 compared to 2017

During 2017 the real estate industry became increasingly involved with ‘PropTech’; in 2018 it will become committed. The difference being that in 2017 many people learnt the vocabulary of PropTech and became good at saying all the right things, whilst actually doing very little about putting any of it into practice. 

In 2018, the innovators will start to steal a very considerable march on the laggards by rethinking their business models, investing in technology and digitally enabling their employees. They will grasp that, yes, they (like every other business) are in the technology business, and that the real estate industry is no longer about real estate. Real estate is moving inexorably from being a product to a service industry. And that changes everything.

The most successful real estate companies will develop three areas of their business in particular, largely with the aid of technology, but also in combination with enhanced human skills and capabilities:

First they will understand exactly how their properties are operating, at a very granular level, and in real time. Through sensors and the IoT they will enable their properties to ‘talk’ and in doing so will enable them to be run much more efficiently and effectively.

Secondly they will understand, again with the help of technology, how people are really using the spaces and places around them, as opposed to guessing and working on hunches. This will enable them to configure their properties for maximum utility and thus raise occupancy and occupier satisfaction levels.

And thirdly, they will learn exactly who is occupying their properties. As opposed to only knowing the person who pays the rent very well, they will begin to treat every single person who enters their property as a customer. In an increasingly #SpaceAsAService industry, providing a great UX, user experience, is what will define an owners Brand, and it is through a great Brand that the greatest Value will be created. To build a great UX though you need to truly understand your customer.

All of this will be hard, and a challenge for the real estate industry. But the companies that are committed to making it happen will be handsomely rewarded. The gap between the best and the rest is set to grow.

So.. did my dreams come true?

In December last year I wrote a post entitled ‘#PropTech resolutions for 2017’. With the year almost over I thought I’d revisit it to see if my dreams came true:)

So here we go:

1. Stop talking of #PropTech; technology is not a bolt on to ‘Property’. If you are in business, you are in the technology business.

I’d say I lost the battle but won the war here. #PropTech has never been talked about so much as it has been over the last year, and my preferences aside, the term has proved very useful in marketing terms and as a tent peg off which a whole host of ideas and conversations have hung. Against that I think we are ending the year as an industry that has realised that talk of #PropTech does mean that many still place the ‘Tech’ bit in a silo and that much work is still required to emphasise the ‘If you are in business, you are in the technology business’ bit.

2. Don’t know much about technology? Get someone in to brief you. Keeping up with tech is not your job, but it is your job to exploit what is possible. Find out.

A score draw? Perhaps, but perhaps a narrow defeat. I’ve not stopped talking tech to people in the industry, and the number of people looking to ‘find out’ has grown dramatically, but I feel there is still a lot of lip service paid to technology, with not nearly enough follow through. Real Estate is still largely an analogue industry.

3. After doing No 2 you will know that near as damn it, you should be able to run your business from a phone or tablet (Marc Benioff of Salesforce tries to).

Total #Fail here: Running a real estate business by pdf is more likely than from a tablet:)

4. With No 3 sorted, feel free to laugh at competitors not fully mobile enabled. They will not be competitors for long.

The #Fail gets bigger: until a fully digital real estate company emerges no one will be laughing at those left behind….

5. ‘I will format any reports we write for mobile.’ What is it about the Real Estate industry that makes them upload print formatted documents, that are unreadable on a phone? Look around you; what are people looking at? Yes, their phone!

And again, no dreams coming true here. In fact only yesterday I heard of how shockingly inefficient much of the investment sector still is, with presentations being manually put together by inserting data stored in pdfs! 

6. Double your hardware budget. Getting your workplace ‘right’ is important but equipping your team with the best possible technology is way more so. A company with great tech could succeed in a terrible office, whereas a great office is useless without great tech.

Well… did you?

7. Sort your office out. The Stoddart Review at the end of 2016 showed only 53% of employees believe their office helps them be productive. An unproductive office is like leaving piles of cash on the table after concluding a deal. Low hanging fruit; pick it.

Low hanging fruit still hanging there, waiting to be plucked. Although with a valuation ending the year at over $20 billion it could be said that WeWork has been harvesting like mad.

8. Less is more is the perfect Life/Work balance mantra. Eat less but better. Drink less but better. Take less office space but make it better. Work less but better. And use technology to enable all of this.

A Win at last. Certainly in London at least there is much evidence that larger occupiers are downsizing their requirements 20-30% when given the opportunity by a lease break or end. This trend can only grow - Per head we all need a lot less space, at least in terms of long leasehold space.

9. Then do More, with More. Technology gives us all leverage. More (of the right) technology will allow everyone to do more with more. If you can do X in an analogue world, you need to be looking to do X times 10 in a digital one. Countless examples of this exist. It is not fantasy.

Another #Fail - Real Estate has not even started in doing more, with more. Combined Google, Apple, Facebook and Amazon have a market capitalisation equivalent to the GDP of India yet they only employ around 700,000 people, and Amazon warehouse workers form even the bulk of that. That is productivity. 

10. Buy software that makes you more efficient – BUILD software that gives you a competitive edge.

I am going to claim a Win here. Many people have argued this with me this year, saying real estate companies are not up to developing software and should always buy it in. But they are wrong, especially when it comes to the large companies. I’ve not seen any competitive advantage accruing to companies that buy in their software. And you won’t: you will see much consumer surplus generated but little competitive advantage. For that you need to Innovate!

11. Try and get rid of your IT Department. Technology needs to permeate your business, not be the butt of jokes and hidden away in the worst space in your office. Amazon does not have an IT Department; neither should you.

Think I’ve won the argument but currently a #fail - the smarter set realise they need multi functional teams with pervasive tech skills throughout their organisations but I’ve yet to see this executed on. Next year…..

12. Prepare to hear everyone tell you how their software uses AI and Machine Learning to ‘insert hyperbolic phrase here’! Mostly, they will be clueless as to what that means.

An outstanding Win: 100% correct on both counts.

13. BUT AI and Machine Learning ARE the most important technologies out there and WILL change your world. My No 1 resolution would be to learn why and how.

And another Win: next year this really will be BIG. 

14. Start by hiring Amy, an AI Digital assistant (x.ai), to organise all your meetings.

A Win, though more for Alexa than Amy. 2017 was the year the idea of talking to your computer went mainstream. Kudos to Amazon.

15. Technology is changing the world to being ‘on-demand’, and our industry is not immune. In fact, ‘The Real Estate Industry is no longer about Real Estate’. Make 2017 the year you think about the Service you provide, rather than the Product you sell.

Biggest Win of the year: #SpaceAsAService is now ‘a thing’ - big and getting bigger. This is the juggernaut coming to change real estate. Follow my ‘twin’ @spaceasaservice to keep up with everything going on in this area.

16. Finally, realise that whilst you probably aren’t that knowledgeable about tech, most #PropTech people know very little about Real Estate. The two sides need to converge. Let’s kill off #PropTech by 2018.

Let’s just roll this one forward. Tech meet real estate, real estate meet tech: you need each other:)

Overall then, did my dreams come true? Of course not, but then dreams aren't supposed to, are they?

A Tweetstorm - Analogue Real Estate:(

A quick Tweetstorm from yesterday as I realised #PropTech really hasn’t changed the real estate industry very much at all:

Talking with someone selling high end investment data into the commercial real estate industry today. Honestly did not know whether to laugh or cry.

Biggest issue? Large % of Customers insist on pdf reports. Quarterly. Why? Because they don’t use tablets, or even laptops much and have no interest beyond headline numbers.

Never use the online system but demand endless customisation - all of which is available online. Thus data is late, static, inert and expensive to produce.

Worse than that; many then get PA’s, juniors or interns to take numbers from PDF’s and enter manually into presentations or other documents.

And guess what? Most of the data has to be manually pulled out of 3rd party source systems and re-keyed into research db’s

In summary: many ‘prestige’ CRE investment funds run as if in the Stone Age. The end reports look impressive but it is all mainly guesswork or a pig’s ear dressed up as a silk purse.

As I say, should we laugh or cry? Or frankly, IMHO, get really angry that this farce is acceptable and accepted. So much innovation will be stopped in it’s track because of this pathetic analogue behaviour.

The sooner the fantasy of investment professionalism is outed the better. This world serves a tiny few and disadvantages the rest of us. The misallocation of capital must be vast. Time for it to end.