Real Estate 2022: The New Rules of Engagement

From The Second Curve Thoughts on Reinventing Society Charles Handy

After nearly two years of Covid we are finally seeing the real estate market acquiesce to the revolution it has precipitated. No longer do we hear much talk of ‘returning to normal’ or of existing trends being ‘accelerated’. Where we do, these are ardently shot down.

Some nine years ago I started writing about the impact emerging technologies would have on the real estate industry, and in January 2019 I published ‘Space as a Service: The Trillion Dollar Hashtag’. The latter is now common parlance and the former can be seen all around us. What the pandemic has done is provide an environment where a slow morphing of behaviours has instead become an explosion of accepted beliefs. What seemed radical a few years ago IS the ‘new normal’. The future has arrived.

Which means we need a new future. We need a new set of beliefs, attitudes and ideas to aspire to. We need a new differentiation. When the market has swallowed the new, the new needs to be reinvented. How do you stand out when the way you think is the way everyone else thinks? When you reach the top right of one ’S’ curve, and innovative ideas have evolved from being customised to productised and finally commoditised, you need a new ’S’ curve. When the slowest late adopters have adopted your ideas you need new ones.

Which is where everyone in thrall to #FutureProofRealEstate finds themselves as we embark on the good ship 2022. In a Catch-22. Is it better to catch our breath, and repeat our vision to those at the back who took a while to come onboard, or should we push on to where, once again, we’ll be preaching to the early adopters?

Well, push on of course! This is 21st century real estate after all. Where good ideas take a decade to be accepted, but also where a decade is a project lifecycle. Where the market will slowly adopt best practice (after trying everything else) but where best practice will look entirely different a decade hence. 

20th century real estate was different. Nothing much changed, beneath the veneer, because everyone needed what we had to sell, and our customers were actually our financial backers rather than the users of our products. But this century, especially from now onwards, our customers really are the users of our products and they no longer need us. Technology has enabled them to work without offices, and shop without shops. They can now do what they want, where they want. Our necessity, our mission, our challenge, is to make them want what we have to sell, now that they do not need it. And therein lies the next ’S’ curve.

What needs are we looking to fulfil? And how will we do so?

The late adopters have clicked that companies, and their employees, now want more flexibility, better quality space, and more of a collaborative environment. And, to be fair, most are now at least trying to provide these. But ….

…. the #RealEstateInnovators, starting out bottom left of the new ’S’ curve, have realised that what the leading companies (from startups to megacorps) want conforms to a new playbook, and tells a new story. These companies, and more particularly their employees, want a new way of living and working. They want to be productive, in fact they want to be hyper productive, but they also want to be happy and healthy. They want environments that enable them to be as happy, healthy and productive as they are capable of being. That vary according to their specific needs and ‘jobs to be done’. They want to spend time with their co-workers but time that is more fruitful than not being with them. They don’t want to commute for hours unless it is to do something that could not be done where they are. They want to be part of a community, but not one separate from their home life. They want access to all the best digital tools to enable them to live online/offline lives that coexist rather than conflict. 

All of this needs to be wrapped up in a sense of purpose, a feeling that the effort is worthwhile, that they are making a difference. There is no effort too great if the purpose is great enough. But where the purpose does not exist any effort is too great.

And above perhaps all else, they know that 2030 is just 8 years, a mere 96 months away, and by then the world needs to have cut its carbon emissions by 50% to have any chance of becoming net zero by 2050. A year where many of those currently ‘ruling the world’ will not be alive but they most certainly will be. So it matters. A lot.

So, our new real estate rules of engagement must address all of this. Where do we fit in? Which parts of this can we impact? What skills, what people, what products, services and business models do we need to maximise our role in building this better built environment?

People spend 90% of their time indoors. In real estate. The form factor of that real estate does not matter. Providing the right real estate does.

Antony

The Real Innovation Academy: A Year of Learning

David Hockney’s “The Arrival of Spring in Woldgate, East Yorkshire in 2011” - from his Four Seasons collection.

The four ‘essentials’ of #FutureProofRealEstate

Just over a year ago Dror Poleg and I launched Cohort No 1 of the #FutureProofOffice course we developed for our newly formed Real Innovation Academy. Though planned before Covid overtook all our lives, the pandemic gave added impetus, even urgency, to what we had in mind. We were already convinced that the real estate industry was undergoing profound disruption, but now it seemed this change was going to occur faster than even we imagined. Being #FutureProof was turning from being a nice to have to a necessity. The 10 year real estate boom, where innovation was hardly required, was turning to a bust where innovation would be everything.

Next week we will be launching Cohort No 7 of the Office course and Cohort No 2 of its sister course, #FutureProofHousing. To date we have over 350 Alumni, from 32 countries across 6 continents. No one, yet, from Antartica.

So, what have we learnt?

First off, the much trumpeted mantra that real estate is an industry of luddites, wedded to the analogue in a digital world, needs to be put to bed. Admittedly our audience is self selecting and perhaps not indicative of the wider market, but the level of imagination, innovation, forward thinking, positivity and smarts (street and academic) that we have encountered in our students has been an absolute pleasure to be exposed to. It’s not only the tech industry where people who want to ‘change the world’ work. You’d not be worrying about whether we really can ‘build back better’ if you’d sat in on the discussions at the Academy. Making an impact is the starting point. Nothing less.

We wanted to build a network of the smartest, most interesting people in real estate around the world, and we’re off to a good start.

The second thing we have learned though is something that has evolved over the year. The course is predicated on the idea that the nature of demand for real estate is fundamentally changing, and that supply will, indeed has to, change in response. What has become clearer though, from running both courses and the dozens of hours discussing, presenting and analysing the industry, is that how we need to respond to this change, across all asset classes, boils down to just four themes. And working upwards from these four foundational pillars is the route to creating products and services that are fit for purpose, and #FutureProof.

Theme number 1 is customer centricity.

Steve Jobs provides the canonical example of this. Shortly after returning to Apple, at their Developers Conference, he was aggressively asked during a Q&A session why developers should have faith in him, as he seemed to not know that much about technology. After a pregnant pause, where he was clearly angry with the questioner, he said ‘You’ve got to start with the customer experience and work backwards to the technology…I’ve made this mistake probably more than anybody else in this room…As we have tried to come up with a strategy and a vision for Apple, it started with ‘What incredible benefits can we give to the customer? Where can we take the customer?’...I think that’s the right path to take.’

Start with the customer and work backwards to the technology. 

Substitute real estate for technology, and then back from real estate to user experience, and you have the best starting point for any business plan.

Jeff Bezos designed the ‘working backwards’ process at Amazon based on this principle. What benefits the customer? So long as you have a laser focus on pleasing your customer, you have the makings of a great business. Don’t focus on what you want, focus on what your customer wants.

This is not the natural order of things in real estate. Because it never needed to be. People needed shops to go shopping and they needed offices in which to work. Over the last 15 years or so the retail real estate industry has learnt this is no longer true, and over the last 15 months the office real estate industry has been learning the same lesson. In retail and office, our customer no longer needs what we have to sell. We need to make them want what we have to sell.

All around us are examples of retail real estate companies, and retailers, who have not cottoned on to this new absolute truth. Many owners and occupiers of offices are going to follow suit over the next 24 months.

Before doing anything, we in real estate need to get to grips with how are we going to better understand the wants, needs and desires of our existing or prospective customers? Across all asset classes.

Theme Number 2 is creating tech enabled ‘Smart’ assets.

We are no longer simply the providers of dumb shells, we are the providers of hardware, software and services that needs to work together to offer our customers the spaces that provide them with the services they need for their ‘jobs to be done’.

That is what a ‘Smart’ asset is. Somewhere that understands what its purpose is. What benefit it is there to offer the customer.

This is why so many smart assets are not that smart. Anyone can kit out a building with tools, technologies and the latest gizmos. And many do. But far fewer kit our their building with only the tools, technologies and gizmos that are needed to provide the UX, the user experience, that they have deliberatively designed for the particular type of customer they are wishing to serve.

Start with the customer and work backwards to the technology.

Real estate is a siloed industry. Just taking offices, there are six industries that need to work together to create a great workplace. Real estate, IoT Networking, Data analytics, Workplace, HR and Hospitality. And they rarely talk to each other. They almost certainly do not all talk to each other before a project starts. So the creation of a truly ‘Smart’ building has little chance of success built in from inception.

Smart assets absolutely need the right technological infrastructure, but this is necessary but not sufficient. A smart building needs to be human smart as well as tech smart.

Smart is a quantitative and qualitative game. Across every asset class. The tech is there to ‘enable’ something. Work out what you want to ‘enable’ first.

Theme No 3 is about storytelling.

Why is someone going to buy, lease or rent your real estate? Do they have to? If the answer is yes then you can skip this section.

Historically the above question would have led to 95% of people skipping this section. Because historically our customers, in most situations, had to buy, lease or rent our real estate. It’s why real estate has made so many people so wealthy over the centuries.

But today, as we discussed above, our customers most likely do not need to do business with us. They have optionality, as the economists say. They can satisfy their needs in other ways.

Hence we need to become story tellers.

Great Brands represent great stories. They have meaning to their customers. Their ‘story’ evokes pleasure, pride, greed, avarice. The Hermes ‘Birkin’ handbag is an an example of what is known as a Veblen good; something that gets more desirable the more the price is raised. Primark, the retailer, work at the other end of the scale, where their clothes become more desirable the cheaper they get. Disposable fashion to eternal fashion. Both tell great stories.

Most analogous for real estate, I think, are the premium car Brands. The most important customer for Audi, BMW or Mercedes is the person buying their first premium car. Because, like the Jesuits, once they’ve got you you’re likely to stay. People buy into brands like this. They buy into a certain style, a certain user experience, and certain ethos. And they invest more than money into them. They start to become, to an extent, defined by them. I am this ‘type’ of person.

In real estate we are going to see the development of Brands, across all asset types, as powerful as these. In offices, the operator of the space is going to become as important as the operator of a hotel, and companies and individuals will become loyal to particular brands. Because particular brands stand for particular user experiences, different ‘end to end’ stories, and over time will know how I want my space set up. It will be hard to wean a customer off a competitor who knows them much much better than you do. It’ll be like trying to get an iPhone user to switch to Android, or vice versa. The switching cost will just be too high.

The same applies for residential, retail, industrial … all asset classes. Remember, we are no longer just selling hardware (dumb boxes) - we are adding digital layers of software and services on top of this hardware. We are, via our human and technological skills, building stories around our buildings.

Modern economies are increasingly valued based on their intangible assets. Our Brand, our story, our user experience, these are our intangible assets.

Ultimately UX will equal Brand, and Brand will equal Value.

Theme 4, the final theme, is about relationships.

The real estate industry has always prided itself on being a relationship business. But usually those relationships were with other people in real estate. So the industry talking to itself.

#FutureProofRealEstate will still be an industry built on relationships, but built on relationships with customers. Nothing will be as important as owning the relationship with our customers.

But who are our customers you might ask? Well, they are not who they used to be. In the past the most important customer, indeed probably the only person treated as a customer, was whoever signed our leases or quarterly rental payments. No-one mattered much besides them. That was the beauty of real estate. Long leases with upwards only rent reviews were a wondrous invention. But those days are dead, or dying. Today, in a world where our customers no longer need us like they used to, we have to please everyone who uses our spaces and places. For long term success, we need to give everybody a great user experience. The customer of real estate in the future will be the user of real estate. All of them.

This can either be, as they say in tech, a bug or a feature. It’s a bug if you do not have that relationship with these customers, because there is then little you can do to influence how much they enjoy your assets. You’ll be commoditised, and nothing more than the owner of the ‘dumb box’. Your fortunes will be dependant on the quality of the middleman, the operator, you have outsourced your customers relationships to.

But if you own the relationship, and do everything we have discussed above to make the user experience of your asset as exceptional as it can be, you’ll be in a position of real power. Having invested so much into understanding the wants, needs and desires, of your customers, and then by real time monitoring and optimising of these variables, you’ll be able to leverage this relationship in meaningful, beneficial and profitable ways, for your self and your customer. 

People spend 90% of their time indoors and in real estate we connect with people for longer than any other service provider. So it is us, in real estate, who are in the best position to service the needs of our customers. We can move way beyond just letting them space by the foot or metre: we can help them be happy, healthy and productive. We can enhance their pleasure whilst shopping, or make them more comfortable when at home. We can do much more than we ever have before. But only if we own the relationship.

And that is it. The four themes above are applicable across every real estate asset class:

1. Focussing on the customer and understanding their wants, needs and desires

2. Creating efficient tech enabled smart assets

3. Developing ‘end to end’ stories and building Brands around them

4. Owning and leveraging the customer relationship

They form the foundations of the next generation real estate company. Sure, each asset class requires particular skills but, unlike in ‘old’ real estate, the core is the same now we are moving beyond selling a product to delivering a service.

Real estate is now a ‘Space as a Service’ industry, providing our customers with the spaces and services they need to do whatever it is they wish to do, wherever they are.

Come join us - register at realinnovationacademy.com

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First published June 2021.

Real Estate and Crypto / Web3

Dante Alighieri, "The Divine Comedy,"​ is depicted amid views of Florence, heaven, purgatory and hell, Domenico di Michelino, 1465, Duomo.

A thread from Twitter .....

Personally I find Crypto/Web3 exasperating. So much feels fundamentally wrong about it, but what if there is a there there? So one’s mind is filled with trying to understand something that one’s mind is looking at askance and thinking ‘No, or please God no’.

With the nagging thought that far better things to concentrate on are being ignored or downgraded whilst we try and rationalise spending money on ponzi schemes or receipts to things we don’t own.

The problem being that ones own thoughts are irrelevant. If the world moves one way you have no choice but to follow. Which is BTW the argument for Ponzi schemes. We pretend Web3 is about having agency but really none exists. The core driving force IS memes. The power of crowds.

Memes are the aim, and the incentive. Buying a token gives you the incentive to shill that token. That’s the business model. Enlist, or bribe, people to pump and pump. Then dump, presumably.

Alignment of incentives is a good and important thing. But doing so ‘should’ (piety warning) have some better good as the objective. Aligning incentives to sell s**** does not stop s**** being s****.

The counter problem though is one can clearly see how crypto/Web3 DOES enable aligning interests, and coordinating large cohorts, exponentially easier than before. So IF the objective had virtue (piety warning 2) this would be a great toolset.

It’s a real heaven or hell technology. It might be the catalyst for genuine societal uplift at a global level. But it equally could be just about the worst thing mankind has ever pursued.

Meanwhile … back with the day job. What does this mean for real estate? Overall, if crypto/Web3 does develop strongly the impact will be more intense.

Hybrid work is going to prove a disaster for many companies. Largely because their management will not make the necessary, organisational changes to allow it to succeed. But crypto/Web3 will be much more about fully remote working, massively distributed.

In a Web3 world you really can send work anywhere. Location becomes a mere matter of personal taste. I live here because I like it here, not because ‘that’s where the work is’. And that is the default position, not the outlier. One’s work is ALL digital, and therefore ALL ONLINE.

Therefore offices, or indeed any place where work is done, are purely optional and opt-in. You will go there if it pleases you. And has a purpose that online cannot replicate.

TBC this is true regardless going forward. Even if crypto/Web3 turn out to be much ado about nothing, this will still apply. Offices HAVE to make people WANT to go to them. But the degree that this is true will intensify if it isn’t a damp squib.

So we end up really in the same position, vis a vis commercial real estate. The ONLY way forward is to assume your real estate is not needed, and to set about creating the story,the narrative, the desire that makes people WANT it.

From the micro to the macro Cities, towns, venues, places and spaces need to work exceptionally hard to position themselves as desirable. The more Web3 one is the wider geographies, and biz models, one might look at but this is rule number one for ANYWHERE.

Offices 2032: will tech have made them redundant?

When you are attempting to forecast the future it is normal to think about the next 1-2 years, where you probably have enough data and evidence to be quite certain about outcomes, and then to work out from there, from 2 to 5 years, 5 to 10, and then 10 years and beyond. And as you go outwards your focus increasingly diminishes, as uncertainty grows. Things starts to blur. But not all things. Some things we do know, well in advance.

For example, we do know that two ‘laws’ are very likely to remain true. First Amara’s Law, named after Ray, the American researcher, scientist, futurist and past president of the Institute for the Future. His ‘Law’ states that "We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run,”. And secondly, Moore’s Law, named after Gordon, one of the co-founders of Intel. The implication of his more famous ‘Law’, which has held for 50+ years, is that computers will double in power every 18 to 24 months.

So we can be sure that, however impressed we are today with the power of our smartphones and laptops, they will look like toys in 10 years time, compared to the 100 times more powerful devices we have at our disposal. And we can be sure that more will have changed about the world around us than we can imagine today. We are so far into the age of exponential change that every doubling in capability is a big deal.

In most industries a ten year view is not the default. 2-5 is more likely. But in real estate 10 years is a development cycle, or the lifespan of many funds. So in our industry a ten year view matters. Especially in commercial real estate, and even more so in terms of office assets.

In the context of the workplace it feels like an eternity.

In the twenty plus months we have been impacted by the pandemic we have broken through many ‘mindset walls’. We have realised that working remotely from our offices broadly works, we have realised we can be productive, and that there are technological tools already available that allow us to do things that many, perhaps even most of us, did not know were possible. We have realised that a better work/life balance is possible and that not commuting is, surprise surprise, a great pleasure. In short we have learnt that having flexibility and more agency over our lives is a good thing. And we do not want to give this up.

We have also learnt, or rather become more conscious of, what we lose when human connection is restricted. Yes we have, with exceptions, missed time with our families, but we’ve also missed time with our work friends and our colleagues. Do we want, or feel the need, to spend 40, 50 hours a week with them, like we used to? Mostly we do not, but we do now have a much clearer idea of when we’d like to spend time together, in person, and why? Rather than being together because that is just the ways things work, we are thinking more deliberatively. Is this a good use of my time. What can I learn or do or feel as part of a group of people together, that I could not learn or do or feel apart? 

In general, remote work is fine across quantitative factors, but across qualitative ones less so. Technology, today, can get us so far but no further. And this is why I feel differently about offices, as an asset class, short term than I do long term.

It is abundantly clear that most organisations, given the right data points, and the budget and motivation, should be able to produce a physical workplace that provides for the wants, needs and desires of employees. If you know, at an individual level, what those wants, needs and desires are, you can construct a plan to satisfy them. Perhaps not in their entirety for every individual but broadly so. Furthermore, if you then collect and analyse data around how your office is performing environmentally (by which I mean temperature, noise, air quality and lighting), and how it is actually being used (in the sense of occupancy, footfall etc) you can optimise and iterate your space to keep it suitable for the jobs to be done of your people.

It is faintly depressing to not see the above becoming the norm. There are some, many even, exemplars who are diving deep into understanding all of these factors and the better outcomes they engender, but one hears far too much talk of companies who are thinking little further than whether they should get people back in the office 2, 3 or 4 days a week. Everyone (or nearly everyone) appears to be bought into ‘hybrid’ working but few seem to have thought very hard about its implications for how they need to run their companies. Or modify their space. Or ensure it is a safe place to be. And as for landlords not universally demonstrating to their customers that their buildings have ventilation, fresh air and air filtration adequate for a post pandemic world. Well that simply baffles me. Though my suspicion is that most buildings do not have adequate air quality so maybe best not to say too much.

Inadequacy of thinking or systems aside, it is clear that offices do have a purpose based on the above. To provide a venue for people to make human connection. In various ways, for varying amounts of time, and in a different and particular manner for each and every company. This is what the technology of today cannot completely satisfy. As we said it can satisfy our quantitative needs but not all of our qualitative needs.

As such it is not surprising that the occupancy level of flex spaces is, in many geographies, far above that of traditional offices. They tend to provide better spaces for human connection. 

For the next 2-5 years those offices that can provide an environment that catalyses human skills, and connections, will win. This is their edge over remote working. A great space, with the right amenities, managed by a great operator, will have a distinct competitive advantage against plain vanilla spaces. Even high quality, but plain vanilla spaces are going to suffer. It’s simply a function of being able to provide what remote cannot. If there isn’t anything, then people will not go there. Why would they? What would be the point?

What though about 5 years hence? Or 10 years? What will the office provide then that we cannot get elsewhere?

This is where it gets worrying. Satya Nadella, CEO of Microsoft, gave a talk in November 21 where he was introducing a product called Mesh for Teams, that will begin rolling out in 2022. He described exactly what we’ve discussed above, that video calls are ok, but ‘remote meetings can feel impersonal and lack the small moments that build relationships and careers’. So Mesh combines mixed-reality, which allows people in different physical locations to join collaborative and shared holographic experiences, with the productivity tools of Microsoft Teams, where people can join virtual meetings, send chats, collaborate on shared documents and more. Jason Warnke, senior managing director and global digital experiences lead for Accenture, who have been working with Microsoft on this for years described his favourite feature as the ability to bump into colleagues from around the world and have deep and meaningful conversations.

In other words, this product provides, allegedly, just those personal, engaging, human experiences that today we need to get together physically, to experience. The current ‘job to be done’ of the office, post pandemic, that of being a venue for just these sort of human connections, becomes rather less valuable if this is the case. Or does it?

I’ve not tried Mesh, but I have heard it is surprisingly engaging. Citing Amara’s Law I suspect we will be overestimating the potential of this, and other such services, in the near term. Not least of all a lot of high end hardware is required to get the whole experience today.

But citing Moore’s Law, with maybe a hundred times as much computing power being available to us in 10 years time, one really has to be nervous about the future of the office. If technology can deal with our qualitative needs, through deep and personal immersion in high definition, smooth and perfect virtual environments, then what need do we have for an office at all. Its lunch has been eaten. Sure, we will still want to get together in person, and converse as real human to human, but why would we do that in an office. Or, more to the point, what would an office need to look like for that to be the natural venue for such a get together? And who would use it, and for how long?

We will always have workplaces, or at least places where we work. They will definitely employ a wide range of digital products and services that help enable us to be happy, healthy and productive. But with a ten year view in mind it’s already quite hard to see these being places we spend a lot of time travelling to and from each day. Do we need, and want, human connection? Yes. The trillion dollar question is ‘do we need offices for this’?

Twenty Trends for Post Covid Real Estate

Pieter Bruegel the Elder’s “The Triumph of Death” (1562-63).Credit...© Museo Nacional del Prado

What are the key trends impacting on real estate as we, hopefully, emerge into a post covid world?

Since May last year I have been co-teaching an online course dedicated to ‘Future Proof Real Estate’. To date we have had just over 500 students, from 46 countries across every continent, except Antarctica. The most striking thing we have learnt over the last 15 months or so is that across the planet, individuals want the same things. Of course there are variations in local conditions but essentially, because of this commonality of end user demand, there are certain trends that apply everywhere.

Many of these were underway BC, before Covid, but many are a result of the new zeitgeist that is developing as a consequence of the virus.

In evolutionary biology there is a theory called ‘punctuated equilibrium’. This holds that instead of slowly evolving over time, when evolutionary changes occur, they happen rapidly and suddenly. Species split into two distinct species, rather than one species gradually transforming into another.

In an equally transformational way, this is where we are in the world of real estate. The way things were in February 2019 must now be considered history. Everything has changed. However long it takes to get through the current pandemic, we are not going to return to the world as it was.

Three zeitgeist changing things have occurred. First, we have been forced to realise that being inside, in confined, badly ventilated spaces, with many other people, potentially exposes each and every one of us to illness, or worse. Our buildings can harm us. 

We have to take environmental conditions more seriously.

Secondly, across the globe, we have been part of the largest behavioural experiment in history. In a matter of days the knowledge economy went from being 95% office based, to being 95% home based. 

And the results of this experiment? With caveats, working from home, works. 

And thirdly, e-commerce works better than most people thought. Online grocery in the UK, for example, doubled within weeks of our first lockdown. For non grocery retail, 40% of revenue is now generated online.

Put these three together and you have a forcing function of unparalleled power.

You must think of what is about to occur as being a revolution, not an acceleration. The equilibrium has been punctured. Our direction of travel has been changed.

The following 20 trends mix up those that were underway before coronavirus with those that have been catalysed by coronavirus. 

Critically each trend, which may be specific to one asset class, has a knock on effect to other asset classes. Much commentary is on the office market today, but be in no doubt that the pandemic is upending all of real estate. Residential, retail and industrial markets are all in flux. 

There is no safe harbour. Across real estate, the risk profile is rising. 

1. We start with the relentless speeding up of technology. Just think of your phone - todays versions are mighty impressive, but in 10 years they will be 100 times more powerful. What will we be doing with all that power?

2. We are moving to an AI everywhere world, supported by huge increases in computing power, data and the sophistication of advanced algorithms, particularly in the sphere of deep learning. Increasingly we will be utilising AI to help us design, build and operate our real estate.

Understanding how AI can both augment our own capabilities and provide smarter, better real estate for our customers is going to become a prized skill within the industry.

Being human really matters in a deeply technological world. But being human alone will not win the race. 

You must learn to embrace the machines. Human + Machine wins.

3. The ‘office as spreadsheet’, where we lined up desks like cells, and everyone did something structured, repeatable or predictable in them, is dead. The mainstream market does not realise yet just how dead the old form factors of offices are. But they will soon. 

4. Google put out a report in 2015 entitled ‘Workplace 2020’. In it they wrote: 

‘Flexible working is the defining characteristic of the future workplace’.

Kudos to them as they nailed it - the only thing they could have done better would have been to replace workplace with real estate.

How flexible is your real estate? Do not buy real estate that is not flexible.

5. Improving the pleasure or productivity of people is the core value proposition. In offices and industrial spaces we need to enable people to be as productive as they can be. In retail and residential we need to create pleasure zones.

Being in our real estate needs to be better than being anywhere else.

6. This change in value proposition of course changes our business model. We can no longer lease someone space and sit back and wait for the rent to roll in. We used to be in the Bond business, but now we are in the business business. Our customers have a multitude of needs, and we need to be able to satisfy as many of them as possible.

Our job is to service as many of those needs as we can and to think of total income rather than rent as the metric that matters. If you only focus on rent, you’ll be seeing less and less of it.

7. Which means we have new KPIs, key performance indicators. Our customers, our investors, and we care about sustainability, so we’ll be needing better, clearer, more real time, and honest, numbers to keep us as exemplars in the marketplace. These will help us provide our customers with spaces that promote their ‘health and wellbeing’. And of course we will need to fixate on flexibility. 

Throughout our business we will be intensely human, but always supported by data.

8. The user experience we can deliver our customers is what will set us apart. That user experience will become entwined with our Brand. Our customers will stay loyal to our Brand because our Brand gives them what they want.

For landlords with office space to let, who want to offer flex space, the operator they choose to work with matters. Seriously matters. As the market deepens and matures this point will only get stronger. Real estate is about to become much more differentiated. Our customers will be singling out Brands they want to do business with.

Choose you Operator wisely.

9. Assets matter more going forward as well. Creating desirable space does require the right type of asset. There will still be low risk assets for investors to buy but the returns will be increasingly low as prices are driven up through low supply. Decent returns will only be achievable through active management. Lease and leave is going to be a harder game to play.

You need the right asset with the right operator. Across all asset classes. Beware the ordinary.

10. Because fundamentally the real estate industry is no longer about real estate. Deep real estate knowledge is still a necessity, but it is no longer sufficient.

The real estate company of the future is a different beast to the real estate company of today.

Most notably it is now human centric. We no longer start with the real estate, we start with the customer, and work back to the real estate.

Those ten trends were all in place pre pandemic - these next ten are the result of the forcing function of Covid. That is compressing the next decade into the next year.

11. Starting with the obvious point that the only thing, related to the office market, that we do not know about the rise of distributed working, is to what degree it will take hold.

The pandemic has irreversibly broken the chain that bound work to the central HQ. We have 18 months evidence that all of us turning up at HQ five days a week is not a prerequisite of a successful business.

The Genie IS out of the bottle, and you know what they say about putting it back in again.

12. At a macro level demand for office space will decline. Historically we never used office space very efficiently, or effectively. Every CFO is now keenly aware that they were probably paying for too much of it. Overall, per person, core office space is 100% certain to be in less demand. You cannot move from a five day week, to a two or three day one and not expect change.

13. BUT, and it is the critical but …. At a micro level, demand for space will grow. The point is that the right type of office space, operated in the right type of way, will be in high demand. Very high demand. Because there will not be all that much of it.

Space that catalyses human skills, and is managed and operated with a keen understanding of the wants, needs, and desires of customers will thrive. Really thrive. Because it will enable people to be unusually happy, healthy AND productive.

Creating and curating this type of space is not easy. Not easy at all. But that is a feature not a bug. The fact that many, if not most, landlords will not be able to offer such space, means that those who can will be prized.

This is no longer a market where everyone rises and falls in lockstep.

14. Demand for industrial space cannot fail but to grow, in line with the increase in e-commerce. But a word of warning: first, the real holy grail in e-commerce is being able to get goods to people quickly, so networks of smaller, utility spaces, are where the real action will be. Watch out for the changing nature of delivery patterns. And secondly, old fashioned sheds are nowadays some of the most high tech real estate out there. So who actually benefits most from increased demand is a moot point. Just dumb walls and a roof isn’t going to get you very far anymore.

15. In a world where you can work remotely (as we have largely done successfully for the last 18 months) or only need to be in HQ a couple of days a week, is bound to lead to different residential demand patterns. The ‘commuter’ belt might be many hours further out from CBDs. Superstar cities are great, but super expensive. People will rethink their relationship with them. 

They’ll also be much more conscious of the need for space to work. Either in dedicated areas at home, or in ‘work near home’ spaces. 

Conversely, if we see much more residential developed to replace offices in central business districts we might well see many more people living centrally in 10 years time than we do now.

Expect to see many new business models develop in the residential sector.

16. One of those business models, across all asset types, will be in providing spaces that are both better designed, with a greater focus on individual human needs, and massively more data driven.

A great space needs quantitative AND qualitative data. Very often we have one or the other. Or the data resides in disparate, unconnected systems.

It is imperative to not only build more robust, real time data systems, but to merge these with your human systems. For example, we need to be tracking environmental conditions throughout our spaces, at a very granular level and in an ongoing, real time manner, but we then need to be analysing and acting on this data, in a very human centric way.

What does our customer want. Are we providing it. If not, what do we need to improve?

And repeat. And repeat.

17. As mentioned before, there will be no success in real estate without great attention being paid to flexibility. The more, the better.

This might mean flexible terms, but it is also going to be about creating flexible spaces, where the form factor can be continually iterated based on need. We have a stage, and we have sets. How easily can we redesign, or rearrange the sets. How many different plays can we accommodate?

But flexibility costs. All sides know this. But the lack of flexibility also costs, often much more. We need to strike a balance, and it will not be cost free. Remember though that we are aiming to create more efficient and more effective space. The gains from that can be fed back into the costs of flexibility.

18. Historically in real estate we have aimed to lease the most amount of space possible, for the longest amount of time. 

But in the new, high service delivery, real estate world we should be thinking about how we can optimise space, and the length of time it is available for, in order to achieve the highest revenue.

Giving our customers exactly what they want, for the amount of time they want it, is the future.

We want to sell concentrate - at higher value.

19. But we also want to sell the best space. 

What does that mean today, and in the future.

This is my take on that for the office market, but the principles apply across asset classes.

For offices, I think the best means space that is sustainable, provides exceptional indoor air quality, and a human skills catalysing environment.

Does everyone care about these things? No absolutely not. Many individuals and companies have no interest in such things. But my contention is that the best companies, with the highest skilled employees, most certainly do. The employees do, their investors do, and so do their customers.

And by best, I do not mean only the ‘financially’ best companies. The best companies, across all categories, care about such things.

And with companies like these, doubling down on providing the best space is a serious competitive advantage.

Be the best to attract the best.

20. And finally, as an industry, we need to better align interests amongst stakeholders. The only way to create and curate truly great spaces and places is by being able to control hardware, software, and services. To maximise each of our returns we need to maximise all of our returns. We need to stop playing a zero sum game where for one of us to win the other has to lose. We need to be playing the bigger pie game.

To sum up all of these twenty trends I think we need to understand that real estate is no longer about satisfying needs, it is about creating desire.

Certainly within the office and retail sectors our customers no longer NEED our real estate. All of us can go shopping without shops and can work without offices.

So we need to make people want our real estate.

We now have the tools and capabilities to design, build and operate better real estate than ever before.

Do that and you win the game.