Delusional Thinking on Planet PropTech
The Desperate an by Gustave Courbet, 1843-1845
Yesterday I listened to a podcast with two PropTech VCs and the CEO of a very large PropTech software company. And I was genuinely shocked.
After two or so years of the Pandemic and a good year or more of ‘normality’, one would expect real estate industry insiders to understand how fundamentally the nature of knowledge work has changed.
Mostly, companies operated as well whilst in lockdown as they did when all in the office.
And post lockdown it has been as clear as the sun in the sky that, mostly, no-one wants to lose much of the agency they gained from working from home.
Yes, people want to get together, but only when it actually adds value, has a purpose, and is clearly planned.
And they are doing so, roughly two-three days a week.
What they want when they get to the office is now supported by oceans of data, as is what tasks and activities are best done in an office, and what better suits ‘elsewhere’.
We are very much in ‘known knowns’ territory. No guessing required. Any company that wants to understand what people want can easily find out at the macro level, and even easier amongst their own employees.
Everything you need to learn about how to operate hybrid workforces effectively, how to maintain culture whilst mainly distributed, foster innovation remotely etc is readily available to anyone who bothers to look.
And the obvious conclusions are as obvious as they were by mid 2020.
Knowledge work is now a distributed game.
Offices are no longer NEEDED.
People need to made to WANT them.
We have the digital tools to work in a manner that befits the 2020s, not the 1980s.
And all of this is like a gateway drug to realising one doesn’t have to work in the stultifying, presenteeism centric, hierarchical, regimented, command and control, intensely inefficient and ineffective way we did pre Covid.
Don’t believe that was the case? Look up the data? Ask around how your colleagues enjoyed old school office life. Look at how reluctant everyone is to go back there.
But returning to our podcasters, none of the above applies, or seemingly has even been considered.
Their reality is (to paraphrase):
Bosses know working from home = slacking.
If you can’t see people working, they probably aren’t.
People are ‘lazy bastards’ (yes, they actually spat this out).
Culture and innovation only happen in offices.
You will never progress in any company unless in the office all the time.
Office centric companies are definitely more productive than any other model.
One day a week away from the office, probably Friday, is enough.
And finally ….. the balance of power will soon be changing and bosses will simply order people back.
Full on macho management was, and will be again, the way to operate.
From which of course followed that the office market might be struggling now, but will recover and return to where it was pre pandemic. Sure, we need to add some more amenities, and do some sprucing up, but you know, business is business and this is how it’s done.
This is delusional thinking.
Discussing this afterwards, someone suggested to me that ‘it’s their bread and butter, their business, so they HAVE to take this line’.
I get that, and understand one has to ‘talk one’s book’, but in this case delusional thinking will help no-one. What will be will be.
And just last week Cushman & Wakefield published their ‘Obsolescence equals Opportunity' report in which they stated just how much US office stock is no longer fit for purpose.
Only 15% of existing stock is ‘Top Class’, leaving 85% at different stages of the slope to obsolescence. 25% already is.
Which is a problem as ‘Top Class’ is what makes people WANT to go to an office. If the space is not ‘Top Class’ it’s likely there are better, cheaper, more convenient options.
So to be peddling the line that the podcasters were is not only delusional but missing out entirely on the plethora of new opportunities this changed market dynamic is opening up.
So much space needs to be repurposed, repositioned, demolished or otherwise transformed.
It is going to happen. You may as well start preparing.
Once you start seeing large investors giving back the keys to very large assets you know where this is going.
When you see traditional offices operating at 20-50% occupancy and even lower utilisation you know where this is going.
And when you see the strong demand for good to great assets, with good to great #SpaceasaService operators you know where this is going.
Sadly many real estate people, even those on the PropTech side, cannot or won’t see the writing on the wall.
And I, for one, know exactly where this is going!