Skills in Real Estate: Please Sir, may I have some more?

Ottoman dynasty İznik basin made of painted and glazed stonepaste. İznik, Turkey, 1545–1550. British Museum.

“The more I know, the more I realise I don’t know”

— Albert Einstein

Aristotle, who lived, 384-322 BC, is said to be the last person who knew everything there was that was known. And even he knew nothing, of course, about the areas of the world that he did not know even existed. Prior to the printing press (starting in 1436) enabling widespread dissemination of the written word, it was possible to get close to reading everything that had been written, that existed within the geography you inhabited. Leonardo (1452-1519) famously travelled around with his own library and was of course a noted polymath. When there wasn’t that much to know about any subject, knowing a fair amount about everything was feasible.

Of course those days are long gone. From perhaps 1700 onwards it would no longer be possible, even with access to the material, to have read everything published. Today, you probably could not read in an entire lifetime everything that was published every single day.

Some industries though have not moved as fast as others. Construction hasn’t changed much in centuries, so there have been near contemporaries who knew just about everything there was to know about the industry. Within the wider real estate world it could be argued that until recently all you needed to know was broadly the same as those from 100 years ago. The mechanics, dynamics and economics of real estate never really changed. The fundamentals, the principals by which you measured the feasibility of a project, were almost a ‘rule of nature’. The universe of required knowledge was not large.

Even in real estate though this perpetuation of a status quo is being rent asunder. The real estate professional of today, let alone 5, 10, 20 years off, has to know so much more, about so much more, than the real estate professional of 5, 10, 20 years ago.

Mostly this is due to technology. Back in 2017, Mckinsey wrote ‘Overall, we estimate that 49 percent of the activities that people are paid to do in the global economy have the potential to be automated by adapting currently demonstrated technology.’ Simply put it’s not the way we work that matters it is the work we do. ‘The Machines’ (to cover computers, robots, automation et al) are ‘slowly, then suddenly’ taking over all job tasks (please note tasks, not jobs) that are structured, repeatable or predictable. The much lauded computer scientist Andrew Ng talks about humans no longer needing to worry about anything that takes them less than a second to consider. All these cognitive tasks will be done by machines. It’s almost like Daniel Kahneman’s ‘Thinking Fast, and Slow’ will no longer apply, as we’ll only be doing the slow thinking.

We live in a paradoxical age. Moore’s Law, which essentially describes how computing power doubles every 18-24 months has held true for nearly six decades. Every decade computers get 100X faster, every 20 years 8000 times, and a million times over 30 years. And as processors increase in speed, coupled with ever expanding datasets, and more and more sophisticated algorithms, the capabilities of machines grows exponentially. The world is becoming ever more technological. Yet, at the same time, the skills of humans are not becoming redundant but in fact ever more important. Because humans and machines are complimentary, and one can be used as a lever for the other.

Machines are good, as we said, at the structured, repeatable, predictable. What they are not good at (at least for now and probably for quite some time) are the things humans, at least potentially, are excellent at. We are good at Design, Imagination, Inspiration, Creation, Empathy, Intuition, Innovation, Abstract & Critical Thinking, Collaboration, Social intelligence, Judgement. And in many cases these are skills best worked at together, in groups and teams.

This paradox, that in practice a more technological world will mean we need to be more concerned about our human skills, than our technological ones, will have wide and pervasive ramifications. Within real estate it will mean that the spaces and places we design, build and operate will utilise the most advanced technologies but, in terms of use, will need to catalyse human skills. The form factor of our real estate will need to adapt and change so as to enable humans to be the best humans they can be. Most of the work they will undertake will involve the human skills mentioned above, and how these skills can inform the design of the software and hardware we want our machines to create. Humans won’t win on their own. Winners will be those who have the understanding and knowledge required to enlist the machines in the service of man. Picasso said ‘Computers are useless, they can only give you answers’, and he was right. Knowing the right questions to ask is the super skill, and that’s a human skill.

All of which leads us to education as being the killer app for those looking for a successful real estate career. Not only is the technology utilised within the industry now developing fast (Covid has acted like a massive forcing function for the PropTech world), but understanding this space is now just necessary, rather than being sufficient. The universe of required knowledge within real estate has exploded.

The industry is now moving from being less about selling a product, than it is about delivering a service. Ownership is no longer the thing, access is. People want more than four walls and a roof. They want a wide range of digital layers being built on top of physical real estate. So the industry is now a service industry. And that is very different from being a product one. And requires a slew of new skills.

In April 2022, Anthropology News, the trade magazine of that industry, published ‘The Work Issue’. Yes the entire issue of Anthropology News was given over to the role of Anthropology in the world of work. And this makes sense, even if it feels other worldly to those of us who have been in real estate a long time. We can easily answer the real estate questions, but can we answer the ones about Branding, or storytelling, or about human behaviour? Quantitative questions, facts and figures, are easy for real estate people, but qualitative ones, about the wants, needs and desires of people, our customers, are way harder. Ask anyone in real estate for a detailed analysis of their customers, and you’ll likely receive a paragraph or two. Ask a company like Lego and you’d receive oceans of data.

Teams within real estate companies are going to become much more multi functional. No longer will the silos of marketing, sales, operations, finance, accounting etc be fit for purpose. In each case getting their ‘job to be done’ done will require both a mix of functional skills, and and a mix of thinkers, feelers, doers. Each of us has their preference: some are good at analytics and understanding the essence of a problem, some have much stronger empathetic abilities than others and can understand the social, psychological and emotional reasons behind XYZ. And some of us are best just getting the job done. Putting into action a plan. Successful teams will leverage all of these complimentary skills.

A rule of thumb of the industry will be starting with the individual and working back to the real estate. Thinking of real estate as the output, not the input. Only by deeply understanding what it is your customer wants will we create great real estate.

So many new skills, and so much new knowledge is required. Everyone needs to be continually educating and re-educating themselves. As Bob Dylan wrote in 1965, ‘he not busy being born is busy dying’.

So, please Sir, may I have some more ....

Innovation: If not now, then when?

The Cathedral of Santa Maria del Fiore, Florence. Dome by Brunelleschi. Started 1418

To brutalise Leo Tolstoy, every non innovative company is the same, but every innovative company is innovative in their own way.

When you look at innovative companies they are all doing so in their own particular way. It can be difficult to understand what one can learn from individual companies, especially from sectors not our own.

There are though a set of principles about innovation that are generic and timeless. There is a ‘way to think’ about how to be an innovative company, that will stand you in good stead, in whatever industry, as an individual, a team member, an employee or an employer. Learning how to ingest the innovative spirit is a crucial human and business skill.

Today we are in an environment where being innovative is not just a nice to have but an absolute necessity. The highest inflation for 40 years, war in Europe, a recovering but badly damaged global supply chain, the fallout from a worldwide pandemic, and the ever looming impact of climate change. These are not normal times. We are in a bad and dangerous place, that could be manageable but might also spiral out of control.

And the real estate industry is at the heart of all of this. We spend 90% of our time indoors, in real estate, so everything that affects the wider world manifests itself, in one way or another, in real estate. 

So. Innovation: if not now, when?

To be fair, innovation has been a warm, if not hot, topic within real estate for some time. However, if we are honest about it, we have often been better at innovation theatre than innovation itself. About appearing to be embracing innovation, rather than actually doing so. True, many large companies now have ‘Innovation’ departments but in practice these tend to be small, if not tiny, with no guiding ‘North Star’, little genuine ‘air cover’ from CEO’s, and with meagre resources. Enough to facilitate a press release but not enough to get much done. 

I say this whilst knowing there are some solid exceptions. We are talking as a rule of thumb here. Also, it is not meant as a criticism, or at least not a harsh one. Because as an industry historically we have not needed to be very innovative. Not a lot changed year by year and, mostly, our customers needed what we had to sell. We’ve been not quite a ‘take it or leave it’ industry but certainly much more so than other sectors. 

All this though is or has changed. Whereas we used to be about selling products (four walls and a roof) we’re now moving fast and far into being a service industry, where delivering a service is what we do. We are now being asked, forced, to come up with spaces and places that are inherently flexible, across many dimensions, and that continually respond and react to changing wants and needs. And when your business is about developing and testing hypotheses, and iterating and rolling out the ones that work, you need a level of inherent innovativeness that is orders of magnitude greater than has been needed in more static environments.

And that’s where we are in real estate today. We need to become innovation machines.

Here are a number of ways to make that happen.

1. Everything starts with understanding your customer. How well do you know them? How well do you understand their wants and needs? What matters to them? It’s an odd thing that in the real estate industry we have our customers in our buildings much of the day but we hardly know very much about them at all. Admittedly we’ve not needed to historically but now that people no longer need a shop to go shopping, or an office to work in, we need to get to what is it about our buildings that makes them places people will want to come to, and spend time in? Customers need to be understood in granular detail. They need to be segmented, probably grouped into ‘personas’, and then analysed in depth. For every persona, for every ‘job to be done’ it’s worth using the ‘Value Proposition Canvas’ to help you discern where you need to focus your attention. I’ll cover this more in a future post.

2. Your team working on innovation needs to be autonomous and multifunctional. You need it to consist of people from different departments, with different skills and with more and less authority. You want representation from across the board; juniors, middle level executives and senior leaders. Innovation teams must not be a club of the like minded. The more diversity of thought, experience and skills you can inject into innovation the better.

3. You must have a clearly articulated company vision. What is the purpose of our company, what does it stand for, what values does it aspire to? Why are we innovating? What for? What do we hope to achieve? What matters? It is possible the purpose of the innovation group is to help define all of this, but either way you need a ‘North Star’.

4. The innovation team must be away from the C suite, but close enough for it to always be top of their minds. You need to give the innovators space to breath, but knowledge that what they are doing matters, and is a key interest of the powers that be.

5. Most specifically you need to have solid ‘Air Cover’ from the CEO that part of your mission is to focus on how competitors would compete with the company, in order that, if necessary, you can compete with yourself first. It needs to be explicit that how things are done today is not accepted as being the way they should be done. The innovation team is not there to deify the status quo.

6. There is a somewhat clunky term called ‘Psychological Safety’ that has become well known in certain business circles. Google in particular is keen on talking about psychological safety. Despite it being leaden, its meaning, which is that people must feel enabled to think how they wish, talk as they wish, and fail without fear of retribution, is important. Especially in innovation teams every voice must be heard, every opinion noted and considered, and every hypotheses tested. From a standing start one does not know what ideas turn out to be good, or from where they might come. You need to foster an open, idea dense ethos amongst the innovation team. Get it all out there, leave no stone unturned.

7. Establishing a foresight function has merit. What’s coming down the tracks? What scenarios might play out, over the next 2 years, within 2-5 years, or 10, or long term? What technologies are likely to impact the company short, mid and long term? Where do our products and services sit on the ’S’ curve. What is a great business today that might not be if X or Y happens. What are the chances of X or Y happening, and when? And so forth. Maybe built around concentrated workshops every quarter, a foresight function helps to alert the mothership of storms, or sunny uplands, ahead. And hopefully gives it time to reset, recalibrate and restructure as necessary.

8. You need to get into the habit, wherever possible, of building with your customers, not just for them. Co-creating products and services. This keeps you deeply embedded in the thought processes of your customers and helps you optimise against real, rather than hypothetical, needs. There are caveats to this, and Apple is the poster child for this approach, where you very much don’t involve your customers. But this only works if you have unique insights into the future utility of your products and services that would be hard to explain until they actually existed. Try explaining the iPhone before it existed. On balance, building with not for is the better approach.

9. Steve Jobs was famous for saying ‘Real Artists Ship’, and you should. Get something done, in the hands of users. The vision might be huge but no vision comes to life fully formed. ‘How do you eat an Elephant? - one spoonful at a time!’ This should be your mantra. There is a lot of tech ready for use in real estate today. Perhaps not perfect but well worth testing out. Get it in one building, learn from that and then iterate. In the same way working with customers is important, so is working with suppliers. Help them help you.

10. Probe what people would pay for. By working with, and talking to, a very diverse and inclusive group of people you should be able to gauge what different segments of the market value, and how much they’d be willing to spend on something. Test as many options as you can. We are all different.

11. Try to develop partnerships with complimentary groups, and don’t be afraid to steal great ideas. Picasso said ‘good artists copy, great artists steal’. By which he meant some ideas are great because they are built on certain fundamental truths that have depth and nuance. That are worth adopting at a deep and pervasive level. Often these ideas are exogenous, whereby they originate from outside one’s organisation or usual peer group. Cast your net wide.

12. Seek out your own blind spots. What weaknesses do you actually have? That maybe you don’t normally think about, or even acknowledge. Where are you vulnerable? Keep a top 5, and test them regularly. How vulnerable is vulnerable? And over what time scale, or under what circumstances. Can you envisage a ‘Black Swan’ event hitting your company? Where would it come from?

13. Remove friction and enable discovery. Learn to love the UX, the user experience, of working for, or with your company. Break every interaction, every workflow down, and look at how much friction doing A or B or C involves. How hard is it to do business with your company? Be a secret shopper - test out working with yourself. And then ask yourself, does everyone who needs something have easy access to whatever it is, wherever and whenever they need it. This is the discovery question? Can I access anything I need, anywhere? If not, why not?

14. Innovation teams need to be responsible as a group. Everyone involved with an innovation needs to be co-responsible for its success or failure. Never make an individual the sole person responsible. Everyone needs to feel invested in an innovation. Everyone needs to care. And never pass on costs relating to trialling an innovation to a business unit so that if it fails their P&L is impacted. If someone is at risk from challenging the status quo they won’t help you do so. Not all innovations work, or are ultimately worthwhile adopting. You need to make it OK to try, and fail if so be it.

15. You need to work at speed, as momentum matters, and you need to communicate amongst yourselves constantly and in depth. Everyone needs to know everything that impacts on what they are trying to achieve. Always.

16. And finally you need to foster a spirit of cultural alignment where the default presumption is that change is good. The whole company needs to be conditioned for change. Innovation is not a sideshow, or something ‘they’ do. It is something we do. We are an innovative company, by instinct and preference.

All of the above can apply to any company in real estate. As you’ve seen it is largely about mindset and how one operates as a company. You can take many specific approaches, and head in a multitude of directions but so long as you keep to these guide rails you will be well placed to succeed.

The real estate industry, over the next decade, is going to see the rise of many new ‘Brands’, each offering a range of new products and services, with new business models aplenty. The best participants are going to differentiate themselves like never before, and most likely be more successful than ever before. And they will innovate like crazy. Against this many will keep to a bit of innovation theatre, not grasp just how fundamental the changes affecting the industry are, and will see value drain away, faster than they could ever have imagined.

Unlike the old days, we are not all going to rise and fall solely dependant on the real estate cycle. Some will thrive regardless, and some will be crushed.

And the beauty of this? It’s going to be down to the choices we all make. We have agency. And that is a beautiful thing.

PS. Filippo Brunelleschi needed several major innovations to construct what is still one of the largest domes in the world.

For a quick explanation click here

Or for a great book on this most extraordinary building, click here

The KPIs of the office of the future

Work - Ford Maddox Brown 1865, Manchester Art Gallery

I’ve been reading much commentary recently on how to measure, to value, the modern office. Especially post Covid, as we clearly head into a world of distributed working, where the HQ is no longer the be all and end all of our working lives.

Mostly I’ve not been very impressed. The thinking seems to be too constrained by how things have been, and iterating the past seems to be hard to get beyond.

So here’s my take (as given within the #FutureProofOffice course I co-run, with Dror Poleg, at the Real Innovation Academy)

The workplace has a problem. And it has a problem in three main areas.

It has a problem in the area of having unaligned incentives, a problem in the area of having a lack of data, and a problem in that it suffers from organisational silos.

Let’s start with the problems of unaligned incentives.

The trouble is you have landlords, occupiers, and property managers, each with incentives that go in a different direction. So the landlord just wants the highest rent possible with the lowest costs and requiring of the minimum of effort.

Then we have the occupiers. They want the lowest rent, but they also want flexibility and they want the highest level of service.

And lastly the property managers. Well, they are sort of stuck in the middle. What ‘they’ really want is to have some pricing power, to not be commoditised, which is very much the situation in property management at the moment.

So you've got three stakeholders, with completely unaligned incentives.

This ‘landlord-tenant dilemma’, with the property managers trying to be the neutral party in the middle, is a well known issue in the office market, and very much a consequence of the way we transact, via leases. It is so easy for there to be a financial disconnect between those responsible for paying the capital expenditure for operational upgrades, and those who benefit from them.

When we look at how the office market is routinely structured it is really no surprise that each party continually feels aggrieved at their lot. And that so many buildings are underinvested in. Maintaining an up to date stock, utilising the most advanced labour and cost saving technology, and setting stretching sustainability goals, is nigh on impossible with how the industry is structurally configured. The 3 or 5 year rent review process itself is like mutually agreeing to having a heated argument periodically.

The misaligning of incentives is, using a tech term, a very serious bug.

If you then look at the subject of data, you’ll find that everyone collects some data. But few collect what is needed, few have actually put that much thought into what data they really need to collect. And mostly you will find that the data that is collected is all over the place. Some of it is over here, and some of it is over there.

The general situation within real estate in connection with data, is there is not enough of it. It is not well enough thought out, and it is not well enough stored and maintained.

And then you have organisational silos. In my mind to create a great workplace requires the skills of what are, today, six different industries.

So, first off you obviously need people with real estate knowledge. Then you need people with IT knowledge, and Internet of Things, network knowledge, and you need data analysts, and you need HR people, and you need hospitality skills.

So there's actually six individual industries, each with their own incentives, that need to be combined, to create a really good workplace.

And this is a problem. And this has really led to what the elephant in the room is. And that is, if we're honest about it, on average, offices are hashtag double fail.

If you look at data from the Leesman index, who have over the last ten years done more than 800,000 individual employee surveys, you will see that they ask one particularly telling question - ‘does your workplace enable you to work productively?

Well, after these hundreds of thousands of surveys, only about 50% of respondents agree that their workplace enables them to work productively. And then if you look at desk utilisation, we all know it is roughly 50%. In fact, most of the time it is probably a bit lower than that.

So we have this situation that if we are brutally honest about it, half our customers aren't very happy with what we are selling them. And they are not using what we are selling them very much anyway. That really is something of a double fail that we just ignore.

But it is coming to the stage where we cannot ignore it anymore. Because the fundamental point here, is that within the real estate industry, we think of ‘Offices’. But it is all a bit of a category error. Because we are creating offices, we think what we have got to sell, and all our customer is after, is offices. But there's no business that actually wants an office. What they want is a productive workforce. It is exactly the same as manufacturers of household drills. Nobody wants a drill. What they want is a hole in the wall.

Because we are selling offices, that’s what we think our customer actually wants. But they don’t. They don't want an office, they want a productive workforce.

So what if you made improving the productivity of people the core value proposition within the Office real estate market

What if we stopped thinking about space, and started  thinking about improving the productivity of people.

What if that was our offer to customers?

Now you have probably seen the graphic from the Green Building Council a few years ago that points out that on average 1% of the cost of running an office building goes on utilities, 9% goes on rental costs, and a full 90% goes on the people working in that space. So clearly, if you make a 10% impact on 1%, or a 10% impact on 90% you are making a massive difference in impact.

Within the real estate industry, we really do focus on the 1%, and the 9%. And historically, we really haven't paid much attention, at all, to the 90%.

And if you think about it, this is what left the door open for the Flex Operators. For all their subsequent difficulties, the WeWork founders are to be much admired for seeing that the human had been left out of the loop, and that a different type of ‘office’ was possible, one that actually looked, and was, human friendly.

With Flex operators having taken vast amounts of space over the last few years, and filled them, it is clear that customers loved the new product they were being offered. And people love the product because the product, the flex market, is human-centric. It appeals to people. The traditional real estate industry concentrates on the energy and the rental costs and the building. And almost ignores people altogether.

So I think to differentiate, you need really need to start thinking that the core value proposition, and what you're offering, is not space. It's not a building. It's improving the productivity of people in that building.

Now, if we did this, the real estate industry would actually no longer be about real estate. Everything that you know about real estate now will be as valid tomorrow, next week, next year, as it is today. But going forward, it will be ‘necessary, but no longer sufficient’.

Because really real estate is going back to what we've just looked at, as something that needs to be built up from a whole range of skills. So we will say IT, IoT, Data, Workplace, HR, Hospitality, all these skills are required to create great user experiences, and great user experiences will go a long way to being the key to creating productive workforces.

So if we thought like this, if we put people at the centre of our value proposition, we could look to how we can break down those silos, align incentives, work from data and add a huge component of human onto all this machine. This is very much a Human plus Machine world we are moving into. So if we did that, what data do we need to make improving the productivity of people the core value proposition?

Now, we've gone through hundreds of documents, hundreds of reports, and dozens of books within the literature - there has been endless amounts written about improving the productivity of people within the office. And there has been loads and loads of attempts to do it, some taking the form of asking hundreds and hundreds of questions. Mostly, they failed, because they haven't really focused, really focused on what is it we really need to know. What are the key variables we need, to be able to improve the productivity of people, within our office buildings.

And actually, we need quantitative data. And we need qualitative data. So we need objective data. And we need subjective data. And we need all of this data to start working together. Because the industry works in silos. A lot of this data that we're going to discuss is collected in some place. But it is never, ever joined up. It never works together, and it's never available to analyse properly, as one.

So let us have a look through what data we really need.

In terms of quantitative data, so the objective data, absolutely the key starting point, even more so now after the pandemic, is environmental conditions. So the big four are temperature, noise, lighting, and air quality, which includes the tracking of particulate matter, carbon dioxide and carbon monoxide levels, total volatile organic compounds, and humidity. These are the most important environmental factors that need to be measured in real time and at a very granular level.

Then we need to, at the FM services level, check things like Helpdesk requests, how many are received and in what categories. What is the Meeting Room availability, broken down at the individual room level? What is the vacancy ratio by room? What is the the speed of visitor processing? How quickly do we get people into our buildings? How welcoming is the reception they get when someone comes into a building.

More quantitative data is required about our workplace. We really need to understand the utilisation of our space, not just an average across a whole building or a whole floor, again we need to understand this at a very granular level, what space is being used, at what time, by what teams and in what location.

And then obviously density, we need to understand what is the space to desk ratio. And we need to measure some factors to give us an understanding of health and well being. So if you start to track the number of sick days taken, how many days are lost by people not being well?

How many health complaints do we get within the building? How many workplace accidents do we get? What is the staff turnover?

This is where you have to start working WITH HR,

because only they have this data, but it rarely gets incorporated into quantitative data studies. So a lot of the time you don't really understand how well a space is performing, because you just do not have access to this level of data.

Then you have the qualitative data. So this is the subjective data. This is derived by actually asking people how they feel. Now a lot of people dismiss how people ‘feel’ but it is actually incredibly important. Because a lot of time you have to correlate between how someone feels and how how a particular space is operating. And you need to understand people, people’s circumstances. If people have had a particularly tough time at home, or getting to the office, they are much more likely to moan about it's too hot, too cold, or whatever? So there's a lot of nuance that needs to come into this. And we need to understand how employees, as people who work in this space, how they feel about their space.

So in the spaces they work in, is the temperature, right?

Is the noise level okay? How is the air quality for them?

Do they have good lighting? And we need to know this for everybody? Everybody, because you cannot generalise here. Everybody has a particular thing that they are interested in. And we need to hone in on really understanding the needs of individuals.

And there are many qualitative data points in terms of FM services. People like to feel that they have control over their personal environment. Do they have that? They are obviously interested and keen on understanding the quality of the catering and refreshments. How easy is it to book meeting rooms? What about the cleanliness of toilets. It feels like a very trivial thing. But it is a very big thing to everyone if you have dirty toilets. How tidy is the workplace? Is it regularly cleaned? Does it look good?

What is the quality of the decor? Is this workplace a nice place to be?

What is the quality of the visitor management service. How well are guests treated when they come for a meeting. Do they feel welcomed into the building, or into a particular office floor. This matters. People often judge a company by such matters. After all, they can choose who they want to do business with.

And then of course, we should be undertaking regular wellness surveys. You cannot manage what you cannot measure, as they say, and that applies to wellness as well.

There is a lot of detailed data that is required around workplace settings. It is vital that people have the equipment that they need to do their job, but also access to the right spaces in which to do it. So you need to ask people, do you have the right space? For the personal meetings you have? Do you have space for thinking? Do you have space for creative thinking? Do you have space for relaxing? And is it easy to find somewhere to take a break? Are there spaces where you can learn from others?

Are there spaces where you can do individual focussed work which is desk-bound? And what is the quality of your desk? And what is the quality of the hardware and the software you've been given to work with? What is the quality of the meeting rooms? What is the quality of connectivity within your workplace? Can you work anywhere? Is there a good wifi signal everywhere?

Do you have storage for all your belongings?

And what are the end of journey facilities like, so if you're cycling to your building, what is it like when you get there?

These are really, really important factors and drivers in the satisfaction, or not, of office space.

Above all of that, we need to spend a lot of time actually looking at ‘Wellbeing’ in general. Now probably the best way to do this is to look at the work that the Well Foundation and Fitwel are doing because they are both tailored for Real Estate. But the point here is what we are trying to do. There is a great deal of research about the impact on cognitive function of environmental conditions. Many peer reviewed papers exist about this. It is not a subjective question about ‘can a workplace enable you to be more productive’. It can, because at the very least, what it can do is ‘do no harm’. And a workplace can be operated in such a way that it performs as well as it is capable of performing.

Because we know if a space is too hot or too cold, or has carbon dioxide levels that are too high, or is too noisy, or has poor lighting, or is too humid, or not humid enough, that the effect will be that the occupiers of that space will have their cognitive functions impaired, and that will, has to, reduce their productivity.

Get these environmental factors right and we know we can help enable people to be as productive as they are capable of being.

Now we cannot make a bad company good by putting

a bad company in a great workplace. But we can make a great company better by putting them in a great workplace.

Because the whole point here is really understanding the conditions, the best conditions, that this space can offer. And measuring and monitoring and optimising on an ongoing basis to provide optimum environmental conditions for the tasks that people have to do.

Now, of course, there's the question of, well, will anyone pay for this? And to an extent this is relatively early days, because frankly, very few people actually pay the attention to monitor their workplace in anything like the detail we are discussing here. But the RICS, the Royal Institute of Chartered Surveyors, put out a report last year, about the use and value of commercial property data. And there's a comment in there that says ‘there is evidence from Knight Frank of landlords in Europe, offering a top slice of rent over and above the market rent, geared to experience, in a similar way to turnover rates in retail.’

And I think the whole premise of this is that this is about creating a user experience that is dramatically better than the user experience of your peers and competitors, and a user experience that you can prove, with data. Will people pay for better? Historically, everyone pays for better.

So to sum it all up, what we're really looking at is how do we understand our building, through really in depth, granular and often real time data? So think about it. Think about it like this, we better understand how our building is actually working. We know the temperature, air quality, lighting, noise levels, everywhere, and through time as well.

Then we get to understand how the space is used, by the people within it. We learn about occupancy levels, density, footfall, desire paths. We are no longer guessing which spaces are busy or quiet, at any particular time of day, or day itself. We start to know enough to be able to predict how the building is going to be used.

And then we need to know more and more about our customers, the more we know about our customers, in terms of their ‘jobs to be done’, the tasks they need to do during the day. And the spaces they need to do them in. What are their wants, needs and desires. This is absolutely what this is all about - it is about how do we create a great user experience. You cannot do it without really understanding all of this sort of data.

If you had all the data referred to here, could you really not demonstrate value? Of course you could. We just need to do what we know we should. Forget how it’s been done to date, we know there is a better way.

How about we stop talking, and started doing?

What matters in the future of Real Estate?

Paolo Veronese - The wedding at Cana, 1563 - the Louvre, Paris

“It was the best of times, it was the worst of times, …”

Charles Dickens, A Tale of Two cities, 1859.

With perhaps the most famous opening words in English Literature Charles Dickens captures the feeling of living in an age of great change. In his case he was writing about the French Revolution but using it as an analogy for his own time. He goes on:

 ‘it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”

Doesn’t this feel just as appropriate today as it did 163 years ago? Having come through two years of a global pandemic we have somehow jumped straight into a land war in Europe. Russian nationalists are raving about submerging the entire UK under a tsunami caused by a strategic nuclear explosion, whilst women and children are fleeing Ukraine and being taking in by good souls in countries across Europe.

And it is not just in Europe that calamitous things are occurring; across the globe we are seeing events of epochal significance.

Most definitely we are living in troubled and changing times.

Which has led me to thinking about what the future of real estate has in store for us. After all we spend 90% of our time indoors, in real estate, so there is no way what is happening outside will not be affecting what happens inside.

And ‘best of times, worst of times’ is perfect for where we are now.

Historically real estate markets have gone up and down in cycles. There were times when everyone was a genius and minting money, and then there were times when everyone was an idiot and losing value hand over fist. Today though, and in the conceivable future, this moving in lockstep is going to end. Cycles will still occur but within them there are going to be significant winners and significant losers, at the same time. We’ll even see near identical assets diverging dramatically in revenue generation, as one is operated in an entirely different way to the other.

This is because fundamentally the real estate industry is moving from one that revolved around selling a product to one that is all about delivering a service.

The real estate industry is no longer about real estate.

Being skilled in the art of real estate is still a necessity but it is no longer sufficient. The real estate industry is morphing, slowly then suddenly, into a different beast. What mattered is not what matters today.

So what does matter in the future of real estate? How should you be thinking about the future, what do you need to know, what do you need to understand? What are the inputs that are going to generate successful outputs?

Here are a selection of things that really matter:

First, the future is going to be ‘won’ by those that embrace the notion of human + machine. Where it is essential to appreciate what it is that machines (computers, robots, whatever…) are good at and what humans are good at. And then how to use the capabilities of one to enhance, or leverage, the skills of the other. In broad brush terms machines are exceptional at processing anything that is structured, repeatable or predictable. Anything that follows a pattern, where B follows A and Y is determined by X. Humans cannot even begin to compete in dealing with such matters. And McKinsey have written (as far back as 2017) that such tasks make up roughly half the things that people are paid to do around the world. These tasks will be automated.

This change in the nature of the ‘work we do’ will impact real estate companies just as much as their customers. So we need to be thinking about the types of environments needed to assist humans in designing, developing and refining new products and services in conjunction with advanced technologies. Machines are becoming extraordinarily capable at communication, perception, knowledge, reasoning and planning but they still need to be given instructions as to what is required, under what constraints, and to what purpose. Computers should not ask you a question they can work out by themselves, but the sophistication of the questions being asked are where us humans come in. We need to be asking the right questions, and that is becoming ever more complicated. Places and spaces conducive to abstract and critical thinking, empathy, design and judgement will become a critical input that real estate people can innovate around. Who has the best environments for humans to work in, with their servant machines?

Secondly, we need to be thinking hard about flexibility. It is the tent pole word of our time. Flexibility in terms of when people have to work, flexibility around where they can chose to work and flexibility around how they can configure the spaces and places that they use. Currently there is much ‘sturm und drang’ within corporates around how they are going to be working post pandemic but this will settle over time and, amongst the best companies at least, employees will win the argument, and will be defining how, when and where they work. It is simply too easy today for the best talent to go where their talents are appreciated, so companies will have no choice but to accommodate locational, temporal and spacial flexibility.

This poses real challenges for a real estate industry that operated on the basis of fixed spaces and routines persisting for years at a time. Going forward, the industry will need to innovate to provide the choices their customers are now demanding. Everything fixed will need to become flexible, and this will entail a wholesale redesign of just about every component part of a building. Interiors will become full of emergent elements, constantly in flux as needs change. The opportunities for new form factors, workflows and operating procedures are immense, though great skill will be needed to execute on each plan.

Thirdly, the spaces and places we spend 90% of our time in are going to have to be become healthier and more cognisant of customers wellbeing. The joke about leaving a building healthier then when you entered needs to become fact. Interior spaces, full of people, can be, as we have found out during the pandemic, literally killing zones. Bad ventilation and airborne pathogens are not a good mix. We have actually known this for decades but done little about it. Those days are over. Being able to demonstrate that you are operating safe and healthy spaces will become mandatory. We have all the technology needed to monitor and continually optimise environmental conditions in our buildings and we are going to have to start using them. There is no future for assets that cannot provide at least decent environmental conditions; whatever is required to get to that state will have to be deployed. 

Fourthly, dealing with environmental conditions will go a long way to dealing with the infamous ‘productivity issue’. As real estate people we cannot make bad companies good, but we can assist good companies in being their best. Productivity is largely a cultural issue determined by good or bad management but on one axis we in real estate can make a major impact. Productivity at an individual level necessitates working at the peak of ones cognitive abilities, and these cognitive abilities are directly affected by environmental conditions. If there is too much CO2 in a room, or the temperature is too hot or too cold, or the lighting too dim or too bright for example it will impact on an occupiers cognitive function. If we can provide our customers with optimum environmental conditions it will not only assist them in being happy and healthy but will enable them to operate to the best of their abilities.

Being overly concerned about ‘health and wellbeing’ is, in some quarters considered a bit woke, a bit too soft and fluffy for serious business people. They are paid aren’t they, so they should just get on with their work. Dickensian thinking persists more than is good for us all. But in reality, being concerned about our employees health and well-being is pure Adam Smith capitalism, because happy and healthy people are statistically most likely to also be the most productive. At root, no company wants an office, what they want is a productive workforce. And the way to a productive workforce starts with putting them in an environment that enables them first and foremost to be happy and healthy. Productivity will follow. Happy, healthy people work better, full stop.

Within the real estate industry we have many tools to help enable happy, healthy and productive people. And people are much more expensive than real estate. So the more we are known for providing environmentally high quality space the better our business will be.

Remember, we think we are selling offices, but our customers aren’t looking for offices. Sell the customer what the customer wants!

Fifthly, creating happy, healthy, productive spaces helps deal with another matter that is perhaps more important than any other. The need to create, and operate, sustainable, net zero buildings. Much of what is needed to create environmentally high quality space overlaps with what is needed to create sustainable buildings. Getting to net zero is a major challenge. Getting there by 2050, across all the built world, can only happen if actions are being taken now. But at least we have aligned incentives. Governments, investors and occupiers are all demanding we deliver net zero over time, but in the short term the strongest demand is coming from customers who want this now. So putting off full throttled commitment to engage with all matters sustainability is already bad business. Unless you are committed to the cause of a net zero built environment you really should be looking for another industry to work in. The carrots and sticks wielded in the cause are only going to get bigger, and you’ll never be able to win in real estate long term without leaning in massively to sustainability. 

Sixthly though leaning in hard is the next thing that really matters in real estate. Because leaning in hard will involve building a trusted, consumer Brand that is recognised for providing spaces, buildings, campuses that deliver a certain UX, a certain user experience, that is differentiated from competitors. Building Brands in real estate is going to be the next big thing. Creative, innovative, visionaries are going to create competitive moats around their business that will be hard to challenge. They will alight on certain customer types, or peer groups, who have particular wants, needs and desires and who seek out spaces and places that give them what they want. Customers of real estate are about to go much more heterogenous than homogeneous. Where once a textbook BCO specification would do for all, in the future the best owners and operators will create and curate spaces and places that are attuned to specific market sectors. There will be Audi places, Mercedes places, BMW places, Tesla places - designed and refined to appeal to certain tastes.

We are learning rapidly that getting people back to the office is not going to be easy. Because people have learnt that they do not need an office to work, in the same way that they do not need a shop to go shopping. For over two years remote working has, by and large, worked. The challenge going forward, if we want an office industry to survive, is going to be creating offices people want to come to, despite not needing to. And that is going to entail branding like the real estate industry has never experienced before. In fact it is going to involve the novel to real estate experience of story telling. The office industry, as with the retail sector, is going to need to develop stories around the user experience they offer their customers. What is the experience of our building? How does it feel to be in our buildings? What human skills do our spaces catalyse? Who are they designed for? What can they help enable you to do? What can you do in our building better than anywhere else?

The seventh thing that matters stems directly from the above, and that is real estate companies need people with different skills from those they’ve traditionally sort out. They have enough people who understand real estate, but they lack those who understand branding, story telling, human behaviour. They need people who can discern the wants, needs and desires of the types of customers they wish to retain or attract. They need people able to put together quantitative and qualitative data collection procedures, and then people to analyse that data. They need to be able to really get under the skin of the people who use their buildings. They need to know their customers like a luxury goods company knows their customers. With demand for space coming more from individual users than from corporate finance types, they need to realise they are now in the B2B2C business. They have to help satisfy the needs of their corporate customers in pleasing their own employees. It’s a joint sell. Landlord and Tenant working together to satisfy individuals.

Quite the different game…… ultimately the future of real estate is about starting with the individual customer and then working back from there to the real estate. The real estate becomes the output, rather than the input.

Which brings us to the eight thing that matters, and that is becoming an innovative company, head to toe. For too long innovation has been a tick box exercise where one, two, seldom more than a few, people are tasked with ‘innovation’. In a basement office, away from the core business, with no North Star to guide them and precious little resources to actually do anything. Going forward, real estate companies need to injest innovation as a way of being. With air cover from the CEO and tasked with doing everything from continuous incremental innovation of existing products or services to the creation and execution of entirely new ones. The flexibility we discussed above necessitates this type of model. We have hypotheses to test, and iterations to roll out. Continually, as if we were working with software. Building, measuring, learning and repeating, and repeating. With a market place subject to so much flux, real estate companies need an innovative core like never before.

The ninth thing that matters is doubling down on relationships, networks and ecosystems. Everything about real estate in the future is about delivering services to customers. It’s about doing so in such a way that your customer cannot leave you. It’s about understanding them so well that you can deliver a level of service that no-one else can. If they leave you they leave behind all that understanding of what they really need to be happy, healthy and productive and they’ll have to start again with a new operator. Which is where networks and ecosystems come in; these are groupings, official and unofficial partnerships you develop with 3rd parties to help you deliver what you could not on your own. Could you build a network and ecosystem such that you could handle whatever real estate needs your customer has? It is a certainty that every company will be served by a network of offices rather than focus on a single HQ. Every company will need a range of spaces to work, in different geographies and catering to different needs. How many of these could you help provide? Where do you fit in? How can you help?

And lastly, the tenth thing that really matters to the real estate industry of the future, is to understand what being a ‘Smart’ building really means. Today ‘Smart’ buildings are mostly described and discussed in terms of real estate and technology. Someone will say we have installed this technology, and that technology and we have a data lake and dashboards galore. They will wax lyrical about the ‘Smarts’ of their building and the accreditations it has received. What you mostly do not hear people talk about is how any of this actually benefits the human beings in the building. How they started with specific customer needs and worked back to the technology. How they designed the user experience they wanted to achieve ahead of any discussion about technology. How all this technology is there to serve the people in the building. How it improves their day to day enjoyment. How it enables them to be happy, healthy and productive.

You won’t find a stronger advocate for super smart technological buildings than me. But, and it is a big but, the only reason for technology is to improve the lives of people. Everything must centre around the individual, and then work out from there. The starting point in every real estate project must be the people who will be using that building.

This does turn real estate on its head. The actual real estate is the last thing that matters. It’s what you discuss after you have designed for all human factors. However, because this is the approach, the resulting real estate will be better than ever before. It will exist to deliver against a comprehensive list of requirements, and in doing so will perform at a level hitherto unimaginable or at least very very rare. You make great real estate by not concentrating on the real estate.

These ten factors to concentrate on will deliver ‘the best of times’. The ‘worst of times’ will be on a scale of not concentrating on them. In practice I think we’ll see real estate companies that seriously commit to creating great, human centric, spaces and we’ll see others that just do real estate.

They won’t get the same results!

It’s not about the building

Johan Zoffany - Tribuna of the Uffizi - 1772 - Royal Collection Trust

There is a fundamental structural shift going on around the demand for offices. It’s something I’ve written about many times. In quite strident terms. But as of today, it is clear that I’ve not been strident enough, because the supply side, on the whole and with notable exceptions, does not seem to be getting the message. Which is that ‘the real estate industry is no longer about real estate’ and it’s not about the building.

As time passes it is becoming clear that, despite (in many countries) Covid-19 being far less of a mortal danger, and all pandemic restrictions being lifted, getting employees to return to their offices, en masse, is not looking likely. Just today, in the UK, Cabinet Minister Jacob Rees-Mogg has been issuing missives to his fellow Ministers to demand they force their civil servants to return to the office. Currently average daily attendance is just 44%. Not surprisingly this has been met, from the demand side, with howls of derision. For a large percentage of individuals, the break from a five day a week office bound life has been the only silver lining to the misery of the last two years. They will not give this up easily. Without good reason to go to the office, they won’t.

And in this is the kernel for amazing new business opportunities in real estate. Once you can reset your mindset to realise that real estate should not be the thing being sold in the real estate industry you’ll start to see the scope to develop new business models, with new products and services, that will benefit from larger margins and greater competitive differentiation. The supply side in real estate needs to grasp that the demand side no longer wants what it has to sell. And worse than that, the Covid experience has proven to them that they do not need what they are currently selling either.

That though is the macro view; overall it is 100% certain that, on average, every company is going to need less full time, long term leased real estate. The evidence for this is all around us. One can quibble whether the reduction in demand is going to be 5,10, 20 or some other percentage, but there will be reductions. Per capita.

At the micro level though the opposite will occur. Successful buildings will be those that combine the ability to enable happy, healthy and productive people but also occupier companies that are interested in doing the same. Anyone who understands the workplace market will tell you that the reason many people really do not like their office is nothing to do with it being a badly designed office. The culprit is the toxic culture of their employee. Sadly, there are a lot of second rate companies with second, or worse, rate management teams.  Rob Harris provides the long view on this but the TL:DR is that the workplace often gets the blame when it lies much close to home.

So what is this telling us?

First, that a hybrid way of working is definitely the future. With lots of caveats and a warning in advance that this will cause much noise over the next year or so, if you on the supply side of the industry you need to internalise this and reset ALL your assumptions around it.

Secondly, in real estate we can make good companies better, but we cannot make bad companies good. So the supply side needs to dig much deeper into the merits, or not, of current customers, and be very precise and deliberate in who they target as future customers. Bad companies will be bad occupiers and much more likely to have real employee/management issues, that could well spill over into being real estate issues. 

And thirdly, the massive opportunity for the supply side is that the workplace issue for companies is now way harder than it ever has been before. Yet there is no standalone segment of the supply side that works at creating and then curating great user experiences for them.

To create a great workplace you need multifunctional teams whose skills cover real estate, IoT, data, workplace, hospitality and HR. Input from all of these is needed to be able to orchestrate the hardware, software and services required. And all working to a predefined and designed UX, that is created before anything technical has even be thought about. ‘Start with the customer and work back to the real estate’, as I have written many times before.

With this knowledge about the skills needed to create your happy, healthy and productive environment, go and try and find a supplier. Someone why will start at the end, and craft everything to achieve it.

I suspect you now have a problem. Such companies do not exist. Most pressingly the overall designer of the UX is usually, if they are commissioned at all, only able to work within the narrow confines of a particular clients domain. Whereas what is needed is a true conductor of the entire orchestra, we mostly have people organising just the percusion section.

Surely this is what ‘Smart Building’ suppliers are all about? Again, mostly not. The ‘Smart Building’ industry is particularly good at thinking ‘it’s about the building’.

What about the property management company, or the workplace consultants, or the tenant engagement people, or, long long shot, the HR department? No. It’s almost a certainty that each of these is working within their silos, and incentivised accordingly. They’ll all talk a good collaboration story, and many will try hard, but the problem is more fundamental. The supply side needs a new type of company. One that is responsible for the UX, on an ongoing basis, of the entire experience within a building, and whose job it is to summon into existence places and spaces that people want to come to. And do come to. 

Buildings that meet the wants, needs and desires of every individual they host will be massively valuable. Because they will have high occupancy and high satisfaction and will be able to charge a significant premium for delivering this. Their customers are likely to be taking less space than pre pandemic, paying more for it per unit of space, yet most likely also saving money on their total occupancy costs. But the cost, whilst always important, will fall down the rankings of most important features, because a workplace that does enable people to be as happy, healthy and productive as they are able to be, IS massively valuable. Conversely a workplace that does not enable this is going to drop in value precipitously, because it has no purpose. It won’t be a bit less valuable, it’ll be on the way or already obsolete.

Sadly much of the above is fantasy at the moment, because the real estate industry is not developing the types of company, or networks of companies, that could make it happen. That are building new Brands, operating on new business models, and offering new products and services. As stated above, with exceptions. Currently we have an industry mostly accepting that things are changing, but without realising that in reality they are on a burning platform.

The route off that platform starts with understanding ‘It’s not about the building’.

UX = Brand & Brand = Value.