Our Four Great Challenges

Detail from Edvard Munch (1863–1944),The Scream. Lithograph, 1895. Private collection, Norway.

Many people, especially on LinkedIn, talk about challenging times, speed of change, and ‘how not to get left behind’.

Mostly though the substance of their arguments are relatively trivial and could have been written at any time over the last 40 years. Much change is actually rather slow, disruption is limited and the same old same old companies carry on as they always have.

But occasionally certain industries are hit with tumultuous change. Tech being the obvious example. In a few generations we’ve gone from mainframes, to PCs, to smartphones. And from client-server, to local networked applications to everything being in the Cloud.

And the undisputed, impregnable industry leaders, those whose power was ‘too great’, suddenly found themselves as also rans. IBM got trashed by Microsoft, who got trashed by Apple. When platforms change, leaders change. Every dog has its day.

But ….. it takes something big, really big, to fundamentally redesign winners and losers in an industry. Incumbents can handle most threats, but tsunamis are tsunamis. Sometimes resistance is futile. You can’t buck the market.

In evolutionary biology they call these moments punctuated equilibriums, where a species splits into two distinct species, rather than one species gradually transforming into another.

I’m wondering if the real estate industry is at just such a moment, especially the commercial sector.

Four massive challenges need to be faced, between now and 2030, now less than seven years away.

First is decarbonisation. Using London as an example, 80% of its office buildings are below the minimum standard of energy performance demanded by existing regulations, and will need to be upgraded by 2030. This equates to an equivalent of 15m sq ft per annum. Per annum!

Much the same applies around the world. 2030 represents a brick wall the industry is careering towards. Anyone hitting it will see value destruction on an unimaginable scale.

Secondly is the impact of the move to hybrid, distributed and remote working. Last week Cushman & Wakefield produced a US centric report saying they found ‘an unprecedented imbalance in supply and demand which, by the end of the decade, will result in a surplus of 330 million square feet of vacant office space that hasn’t kept pace with demands to support hybrid working and efficiency/ESG priorities.’ Delve in to the report and it looks even worse. Only 15% of office stock is currently absolutely fit for purpose. The rest requires some to a great deal of remedial work to be brought up to scratch.

The way we wish to work has fundamentally changed and is not returning to ‘how things used to be’. Most of the supply side needs to change to match current, let alone future demand.

Which brings us to the third massive challenge. What on earth is to become of all this space?

Decades ago Management guru Peter Drucker wrote that ‘office buildings would be similar to the pyramids — we'd come to marvel at them, but they'd serve no functional purpose.’ For a lot of them this is coming true. The flip side is that the best offices will be in more demand than ever before, but that’s ‘the best’. Wither the rest?

We can convert some to residential, repurpose some as hotels, or urban farms, or logistics centres, or whatever. But finding a use for all the obsolete space is going to be difficult, to put it mildly.

And the fourth massive challenge flows on from this: how are we going to save our cities from the revenue crash implied as a consequence of the above. And from the changing patterns of use. How are we going to create cities where people want to be? Where will people want to do whatever it is that they’ll want to do in the future. 

This behavioural change impacts way beyond offices. It will impact every real estate asset class. Every assumption we have stored as to what to build where is being thrown out of the window. City centres are seeing this right now, but everything is connected and the flywheel of change will permeate everywhere.

Together these four challenges could melt the minds of real estate people. They require depths of thinking that one seldom needs to employ. If ever there was a wicked problem, this is it.

But if ever there was an opportunity to ‘change the world’ this is also it.

It’s also why #SpaceAsAService really is The Trillion Dollar Hashtag. Because it applies across the board in real estate. Wherever you look we need spaces that provide the services, physical, digital, social and emotional, that people need, wherever they are.

Work that out and good things will follow!

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The next cohorts of the online ‘#SpaceAsAService - The Trillion Dollar Hashtag’ course starts April 17th. One for Europe & the Americas and one for APAC. Visit trilliondollarhashtag.com for details and to register.

#SpaceAsAService and the hyper competitive company

We are already in the age of ‘Superstar’ companies. McKinsey wrote a report about them in 2018. They concentrated on the rapid growth of $Billion+ companies, and demonstrated how ‘In this group, economic profit is distributed along a power curve, with the top 10 percent of firms capturing 80 percent of economic profit’. Superstars also exhibited ‘relatively higher levels of digitization; greater labor skill and innovation intensity’.

5 years later this superstar effect is, if anything, becoming more pronounced. It is also though becoming noticeable amongst all companies, from startups upwards. Covid, by acting as a forcing function, has magnified this trend. Being pushed to work from home rather than the office necessitated a wide range of technological, behavioural and societal changes that have all played into the hands of the best companies. The actual and the aspiring superstars.

These fit into two core buckets which, I believe, will act as massive drivers of adoption of #SpaceAsAService real estate.

The first bucket is technology. The best companies are trialling, testing, and adopting where appropriate, every digital tool that enables an end to end digitally native company.

It is estimated that a startup with 35 employees has an average of 102 SaaS (Software as a Service) tools, with a power law distribution where 5-10 account for the bulk of usage. The SaaS universe has become so large that one can find world class tools, available on demand, that cover just about every use case within just about every business.

Starting from scratch is a great advantage as a new company can adopt best in class with no ‘technical debt’, but the best companies have been big users for years, and Covid egged them on. Being dispersed, and needing to work more asynchronously, with better channels of communication, and more need to activate ones culture without the crutch of a corporate HQ, led all of them to either upgrade existing systems or leverage, rapidly, new ones.

And every good SaaS tool is a force multiplier, enabling one person to generate the output of 2, 5 or even 10 people using ‘old school’ technology. The latest AI systems, such as ChatGPT, DALL-E, or GitHub Copilot, have been described as like having an army of interns available to you, on demand. Skilfully used, these tools are extraordinary augmenters of humans. Superstar companies not surprisingly cannot get enough of them. They embrace them, test them, and roll out those that work well for them, at speed. As a tool of competitive advantage against ‘the average’ they are without doubt widening the gap between the best and the rest. And this gap, once opened up, is nigh on impossible to close. Technologies interact, and act as fly wheels for each other. Simply put, the faster get faster.

The second bucket is productivity. The best companies are relentlessly focussed on maximising the potential of each individual. They are employing advanced, scientifically validated, tools to help people maximise their potential. They know that athletes get personal programmes to ‘tune’ their performance, so why not knowledge workers? They know that management of highly talented people is not a guessing game. Every manager is committed to learning, and learning everyday. 

Daniel Pink famously wrote that ‘Purpose, Autonomy and Mastery’ are the keys to being happy and productive. Companies need to instil into their employees a sense of purpose, that what they are doing day to day matters. Everybody needs a sense of purpose. Then they need to be given the agency, the autonomy, to work out how to do what they need to do as efficiently and effectively as possible. And finally they need to be given all the requisite tools to enable them to master their brief, their work, their contribution, their output.

The superstar companies of today and tomorrow obsess about this.

Combined with pervasive adoption of productivity enhancing technology, a relentless focus on productivity across the board becomes easier. One simply has the tools and techniques needed to ‘make it happen’.

And that is where #SpaceAsAService comes in. I’ve described it as a refocussing of real estate around people, where pleasure and productivity IS the value proposition. Where understanding the wants, needs and desires of individuals, underpins the provision of the places, spaces, products and services that enable people to be as ‘happy, healthy and productive’ as they can be.

And flexibility, of location, space and time is central to making this work. So it is no surprise to see the best companies lean in to the opportunities that Covid has made clear as to how and where one needs to work. The Gordian knot tying work to ‘the office’ has been irreversibly cut, and the best compares are embracing this as well when they debate and decide how they use real estate. Yes, they will utilise core space but they’ll also adopt flexible space en masse. 

Offices are going to have a much more particular purpose in the post Covid, ‘Superstar Company’ era. No longer are they where people go as a matter of course. One goes for a reason, and that reason needs to be worth the effort, and time, to get there. 

Average companies are quite likely to fail at adopting hybrid (or distributed - call it what you will) successfully, because they won’t work hard enough on their technology and productivity. We’re already seeing dumb mandates galore. A Future Forum survey reported that ’60% of executives said they’re designing their companies’ policies with little or no direct input from employees.’ Imagining the result of this thinking isn’t hard, and it isn’t hard to understand why the best and the brightest will not work for companies that operate like this.

They’ll be working for, or with, the ‘smart’ companies, and almost definitely they’ll be utilising #SpaceAsAService.

They understand what #SpaceAsAService means, and how it’s the third bucket, to match their other two, of technology and productivity.

For us in real estate this means we need to double down on finding product/market fit with the best companies. Because real estate is not a bit player here: forward thinking companies want, AND NEED, a forward thinking real estate industry.

#SpaceAsaService - The TrillionDollarHashtag’ is no joke. Behind every great company will be great real estate. 

And today, there isn’t nearly enough of it.

52 (+1) Pointers

The Hunters in the Snow Pieter Bruegel the Elder.- 1565 - Kunsthistorisches Museum- Vienna

What do you need to know to succeed in the real estate industry? 

The Real Estate industry is no longer about real estate. Well actually, of course it is. But while real estate knowledge is still necessary, it is no longer sufficient. 

We’re not just in the business of providing four walls and a roof. As the places and spaces where people spend 90% of their time inside, and as the source of 40% of all the worlds carbon emissions, and consumer of some 30% of total global energy, real estate IS the most important industry in the world. Nothing happens without real estate. As such we have a responsibility, and an opportunity, to live up to the implications of this. What we do has real impact. On individuals, communities, wider society and the planet. 

So, we need to know a lot, about a lot.

As we prepare for what looks set to be a very trying 2023, here are 52 pointers to what to learn, ways to think, and things to do.

1. The days of tech businesses being predicated on world domination are over. Easy and abundant money is no longer available. Designing business models focussed on filling one’s niche and making a healthy profit is the new ‘sexy’. Ignore this at your peril. 

2. PropTech needs to stop apeing FinTech. Spend less time thinking how to financialise everything and more on building a better built environment. The actualité of real estate is that almost everything could be much better. Concentrate on that.

3. Globalisation is not dead, but ‘Chimerica’ is. A great decoupling is underway, and this will have huge implications for real estate. As supply chains are reconfigured so will be real estate needs. What we build where is in flux.

4. Not least of all manufacturing. The ‘big one’ is computer chips - witness TSMC upping investment in new fabrication plants in Arizona from $2-40 billion. But this near shoring will be across the board. After all a robot costs the same in Shanghai as it does in Sheffield. Low labour costs are no longer the central determinant of where factories get built. Learn about supply chains.

5. Artificial intelligence is often criticised as being laden with biases. As if humans aren’t. The difference is that software can be easily recoded, whereas humans are often immune to being ‘updated’. Don’t let talk of bias put you off understanding what AI is capable of.

6. Think in terms of systems when considering how to introduce AI into real estate. Yes, many point solutions are available but applying AI to the structures of the past is self limiting. Just as factories needed to be fundamentally reconfigured before the industrial revolution saw significant productivity gains so we should be looking to new business models, workflows and methodologies in real estate. Don’t digitise the past, create the future.

7. It’s very hard for incumbents to do anything but adopt point solutions. Systemic change to successful models is too hard. So your competitive advantage will come from being new. You don’t have to worry about any legacy: you can design your business to leverage every new technology imaginable, and to adopt new ways of working. Maybe stop trying to steer the supertanker. Get a speedboat instead.

8. Think about power structures within the industry. Especially within the areas you are operating. If you can change X who does that impact? Who does it benefit but also who does it harm? For example, we have, or are getting close to, having the technologies that would enable a building to operate autonomously, based on data captured by sensors and analysed by an AI. This would benefit occupiers and owners considerably. But, at the least, change the working environment of much of the FM and PM industry. So how will it get adopted? This is where you need to think about your tactics, not just your strategy. Your strategy might be spot on but it’s your tactics that will make it happen.

9. Next time you encounter a reluctant adopter of technology consider point 8. Most likely their reluctance will not be because they cannot see the benefits of the technology. It’s just that they aren’t the ones benefiting. How do you get around this? Map out the territory; find the pain points and then the pain killers.

10. Dismiss thoughts of AI destroying jobs. Given the above it’s clear that individual tasks are far more likely to be impacted by AI than entire jobs. Take radiologists for example. A few years ago it was assumed that AI (which can interpret scans better than any human) would be their nemesis. But it turns out that AI only impacts 1 of 30 key tasks a radiologist performs. So a human+machine future seems far more likely. How to leverage technology to augment a human. Systems still need to be redesigned but don’t assume you can remove all the wetware and replace it with software. Think holistically.

11. ‘Show me the incentives and I’ll show you the outcome’ - famous words from Charlie Munger, Warren Buffett’s longtime partner. This needs to be deeply internalised. Just about every decision made reflects the incentives of the person making it. Every value chain is made up of chains of decisions and each of these reflects chains of incentives. Obsess about the ‘chains’ of your stakeholders. Understand them and you’ll know what levers to pull.

12. “it is difficult to get a man to understand something, when his salary depends on his not understanding it.” - so wrote Upton Sinclair. Once again, context matters. Understand the context. Plan accordingly.

13. ‘Don’t aggregate me’ - averages seldom tell us much. In real estate though they traditionally have done. We all tended to rise or fall together. In a bull market we are all geniuses, in a bear market idiots. Those days have passed, or are passing. The right asset, operated in the right way, will massively outperform even the right asset, operated in the wrong way. The UX, or user experience of an asset is now a major differentiator. The underlying real estate is an input, not the output. Necessary but no longer sufficient.

14. ‘You won’t see much innovation in a downturn’ - you will hear this often. Ignore it and be thankful that your competitor has decided not to compete. Bull markets are when innovation dies. Especially in real estate. When demand outstrips supply you can get away with ignoring innovation. And many do (looking at you residential industry!). Going in to this downturn the real estate industry, particularly the office sector, is facing a customer base that has realised it doesn’t NEED what the industry has to sell. Innovation is the only thing that will persuade them that they WANT it anyway. Surround yourself with innovators.

15. Investigate ChatGPT, the question and answer large language model AI developed by OpenAI. This is the latest product to be built on GPT-3 which is imminently going to be superseded by GPT-4. Think of a chatbot on steroids, for everything. There are huge downsides (around privacy, copyright, trust etc) with these models but they will be utilised to help us operate real estate in the future. A human + ChatGPT will beat a comparable human without it. Gem up.

16. Read Nouriel Roubini’s book Megathreats, where he explains how vulnerable we are to 10 different vectors of disruption. ‘For four decades after World War II, climate change and job-displacing artificial intelligence were not on anyone’s mind, and terms like "deglobalization" and "trade war" had no purchase. But now we are entering a new era that will more closely resemble the tumultuous and dark decades between 1914 and 1945.’ Again, context matters. Real estate is especially influenced by macroeconomics, and global geopolitics: It’s wise to understand key trends.

17. Think about the merging of asset classes. What’s an office, a home, a hotel? These worlds are beginning to overlap in a fundamental way. Work, rest and play has segregated our modern cities. Do this here, and this here. In the future everything might revert to coexisting. Especially if ‘the 15 minute city’ idea gathers momentum. Either way, what you build where is changing. Think about what you would personally like to see, and then wonder why if you want it why wouldn’t others?

18. Commuting matters. As travel times increase the desire to visit an office each day diminishes. Which explains, beyond anything else, why ‘return to the office’ is occurring to different degrees in different cities. It’s maybe the biggest ‘bug’ about large cities. Do we fight resistance to commute, make it better (and cheaper) or roll with it and lean in to a post commuting world? How does that impact where to build or invest? One way or another this is something which needs to be ‘fixed’.

19. Dig deep into the concept of converting offices to residential. Where is it feasible, or desirable, and what needs to happen to enable it. At scale. And what’s the aim? More ‘money deposit boxes in the sky’ or the key to revitalising city centres with 50% less office workers? It’s just one option to deal with office buildings that are no longer fit for purpose, but is it the best option. Or just the easy answer?

20. Invest in management training. We take people who are good in their field, and have great skill, and make them managers. Without training them for what is an entirely different skill set. So why are we surprised when the Peter principle kicks in? We’ve institutionalised incompetence, and need to stop.

21. The chaos around hybrid working is the perfect example of this. Asking managers who are used to office centric environments to successfully develop strategies for hybrid working, without any training, is proving to be the #fail many anticipated. You cannot run a company designed for office centricity successfully in hybrid mode. We need to understand how managing a remote team efficiently and effectively is a source of great competitive advantage. But that requires understanding new ways to communicate, write, mentor, meet and innovate. It won’t just happen. But the answers are a known known. Take the free Coursera online course offered by Gitlab. And work from there.

22. Never go a day without learning something. Education does not stop when you leave school, or university. That is just the foundations being put in place. Lifelong learning is a prerequisite to success in the 2020’s, and beyond. Make it a habit. And surround yourself with other learners.

23. Learn how to use technology to automate away tedium. Tools like Zapier enable you to easily set up ‘if this then that’ processes for your business. Think about, and write down, rote processes you do repeatedly and those done across your company. And then automate them away. Never even dream about rekeying anything. Anything structured, repeatable or predictable should be done by a machine. And sooner or later will be. Spend your time doing what humans are good at, not what machines are.

24. Learn how to innovate, and how to build an innovative company. Again this is largely a known known. Not necessarily easy to achieve but the processes and actions needed are easy to work out. Here’s a crib sheet - https://www.antonyslumbers.com/theblog/2022/5/21/innovation-if-not-now-then-when

25. Learn about Design Thinking. A methodology popularised by design agency IDEO ‘Design thinking has a human-centered core. It encourages organizations to focus on the people they're creating for, which leads to better products, services, and processes. When you sit down to create a solution for a business need, the first question should always be what's the human need behind it?’ Tom Kelley, the founder of IDEO and creator of the Stanford d.school wrote a great book about it called ‘Creative Confidence’. It should be essential reading for anyone in real estate. If we don’t understand our customers how can we create great real estate?

26. Who’s the Landlord? A question worth posing to anyone in real estate, but especially to anyone in PropTech. Take any asset and work out who owns what about it? Who owns the equity, the debt, the mortgage, the land, the air rights? And what are their incentives (see above)? Are they short, medium or long term players? Are they ‘flippers’ or are they looking to asset manage their way to a superior product or service? Then don’t bother trying to sell a technology with a 10 year payback to a ‘Landlord’ who has to exit the asset within 3 years. We waste far too much time trying to sell things to people who are never going to buy. Save yourself the stress by understanding ‘Who’s the Landlord’.

27. In a world of hybrid and remote working companies are going to invest more, and be keener on, getting their teams all together in high quality offsite, or retreats. Spending an immersive week together every 2 or 3 months can be far more rewarding than sitting next to each other every day. But the emphasis is on ‘can be’. New businesses are going to be formed around amalgamating well designed, thoughtful real estate with engaging programming. Lots of opportunities here.

28. Embrace the circular economy. Arup and the Ellen Macarthur Foundation are strong sources for inspiration on this. The latter’s recent report ‘‘Realising the value of circular economy in real estate’ ’ outlines these five new business models: 1. Flexible spaces – multi-use spaces to unlock the potential of underutilised space in buildings / 2. Adaptable assets – creating buildings which are resilient to both changing market conditions and social expectations by being able to adapt to alternative uses / 3. Relocatable buildings – moving across sites for temporary uses using modular, deconstructable buildings / 4. Residual value – tradable futures contracts related to the value of building materials at deconstruction / 5. Performance procurement – product-as-a-service business model scaled up to whole building systems

29. ‘The most sustainable building is the one already built’ - what’s the point of building net zero in operation buildings when their construction creates 60 years worth of emissions? This attitude feels somewhat ‘out there’ today but give it a few more years and it will be the default. Unless we can massively reduce the embodied carbon involved with construction we really need to be setting the default position as refurbishment first. This is an area where deep knowledge is a valuable asset. The whole topic is nascent and there aren’t many people who really know their stuff. If you wanted to specialise this would be a good space to build a personal Brand.

30. We all need good and strong networks. To mentor, advise, consult, assist, support and generally enrich our lives, both personal and in business. But beware of too much depth and not enough breadth. A network of like minded and similar people is very comforting, and useful, but a network of varied and dissimilar people even more so. Sandy Pentland, the MIT based author of ‘Social Physics’ explained how the best performing teams are ones who communicate amongst themselves deeply and liberally but who also communicate with many others outside their organisation. You need diversity of thought to build a powerful network. And for that you need to spend a fair amount of time away from your base. In person but also online. My Twitter feed is infinitely interesting, but you choose what suits you.

31. Flexibility, Flexibility, Flexibility is the new Location, Location, Location. We want flexibility of time; to work when best for us. Flexibility of location; to work where suits us best. And flexibility of space; to have available spaces that are optimised for the ‘job to be done’. And this flexibility needs to be able to also accommodate the needs of the teams we work with whilst also honouring our commitments to our employer. All of which is a complicated need. Some is cultural and operational but there is much we in the real estate industry can do to create physical flexibility in our assets. But we need to always have in mind that anything fixed needs to be flexible. And that is going to mean a lot of new form factors, fit out procedures and design updates.

32. A key ingredient in creating a sustainable built environment is going to be new materials. To replace the environmental horror shows that are concrete and steel, to develop glazing that performs as solar panels (these exist now but they’re not very efficient), and to appraise and potentially replace every physical item we use in our buildings. Databases of materials that specify their sustainability credentials are being built but they have a long way to go. This is another topic offering strong opportunities for growth.

33. For those so minded diving into the world of Space Science could be very rewarding. A fast growing, very specialist area but no doubt with very specific real estate needs. Being generic might work, but only until someone arrives who really understands this sectors needs, and knows how to provide for them. 

34. Think about the talent around you, and in your company. Is it what’s needed for a ‘Space as a Service’ real estate industry? You’re probably strong on real estate knowledge, the quantitative stuff, but how do you fare on the human needs, qualitative questions? Do you know what questions to ask to understand customers wants, needs and desires? Do you know how to satisfy them? Who do you need in your organisation? Or your network? The real estate company of 2025 is going to look very different from the real estate company of 2015.

35. Dive into the world of modular technologies. More and more of the built environment is going to be designed, built and operated using digitally connected software and hardware. We’ll design in data driven digital twins then construct with robots, or 3D printers. Think Lego. A kit of parts which we can put together in a multitude of ways, and then deconstruct and use elsewhere. In the west at least we are facing a shortage of construction workers, which is unlikely to naturally correct itself. So, apart from being environmentally far superior, modular construction, in many forms, is going to become pervasive. Yet another area to differentiate oneself.

36. Drones and Digital Twins. Forget the Metaverse, in real estate the most exciting technologies will all feed back into Digital Twins. This will be where persistent, interoperable, 3D worlds will develop. We won’t build or operate anything without modelling it first. So much to get your teeth into. All of which will one day look commonplace but in the near term will be as close as we’ll get to science fiction. The industry needs to attract gamers and give them real environments to play with.

37. Be curious and only mix with curious people. They exist, from 8 to 80. Once curious, always curious. Curious people want to know more and they want to predict what’s coming next. Combine them with ‘Prediction Machines’, aka AI’s, and you have a powerful toolkit at your disposal. Slowly but surely real estate is developing a data mindset and more and more of it is becoming available, enabling us to understand the world around us like never before. So learn about data, about prediction, and how, combined with human judgement, these are skills of great power. To avoid mistakes but also to enable ‘better and best’ to be the default in everything you do.

38. Abstract & Critical Thinking - the critical skill for a technological age. People talk about regulating social media and the internet, and banning misinformation and worse, but in practice this is never going to be possible. ChatGPT is enabling the mass creation of plausible but often thoroughly inaccurate text. This essay reads perfectly - but nothing is true. So what do you do? The answer is that we all have to develop our abstract and critical thinking. We need to have the ability to intuit right from wrong. To ask the right questions, and to be cognisant of misleading statements. And these are skills that can be taught and learnt. The problem is we do not do so as a matter of course. If you follow only one of these pointers this is the one to dive into.

39. One example of using data to enable better and best is in air quality monitoring. We know that environmental conditions have direct impact on our cognitive function, and we know that really bad environmental conditions can kill us. Post Covid it is essential landlords provide, and occupiers demand, access to realtime and granular air quality data. To facilitate health and wellbeing, but also to improve productivity. It shouldn’t be but this is an area full of competitive advantage because too many in real estate either do not understand its importance or aren’t customer friendly enough to roll such services out. Near term there is much value to be created, and much to be destroyed, around air quality. Be on the right side. And name and shame those who ain’t.

40. Events are a key attraction for getting people back into the office. As discussed above we all need to learn, all the time. But how do you decide which events to put on, and who to invite? And how do you act as a maven, ensuring X meets Y? These are skills vital to flex operators but also within larger companies. Are they real estate skills? Maybe not, but maybe …. Why not? After all, who is creating the user experience of this space? Who’s generating the most value?

41. How are your statistical abilities? Particularly in an AI driven world, you need to understand probability, because we are moving from a deterministic world to a probabilistic one. AI does not give you answers. What it does is give you is predictions. X has a Y% chance of happening. Etc etc. Good books on statistics for the layman are David Spiegelhalter’s ‘The Art of Statistics Learning from Data’, and Tim Harford’s ‘The Data Detective: Ten Easy Rules to Make Sense of Statistics’. For an understanding of how AI works in real life Hannah Fry’s ‘Hello World: Being Human in the Age of Algorithms’ is brilliant.

42. Once you are comfortable with data, and have a lot of it, you’ll be using it to help, amongst other things, you run your assets. But how does a 3rd party know whether they can trust your data. Maybe they are buying an asset from you and you are saying it performs according to ‘this data’. But how do they know you’ve not doctored that data? The industry is going to need some form of ‘Data Regulator’ or Standards body. The RED Foundation will be able to help with this. https://www.theredfoundation.org/

43. Demography is Destiny. Get into demographics. Young countries will behave in different ways to old countries, and have different real estate needs. But the same applies at a micro level. Every borough, every village, every town, every city has a different demographic composition. Understanding peoples wants, needs and desires starts with simply knowing who they are, demographically.

44. Which leads on to migration. Given geo political upheavals, climate change and sociological drivers, we are going to see migration at a scale never before seen in the next thirty years. Within countries, within continents and from South to North. And everyone needs a home, and a place to work. The real estate implications are going to be profound. Get to grips with the fundamentals.

45. It barely needs saying that a deep understanding of the forces behind climate change, their consequences, and the implications for real estate should be high up on your priorities for learning.

46. Likewise inequality. Which has lessened between countries globally but has increased markedly within countries. To a point where we saw Donald Trump elected President and Brexit occur. In less unequal countries neither of these would likely have occurred. And they are your starter for ten. Inequality within cities and between cities will drive much change, and again the impact on real estate will be considerable.

47. Develop your communication skills, both verbal and written. Particularly written. As we move to a more distributed way of working, we are going to operate more asynchronously than synchronously. And this is going to require more documentation, and more written communication. The ability to write clearly, concisely and precisely will be at a premium. Not being able to do so will make you hard to work with. Emojis can be used but they’re not enough. Learn to write well.

48. Have a personal North Star. What is it you want out of your life? Personally and professionally. Be honest with yourself. Does your North Star align with the people, team and company you work with? If not, judge how much this matters. If they are fundamentally misaligned, move on.

49. Define your own success or failure. Set your own KPIs. Only you really know what you want. Or don’t want. Or maybe you’ve never really addressed the question. Do so. It’s hard to know where to go if you don’t have at least a direction of travel in mind.

50. Pay deep attention to the challenges and obstacles under your own control. Can you get past them? As Robert Frost wrote, sometimes ‘The only way round is through’. Can you get through? And what about those challenges and obstacles not under your control? Is there a way through, or are they dead ends? Can you, like Hamlet, ‘take arms against a sea of troubles, And by opposing end them’. As above, if not, move on.

51. What don’t you know that you wish someone would teach you? As discussed the real estate industry is no better than much of industry at teaching and training. Are there things you really wish you knew but no one is teaching you? If so, list them and ask your network. That’s the point of a network. Someone will have the answers. Don’t be shy. Ask.

52. Critically, in a highly technological age you need to, paradoxically, develop your skills at what the machines cannot do. Yes you need to know enough about technology to co-opt it as a lever but it will be your human skills that will keep you employed, and employable. To remain competitive these need to be trained and retrained. And for clarities sake these are the key human skills: Design, Imagination, Inspiration, Creation, Empathy, Intuition, Innovation, Abstract & Critical Thinking, Collaboration, Social intelligence, and Judgement.

AND THE Christmas Bonus

1. And finally, don’t fight the future. Respect the past but embrace the future. As Bob Dylan wrote "He not busy being born is busy dying,”

Have a great year.

Antony

Smart - The most misunderstood word in real estate?

Marble from the staircase to the Boston Public Library.

Everywhere in real estate you hear people discussing, often bragging, about ‘Smart’ buildings. ‘Our buildings are smart’, ‘we have the smartest buildings’ ‘let me show you how smart our building is’. And so on.

Don’t be taken in.

Because the foundational point to understand about ‘Smart Buildings’ is that …..

….. it’s not about the building.

Now, to be clear, having a building be smart, in a technological sense, is vitally important. Certainly do not invest in a building that isn’t already smart, or at least has the potential to be made smart. But ‘smart’ on its own is now necessary but not sufficient.

Smart buildings tend to be awash with obligatory dashboards, but these are often seldom looked at, and the data poorly analysed. Does a tree make a sound if nobody is there to hear it?

Smart buildings also tend to boast about their accreditations. We are gold this, and platinum that. But often these awards are awarded either before anyone actually occupies the building, based on unrealised designs, are ‘pay to play’ and/or the result of measurements taken at a particular moment in time. 

The fact that this building performed to this level, on this day or month, really is not telling us very much.

And we have all heard of the buildings that worked brilliantly in theory, but not in practice.

Starting with the technology is not Smart, it’s Dumb.

In reality there is only one place to start to be ‘Smart’’ ….

You have to start with human needs and work back to the technology required to satisfy them.

Ideally one should be designing a desired customer and user experience before even thinking about the technological ‘smarts’. One should be viewing the real estate as the output, not the input. This relates back to those Brand values we’ve discussed elsewhere. Where we are developing what it is our particular Brand stands for. Where we are co-creating, in multi-functional teams, what it is that we want to achieve. At a human level, for our customers:

So…

What is the experience of our building? 

How does it feel to be in our building? 

What human skills do we want to catalyse? 

Who is this building designed for? 

What will this building enable our customers to do? 

And what can be done in our building better than anywhere else?

This last point is absolutely crucial. If our building is not the best place to do X, then why would anyone come to it? Wouldn’t they go to wherever is the best place for them to do whatever it is they wish or need to do.

It is a brutal question, but reiterating the point that post covid we have realised we really do not need an office, it has to be addressed. Even the smartest of smart buildings, at a technological level, will prove to be extremely dumb in reality if it cannot attract customers. No one will come to your building just because it is smart.

Necessary but not sufficient.

We have to have a laser like focus on the real meaning of smart in a real estate context:

’Smart’ buildings serve the people in a building.

‘Smart’ buildings improve the day to day enjoyment of spaces.

‘Smart’ buildings HAVE TO enable happy, healthy and productive people.

The bottom line is that ‘Smart’ buildings improve the lives of people. If they do not, they’re not smart.

You will have guessed by now that being smart is, once again, a human + machine endeavour. We have to start with the experience we are trying to create, that meets the wants, needs and desires of our existing or targeted customers, but then move on to creating and curating the technological infrastructure of hardware, software and services that will enable it.

Investment into ‘smart building’ technology continues apace, and will likely do so for many years to come, because we ARE demanding more and more from our buildings. We are seeking user experiences that really do redefine what it means to be in a ‘smart’ building, and there is a lag between desire and ability. We want sustainable buildings, that look after the health and wellbeing of people, but also enable them to be as productive as possible and are also a pleasure to be in. 

Being net zero and better than ever before is a tall order. 

So it’s no surprise to see big money going into developing digital twins, virtual power plants, IoT connected heat pumps, smart glass, occupancy and security tech, and other products and services. And this is a very good thing.

We just need to never forget the purpose of all of this - to create a better built environment. For us humans.

That’s what ‘Smart’ means. Or should do.

Relationships, Networks, Ecosystems - ‘How can we help?’

Caravan of Marco Polo traveling along the Silk Road. Geography and Map Division/Library of Congress, Washington, D.C.

Relationships, Networks and Ecosystems are really going to matter in the future of real estate. As we move from being a ‘product’ industry to a ’Service’ led one we need a different approach to how we deal with our customers. We need to move away from a transactional mindset and rethink where our value lies. There will always be a place for deals and dealmaking in real estate but the deal we will have with our customers will be a different one. And it will be based on relationships, networks and ecosystems.

Delivering a great service can only occur if you are working with great data. That enables you to monitor how you are performing and provides you with the feedback loop that allows for continuous optimisation. In the context of the workplace we need to know, in realtime and at a very granular level, how the building is performing, in terms of providing exceptional environmental conditions, how the space is being used, and to what purpose. To what extent are we providing the spaces and services that enable individuals to perform their tasks as efficiently and effectively as possible. I.e are we providing 1st class ‘Space as a Service’?

Our aim, apart from the obvious one of pleasing our customer, is to create a working environment that is tightly attuned to personal need. That actively and continuously learns from qualitative and quantitative data what a customer wants, needs and desires and seeks to provide it. We have talked elsewhere about thinking of ‘workplace as software’ and this is at the core of that concept. By constant iteration, by a process of ‘Build, Measure, Learn’, our workplace gets better as time goes on. For our customer. Their off the shelf workplace becomes increasingly made to measure.

And the benefit to us is powerful, as competing with made to measure is hard. Our customers could leave for a competitor but then they’d lose all the personalisation now incorporated into their workplace and would be back to off the shelf. The learning process would have to start again.

Our value proposition is that we are creating the perfect space ….. for you.

But we cannot do this alone. Which is where relationships, networks and ecosystems come in.

We need to build close relationships with our customers because we need to understand a lot to deliver a lot. And these relationships need to be built on trust. For us to really understand the wants, needs and desires of our customers, which is essential to delivering a great service, we need a lot of data. However, having been burnt repeatedly by companies extracting data from us only to then ‘productise’ us, many people are very wary, rightly, of being tracked. So we need to be extremely upfront and transparent as to the trade we are offering customers. We need to be able to explain why we require X, Y, or Z data and how it enables us to provide A, B or C service. And how we are storing the data, how we are respecting privacy, and what else we are doing, or not, with their data. 

Our approach to customers data needs to form part of what our Brand stands for. Make no mistake, within the real estate industry we will see increasing examples of customer outrage as companies fail to handle data properly. And in a ‘Space as a Service’ world the price could be very high. Reputations take years to build but days to destroy. Try to be Apple, not Facebook.

Networks and ecosystems are required for two reasons. To help satisfy a customers real estate, and non real estate, needs.

Starting with real estate needs these are becoming more complicated for companies. In the old school, highly office centric world it used to be the case that all employees came into a single office building, every day, Monday to Friday. So a companies real estate needs usually amounted to securing one building per geography. Increasingly though, as companies move to a hybrid way of working, and then on from there to a fully distributed model, they might need a network of spaces. They might need a CBD base, some flex space, some co-working space, some ‘Club’ type space, some ‘Near Home’ space. And they might need these available across multiple geographies. And ideally they’d like them all wrapped up into a single offering, managed from a central online location, and managed and billed together. In other words, their needs are ‘complicated’.

How much of this could you satisfy on your own? In reality probably not much. Which is where networks and ecosystems come in. We are supposed to be the real estate experts and we are in the service industry, so we should be building our own support network, and ecosystem of partners that would allow us to tick off many if not all these boxes. We should be putting in place the arrangements that would allow us to service most of a customers real estate needs.

Because if we don’t, someone else will. And that someone will then ‘own’ a very important part of the relationship with our customer. And once you lose your relationship with a customer you are but one step away from being commoditised. Many landlords will learn this lesson over time; in a space as a service world owning the customer relationship is vital. Landlords could easily find they have no relationship with their customers, and step by step move from being ‘king of the castle’ to interchangeable suppliers.

On the flip side todays leasing brokers might morph into this sort of super advisor, where instead of making money signing up clients to leases, they have a more ongoing, less transactional role advising and organising away all the complexity of future real estate needs. Getting rid of problems can be a very lucrative business.

And then we have a customers non real estate needs. Unlike most consumer goods companies, who need to know a lot about their customers but seldom have any real world contact with them, our customers spend 90% of their day inside real estate. Our customers are with us most of the time. Historically though we have known very little about them. Which will change dramatically in a space as a service future. As we have discussed many times, we need to know a lot about our customers in order to provide them with a great user experience. In so doing we ‘should’ be able to discern what non real estate needs they have that we might assist them with. These might be hospitality services, or learning and development ones, or digital skills we can aggregate demand for. Or ….. whatever. The point is not to be prescriptive but to listen, learn and provide, where possible. What can you supply? Where do you fit in? How can you help?

In the tech industry companies talk about CAC and LTV. What is the Customer Acquisition Cost and what is their Life Time Value. The higher the life time value the more one can pay to acquire a customer. Why don’t, can’t we think more like this in real estate. Stop thinking of customers as transactions but instead see them as long term ‘guests’ whose lives we can improve in multiple ways.

Via our relationships, networks and ecosystems.