Real estate doesn’t know what is coming. I have attended multiple ‘innovation’ or ‘disrupt’ property conferences or seminars over the past few months, most of which have had one thing in common: a chronic lack of willingness to innovate or disrupt.
This malaise is present at all levels of the industry, from backward-looking interventionist housing policies, through antiquated planning processes and boring design whose primary purpose is not to offend, to Victorian construction methodologies and oligopolistic lease structures.
We developers are as much to blame as anyone else because we accept the status quo; or if we try to resist the seemingly unstoppable bureaucratic avalanche, we eventually lose heart and give up.
In short, we are an industry ripe for innovation and disruption, but neither of these elements is likely to originate from within the industry. It is an uncomfortable truth that long-established industries such as ours tend to require external revolution rather than internal evolution.
”The real estate industry ripe for innovation and disruption”
This is not to say that there isn’t a lot of good work taking place in the industry, from more sustainable building techniques to more inclusive digital consultation approaches and collaborative digital operational platforms.
There is a big industry focus on proptech and clearly a lot of potential in many of the proposed disruptions. Surely it is only a matter of time before the use of blockchain becomes standard practice, certainly in transactions and the legal process, but also throughout the delivery supply chain.
But the sharks are circling and can smell blood. The world’s five largest companies are all tech companies, as are seven of the top eight, and all of them are now taking aim at the real estate industry in one form or another. The DNA of the likes of Apple, Amazon and Alphabet is to look for market inefficiencies and find solutions to them.
Moreover, as government scrutiny intensifies, tech companies are on a mission to be seen as responsible businesses delivering a social benefit. Real estate, like healthcare, is not only ripe for disruption; it provides the opportunity for these companies to do good, for example by looking at:
- Comprehensive, mixed and sustainable communities, delivered at scale and at speed;
- Integration of modern lifestyle and smart technologies into our physical landscapes;
- Inefficient and underutilised space; and
- Ineffective and inflexible commercial arrangements between landlords and tenants.
Alphabet’s Sidewalk Labs has already begun work on Quayside in Toronto, effectively a test bed for a new approach to designing mixed-use communities, which will be rolled out fully on Toronto’s Eastern Waterfront.
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Amazon has turned the tables on the real estate industry and government policy by running a competition to find a city to host its second HQ. Apart from effectively reversing the relationship between landlord and tenant, it has even changed the taxation landscape by encouraging cities to provide long-term taxation benefits and discounts to attract it.
With the big tech spectre looming large over real estate, the next wave of disruption is likely to be too big to ignore.
WeWork has already disrupted the landlord/tenant relationship by providing the flexibility that the industry has been crying out for, certainly for the past two to three decades. In a fast-moving business world, the need for flexible lease terms has never been more important to tenants.
And what has been the real estate industry’s reaction? A raising of eyebrows and a sarcastic comment about brash American tech hipsters, perhaps a nervous look towards government to see whether we might be forced to adopt some innovation against our will. Of course, not everybody in real estate is as reactionary as this, but most of us are.
With the big tech spectre looming large over real estate, the next wave of disruption is likely to be too big to ignore.
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