How Real Estate will finally join the 21st century
The ‘Roaring Twenties’ was the first real decade of the 20th century. The years when we escaped the Victorian Age, when consumer goods started to become a ‘thing’, when automobiles started to be thought of as motor cars and the airline industry was born. During the 1920s the US economy grew 42% and the world had a new ‘superpower’.
Starting as a time of peace and great prosperity the ‘20s were a decade of two halves and the fun and games was well and truly over by 2025, when Churchill reintroduced the Gold Standard. The US kept firing on all cylinders right up until the Wall St crash of 1929 signalled the start of the great depression.
So let’s hope history does not rhyme as Mark Twain wrote. Maybe with the crash of 2008, and the years of austerity, we’ve had our ‘big bust’ already.
But is ‘big bust’ the right phrase? The 2010s have actually been the best decade in history. Extreme poverty more than halved, the child mortality rate was reduced by a third and life expectancy across the globe increased by 8 hours every single day. Oh and, 28% of all the wealth mankind has ever created (as measured by GDP per capita) was created in those 10 years.
Progress looks much better if viewed at a global level. We might be thinking the world has gone to hell in a handcart, but it hasn’t. With a wide angle lens, the world is smiling.
So how does the next decade look? TL:DR: Fantastic; if we play our cards right.
Here are 20 changes for the 2020s. Remembering that as Amara’s Law (not Bill Gates’ as commonly thought) states “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”
By 2030 no-one will use the term #PropTech, because that would sound as silly as saying ‘Colour TV’. The industry focussed on developing technology for the real estate sector will have been subsumed into the real estate sector. We are going to find that WeWork was the prototype of a modern real estate company, because whilst it is clearly not a technology company, it built, acquired and consumed technology in a manner that was not the norm for a real estate company. How it was, we will all become.
Director of UX will become one of the best paid, and most important, roles in real estate. #SpaceAsAService might already have become quite a sizeable niche but in 10 years time it will be the default setting of the office market. Given Moore’s Law (which will still be going strong after another 10 years) our mobile devices will be 100-150 times faster than today, the machines will have automated a good 50% of everything we are paid to do today, and ‘human’ work will be our core competency. Creating great user experiences for customers will be the way to make outsized returns. Those that can do so will be highly prized.
Conversely, investment agent roles will be as rare as hen’s teeth, but worth less. As Goldman Sachs traders became a thing of the past (down from 600 in their NYC HQ to…. 2) so will real estate investment agents. Like the old Wall St Masters of the Universe they will be replaced by better, faster, cheaper machines. Sure, there will still be an advisory role to be done, but more as a comfort blanket than an executor of deals. Will anyone miss them? Hard to say.
Architects, or at least a subset of the industry, will once again be treated with awe and respect, rather than value engineered out of the way. Together with our directors of UX they will be creating the spaces that catalyse human skills, that help enable people to be the best versions of themselves. A great UX, in a great space, is the wrapper at the top of the value tree.
And great spaces require great planning, at a macro and micro level. Fed up with the dystopian environments created over the previous 20 years, the ‘people’ will start voting with their wallets and insist on a faster, more responsive and well-funded planning system. When prices were rocketing, regardless of aesthetic or building quality, no-one cared much about either, but the 20’s are unlikely to be inflationary and we will collectively realise that we are stuck with what we build. So we have to do a better job.
Along with better building and aesthetics, a decade (and it may take all of it) should see the digitisation of the entire planning stack. What the Future City Catapult mapped out during the 2010s will become reality in the ‘20s. #PleaseLetThisOneBeRight
Securitisation via Blockchain though will be but a memory. Slowly the sheer clunkiness, cost and failure to do what it says on the tin of Blockchain will become apparent to all. The question is whether we go through a boom, bust and scandal phase first. I think we will.
Were you mis-sold a Blockchain investment? The PPI farce of the 2020s.
A better mousetrap though will enable anyone to buy slices of real estate assets by 2030. With planning digitised, 100X faster devices, and years to work out the regulatory framework this will become as easy as buying shares. And in a world where UX and great spaces are what determine income (and income = value) people will be actively buying stakes in their favourite spaces. Collecting space investments as they collect memorable experiences. If you buy into it, then buy into it….
Online residential agents, like online only stores, will have died out. The game only ever did work if you ignored that marketing line in your P&L. Turns out shops were a pretty decent customer acquisition cost. And dealing with their most important investment by a country mile meant humans wanted a human in the loop. The human agents could acquire the technology, but the online agents only ever had half of the pie. Of course the human agents who ignore the technology side of the pie will die alongside their online peers.
We will have so many options for how we want to live. #SpaceAsAService is not just something for the office market but will also be pervasive across the residential sector. With so few people able to outright purchase homes a dynamic build-to-rent market will develop with a plethora of brands offering products and services to suit all budgets, age groups and lifestyles. In fact not owning will become a feature not a bug, as the variety, quality and options available to rent will far exceed what any of us could afford on our own.
High Streets will thrive by 2030, but only after the analogue powers that be realise that as pure play retail locations they have no future. But as mixed-use, buzzing, dense, work/live/play areas, devoid of stores as distribution channels they’ll become quite the place to be. As we’ll only be commuting into the office a maximum of two or three days a week they will be busy all the time, with the reinvigorated libraries the busiest of all. Having bought into the new concept of education being a pleasurable, lifelong pursuit, these temples of knowledge will have their second renaissance.
What stores there will be, and there will be a lot less than today, will be inspiring, innovative and exciting places to be. All our day-to-day shopping will be done online, so the purpose of a store will be to tempt us to buy into the seemingly endless new brands, curated with in-depth knowledge of local preferences, and sourced from all over the world. The old ‘clone High St’ will be a distinct, unpleasant memory.
Those brands that remain a constant of the retail world, that win the ‘great network effects’ gold medals will be spectacular. Having sorted out the abusers of our data and placated the public about invasions of privacy, these stores will know so much about us that their directors of UX can work wonders for each and every one of us.
Much of our shopping though will be by way of subscription services. Either regular replenishments of our larders, or fridges, but also our wardrobes. We’ll receive two boxes a week, or a month; one full of items, the other empty. We’ll simply keep what we like and send the rest back. Rinse and repeat, rinse and repeat.
And most of this will be sourced from a new network of micro warehouses and fulfilment centres dotted around our towns and cities. Using predictive stocking algorithms they will not need to be very large but will still be able to get us pretty much anything we want in an hour or two. The old school industrial real estate agent will now be an ‘as a service’ warehouse, robotics and logistics wizard. By merging real estate knowledge with expertise in a range of value add services the old world of ‘shedmasters’ will be transformed into one of the most tech savvy and lucrative areas of real estate.
Some landlords will find the 2020’s very hard. Deciding that they weren’t interested in all this ‘soft stuff’ they will offer nothing but dumb shells, with third parties providing the entire digital layer as a service to their customers. This type of landlord will know nothing about what happens inside their assets, or even who is inside their assets. After centuries of the asset owner being top of the value tree, they will completely miss the warning signs that the returns from assets could be significantly increased but the people adding the value would also be taking the lion’s share of it. But at least they will get to play a lot of golf.
Investors themselves will do much better than landlords or (see item 3) investment agents. The smart ones will realise that the days of passive investment are becoming, if not numbered, then the fastest way to low returns. So, they’ll start to fund operators directly rather than through the middlemen, the landlords. With aligned incentives (the happiest, most productive customers will pay the most) they will embrace the as-a-service world and work tightly with operators to create the great spaces and UX mentioned above. Yes, investment management will become a different game to the past, and riskier, but the returns could be exceptional. Especially when there are still trillions of investment dollars receiving negative yields around the world.
The real real estate people will have a great decade. They will decide that added value derives from sticking to real estate and exploiting their entrepreneurial development skills. Either building great new assets or repurposing, extending, updating great old assets. There’s plenty of money to be made before you hand your assets over to the service sector. You just need to be clear on what side of the product or service line you stand.
Across everything, wellness and sustainability will become hard-wired into the entire real estate industry. No building should do any harm to humans, and every building needs to be designed, built, managed and operated to do as little harm to the planet as possible. Fail to abide by this and see value go up in smoke. The 2020s will be the decade the industry goes seriously green.
Real Estate will become #PropTech and #PropTech will become real estate. The grand silos of the 2010s will be blown up. There is no them and us, no separation of church and state. Real estate will morph into a service industry, powered by technology. Physical assets will become wired assets. Everything become ‘Smart’. And connected. And a node in a giant network, connecting buildings, to campuses, to areas, to towns, to cities. As the place where people spend 90% of their time real estate will take its place at the top table, where what it looks like, and how it works, really matters.
The current #PropTech industry going in to the 2020’s should hope they become as irrelevant as the above foretells. Because if this comes to pass, #PropTech really will have been amongst the very very best places to be over the next 10 years.