Inside Grosvenor’s £65m innovation drive
The company’s 340-year-old UK real estate business has put innovation at the heart of its strategy, launching an alternative investment team to pursue ideas to help transform its largely historical portfolio.
Tapping into £65m of its own capital, Grosvenor, whose UK portfolio includes assets in London’s Mayfair and Belgravia neighbourhoods, will invest in early-stage companies and VC funds, while also allocating about half of these funds to renewable energy generation.
PlaceTech spoke to Andy Doyle, innovation director for Grosvenor’s UK property business, about the company’s strategy as it collaborates with innovators to accelerate its sustainability and commercial targets.
What themes is Grosvenor considering?
About half of the funds will go towards futureproofing Grosvenor’s energy supply in the longer term. “That was always part of the strategy,” Doyle says, explaining that it was about meeting net zero commitments and that it pre-dated the energy crisis.
On the startup and venture front, Grosvenor is exploring ideas around building materials, energy solutions, building and construction management systems and occupier services.
While sustainability is at the heart of this, it’s about a wider change to the organisation. Grosvenor believes that a challenging, low-growth environment requires “innovative and creative ways” of operating to be successful.
For example, the company is exploring ways to tackle surface water flooding. Not only does this tick the climate resilience box; it could potentially drive down insurance premiums and help retain tenants.
How does Grosvenor choose where to invest?
“When you start to explore these themes, you realise how many different organisations are out there,” Doyle says. “There’s such a fast changing and dynamic market.”
To narrow down the options, Grosvenor takes a “problem-led” approach to ensure it is tackling the areas with the biggest business impact.
Demand Logic, the first company Grosvenor invested in, is an example of the “highly relevant and deployable businesses” Doyle is looking for. The startup identifies inefficiencies in buildings, helping owners pinpoint potential savings. So far, Demand Logic has identified £16m of energy savings in over 300 buildings and enabled savings of up to 30% in Grosvenor’s buildings.
The bet with any potential investment is that if a solution is demonstrably beneficial for Grosvenor’s portfolio – a portfolio full of hard-to-retrofit historical and listed buildings – it should be beneficial for others, as well.
On a smaller scale, a culture of innovation is being encouraged in individual teams, through an employee-led innovation programme called Future+. Teams start by identifying a problem relevant to them and exploring what solutions might exist to overcome the specific business challenge.
More than 80 Future+ trials have been conducted in less than two years, with more than half of all successful trials now being embedded into the business.
What makes a bad investment?
“We’ve turned down opportunities to invest in businesses that were very strong,” says Doyle. What matters to him is not whether a company simply has the potential to be successful, but whether that company has the potential to immediately enhance Grosvenor’s portfolio, perhaps through cutting costs or reducing carbon.
While the fund will target early-stage companies, Doyle is less keen on “pipedreams”: ideas so early on in development that benefits are unclear. One building materials business that Grosvenor passed on was raising money to construct a facility to develop a test product. Regardless of how good that opportunity sounded, “those steps were too early stage and elongated for us”, he says.
What companies has Grosvenor already backed?
Besides Demand Logic, the property company has also invested in Pupil, a company that digitally maps spaces with a high degree of accuracy. In the spirit of backing businesses that offer a range of benefits, Grosvenor believes Pupil will not only enable it to make better data-driven decisions about its portfolio but also create better marketing material.
Grosvenor, like many in real estate, is finding that sustainability, innovation and financial resilience overlap more than ever before.