How can real estate adjust to the brave new world of tech innovation?
With this year’s ULI UK Conference hosted at UBS’s new “groundscraper” HQ in Broadgate, an imposing steel-plated building designed around cutting-edge concepts such as “agile hotdesking” tailored to the preferences of the modern worker, it was only apt that much of the day focused on how real estate could respond to shifting employee demands and the profound technological shifts of our time.
But perhaps there may not be as much of a shift as many expect. Keynote speaker Paul Donovan, global chief economist of UBS, kicked off the day by highlighting the impact of increased connectivity as one of the most significant trends for real estate. He predicted that “cities will need to emphasise the desirability of urban living rather than its necessity” in future – an outcome the industry ought to be well-placed to meet, thanks to the recent focus on placemaking.
The bigger surprise for many came from the cold water Donovan poured on the effects of automation. Donovan was quick to dispel the popular vision of a jobless dystopia often predicted, citing the statistic that 40 percent of jobs worked in the 1970s no longer exist: “Automation doesn’t kill jobs, it creates new ones”.
While he specified flexibility in infrastructure to cater to potential new jobs as key, Donovan cautioned against assuming that everything will be done by robots. “People don’t always want robots – you only have to look at the popularity of coffee shops compared with vending machines that dispense the same coffee for free. People still want to pay to have their name spelled wrong on a cup!” And while Brexit murmurs are the order of the day for most in the industry, Donovan did at least leave the audience with reassurance that the UK is well placed to adjust to these huge technological changes, thanks to a higher education system with more of a knack for producing flexible skilled workers compared with Europe and Asia.
Flexible living, flexible working – flexible buildings?
On the threats and opportunities for real estate, panellist John Barakat, head of real estate finance at M&G raised a similar note of caution that finance would likely take a traditionalist view of new tech in real estate. “When broadband was first rolled out there were pilots on having it delivered through windows by laser. Ideas often come and go before something more efficient takes their place.” Yet fellow panellist Reza Merchant, founder of co-living operators The Collective, identified real estate’s stasis on technological change as one of the drivers of demand for co-living. “Technology has made everything from booking taxis to holidays hyperconvenient, but housing hasn’t kept up. The several-week process of renting a flat and its utilities is archaic. There is a massive need and demand for a housing product that caters to hyperconvenient ways of consuming.”
Merchant’s emphasis on millennial demand for flexible working patterns was echoed by the other panellists as potentially transformational for real estate. Increased government support is likely to play a part; Allianz Real Estate CEO Francois Trausch referred to newly elected French president Macron’s intent to reform labour laws in favour of freelancers. And in the words of Madeleine Cosgrave, managing director and regional head of Europe at GIC, “flexible patterns will need flexible buildings” – with the rise of co-working and the fall of prescribed hours, there will be a need for greater densification of uses to be designed into buildings that will be increasingly used 24/7.
The importance of data
How to densify those uses? In the words of second keynote speaker Henry Mason, managing director of Trend Watching, the new digital environment means placemakers can now “place many small bets and see which ones are working. They can monitor metrics in a way they couldn’t before”. Mark Curry, senior director of development at Grosvenor Britain & Ireland, could attest that the blurring of boundaries between the places people live, work and play meant developers were happier to “trade the short-term value from a covenant to create something more experiential”. Put simply, when top employers are competing for the best talent, the rewards are there for developers just as focused on the leisure offer accompanying a workspace as the workspace itself. But as many will know, the power of data goes beyond just better measurement. And while one audience member’s speculation that “data is the new oil” may be a little far-fetched, the monetisation of data has immense potential, with Curry speculating that in time they could make ever-shorter lets as brief as a week a possibility.
The impact of transport
Ian Mulcahey, managing director of Gensler kicked off the afternoon’s session on the specific trends likely to affect our spaces by harking back to the famed “age of the train” adverts of the 1970s – more a success of advertising than a reflection of reality. “With the popularity of out of town offices and out of town shopping centres, the 70s and 80s were if anything the age of the car. When you consider the purposeful march back to rail, tram and bus projects in recent years, now is the age of the train.” – a move which has come in lockstep with a move away from out of town working and leisure. But whether this trend continues is one that hinges on the progress of self-driving cars: in Mulcahey’s words, the 2020s could yet be the decade of the car again.
While much focus has gone on the likely impact of self-driving vehicles on car parking space, Mulcahey put forward that it could be just as much a game changer for office space. With congestion making commutes to inner cities less appealing and self-driving cars making longer commutes elsewhere less daunting, the comeback of the out-of-town business park – or even the office-in-a-car – could be on the horizon. As James Kidner of CGI mappers Improbable said, cities like London are running out of space to satisfy the “greed for new experiences, friends and passions” people have. Barakat stated “growing urbanisation: areas of density in places you wouldn’t have called cities” as the main trend he observed – it could yet be that self-driving vehicles turn the focus of the coming decades away from the city once more.
Laura Shoaf, managing director of Transport for West Midlands, also acknowledged that ridesharing in self-driving vehicles would be transformational but raised a cautionary note of the potential unintended consequences for public transport. “What will happen in a situation where affluent commuters have been moved off public transport?” A decline in ridership could raise the spectre of neglected services. While the benefits of autonomous vehicles for safety, convenience and accessibility are huge, ensuring that those who don’t have access to them aren’t left behind will be an urgent priority – lest employers are cut off from a swathe of potential workers.
But while discussion of future trends can easily get lost in a thorn of fantastical visions, founding partner of Orion Capital, Van Stults, provided a timely reminder that sometimes the change we expect is not always the one we get. Referencing a futurist cartoon from the 1950s showing a husband kissing his stay-at-home wife goodbye as he got ready to take a helicopter to work, Stults said, “It got the focus the wrong way round: the big change was that the wife would be going to work as well!” It fitted one of the recurring messages of the day: flexibility is key, rather than assets built to a specific vision of what the future will be. Investors are looking for versatile assets that they can sweat in different ways: be it co-living, co-working, or previously unthinkable combinations such as ‘beds and sheds’ developments.