New real estate challenges need a pioneering PropTech mindset

Bill Clinton once said: “Follow the trend lines, not the headlines.” The trade market sector appears to be subject to various disruptive developments, and there is confusion everywhere. The sector seems – despite the improving economy – to be in search of a new structure and a new perspective for the future. Fortunately, the trends offer a very promising perspective. In my annual trend overview in the Innovation catalogue, this time there were four trendlines that could help get this sector on its way to creating a new perspective.

Trend 1 – Digitization is transforming the playing field

Through digitization, clients and users are increasingly in direct contact with the owner and/or producer. The value chain is no longer linear, but integral and cyclical. The position of the middleman is therefore under pressure. However, the transformation of the playing field doesn’t only have an impact on the position of the middleman.

Every real estate company struggles with the question: how can my company become a future-proof endeavor? The rediscovery of the primary process, along with the accompanying decision-making, is challenging while daily business is going like a freight train. If even then you’re still bombarded with digital trends like blockchain, machine/deep learning, self-driving cars, and drones, then a dual strategy – through which innovation isn’t hindered through the existing organization, but is in line with the existing business – is not the wrong choice. Remember to take account of the fact that in the coming year, the smart workplace, IoT platforms and virtual assistants are going to get hyped up.

Digital technology is becoming the most important ingredient for platforms that directly provide products and services to the users. The question remains: will the middleman develop these platforms, and/or will the owner/investor assume this position? The former has to modernize his plan, and the latter gets to deal with the real estate that is developed from a network (community) concept, through which the quality of the network and the manner in which input can be delivered can determine the value of the real estate.

Trend 2 – People central completes the circle

In the popular sustainable business model, “People, Planet, Profit”, over the past few years, a shift has occurred from Profit (energy reduction) to Planet (material). In 2018, I anticipate that People will become a strategic theme in the real estate sector. This theme will be built on three aspects: Happiness, Health, and Building.

1. Happiness: Happiness is more than a happy face, it’s a mindset. In October, Dan Buettner released the book “The Blue Zones of Happiness” (wherein there are other remarks that Copenhagen is one of the happiest cities in the world). Earlier this year, Mo Gawdat, former Business Officer of Google, released the book “The Logic of Happiness”. Gawdat says that everyone has the potential to be happy, regardless of obstacles that come into our paths, the difficulties we carry and the trials that we endure. Also, the book “The Way (Ikigai): Some Chinese philosophies about learning to live the good life”, by Michael Peutt and Christine Gross-Loh, is a bestseller. Companies in which the people and happiness (and your social contribution as a company, i.e. Purpose) are really central are conquering ground. In order to be an attractive company – namely for the new generations – it is important that you, as a company, work on sustainable solutions for social issues, through which you stimulate your employees to think and do autonomously and outside the (real estate) box.

2. Health: Burgers and soft drinks we can find in almost every company cafeteria. At the same time, the assortment of healthy and vegetarian products on the shelves in the supermarkets is growing. Health has become an important theme. That also explains the enormous increase in jogging in high-impact activities. We also take the stairs more and avoid the escalators. Architects are placing the elevators out of sight in order to stimulate movement.

3. Building: Aside from BREEAM and LEED, which have been a main focus in sustainability performance of buildings, it’s now time for the WELL-standard, through which the building should also offer a stimulating, healthy work environment. This is a development that, at the same time, makes for more complexity, because sustainability and wellness performance are interdependent (and sometimes contradictory).
   
   To get to work on a strategic level with Happiness, Health, and Building, a cyclical, holistic approach is essential, making the preliminary process of real-estate development more knowledge-intensive and bringing more disciplines to the table. The circle is therefore complete: Profit, Planet, and People are becoming more intertwined than ever.

Trend 3 – The Experimental entrepreneur

In unpredictable times, “playing” or experimenting is often important for the development of a new goal, a new concept, or a new business model. In order to stimulate this, the established real estate companies will structurally focus on a trio of issues in 2018:

1. Attracting new talents that excel in complex problem-solving, critical thinking, and creativity;
2. Stimulating new internal entrepreneurship; and
3. Entering into cross-sectoral relationships.

Companies that want to make an impact no longer lean on the entrepreneurial and innovating possibilities of startups, but take things into their own hands. They see startups as puzzle pieces of bigger transformation tasks. The startup hype may very well be over, but that doesn’t mean that there is less attention paid to innovation satellites, where risks are taken without being obstructed by old processes. You also see more living labs emerge, in which the business community – startups and established companies – work in collaboration with the government, universities, and end consumers in living labs and reflect on radical changes in real estate. Consider Brainport Smart City District, ReGen Villages and the National Smart City Living Lab; surprisingly, also in this collaboration are MIT/Harvard and Andorra , as well as the recent initiative of Google (the plan for a mega-living lab) in Toronto.

“As a rule, developers just follow the market while entrepreneurs and enlightened individuals lead it.” - Norman Foster, architect of Apple’s new HQ

Trend 4 – Space as a Service ensures growth and disruption

Research by PwC (Emerging Trends in Real Estate® Reshaping the Future of Europe 2018) shows that two-thirds of the respondents agree with the statement that (technological) developments, such as big data and Space as a Service, will radically change the traditional real estate valuation model. The emphasis will be on other values in real estate – experience, health, social relevance, and community building. This also ensures the shift in the perception: we’re not going to a place where we have to be, but a place where we want to be. The previous soft criteria – therefore not taken into account – are now more important for millennials than other criteria, including salary. Worldwide, 67% of companies now opt for flexible workspace as a long-term strategy instead of a temporary solution (source: Mindmetre). The changing workplace strategy over the coming year is going to have more and more of an impact on investors, the middleman, and the users, because thinking from a building perspective to thinking from a community perspective is radically different. This shift ensures a change in mindset: from supply- to demand-driven. The real estate sector is entering an era in which the user is at the center, and the user still chooses more often for services: Space as a Service already ensures economic growth – and is at the same time a source of disruption in the traditional real estate sector.

Summary

2018 probably won’t bring revolutionary changes to the real estate sector. What you do see is the emergence of more living labs, in which there are experiments with unorthodox, new forms of integrated real estate development. This way, the starting points for the financing, the development itself, as well as the use of real estate will be established from radically new perspectives. Putting people's well-being at the center (employees, residents, etc.) and their ecosystems is therefore one of the most important perspectives. The direction for the future is being further explored by entrepreneurs. This means that, for the real estate sector, it is important to think and act off the beaten path. Exploring cross-sectoral, educational collaborations is essential for creating a new perspective.

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