Real Estate In Disruptopia – What Will Happen Next?
Where do you live? Location, Location, Location! Will that always be true or the reference points change for that statement? I think we live in ‘disruptopia’. It is a made-up sprawling new habitat in seemingly (becoming) true cities across the world and the name implies what it sounds like – a dwelling of constant disruption changing the way we live, learn, work, travel, eat, shop, play, heal, pray, self-preserve and maybe even die amongst other things. It is enabled for the most part by ‘free range’ millennial mindset, ubiquitous technology and collective information deployment with almost infinite possibilities. Somewhat utopian (read egalitarian) by access but equally dystopian by sometimes known and other times unknown externalities. Often spawning the birth of new industry, ways of working, economies of scale and formation of culture whilst rendering traditional constructs on the verge of extinction or by reliance on their increasingly obsolete vertebrae of technology. There are several examples of this phenomena in recent memory – Netflix and Blockbuster dynamic; Uber and the taxicab industry; Airbnb and the hospitality world to name a few. No one really saw these coming or the pace with which they caught on, and given the recent past, we will probably see more of this disruptopian way of life percolate everything everywhere.
A recent future gazing report sighted that capital is now superabundant where global financial assets are ten times global GDP rendering talent and ideas (not capital) significant constraints for growth in most large companies. Design Thinking and Innovation are rapidly becoming common place in most industry boardrooms with an outlook to provide solutions for millennials and their shared economy in disruptopia. Higher purpose, culture, diversity, collaboration, talent empowerment, and intrapreneurship are being encouraged in most enlightened corporations to find their place in this new habitat. There is recognition for two separate but symbiotic engines of Growth and Innovation to work together in staying ahead and possibly disrupting industry towards transformation. Finally, it is about putting the customer and their experience at the heart of the enterprise. Perhaps if data is the new oil, technology the vehicle, and experience the representation of the customer put in the driver seat as one moves from place to place for curated transactions in disruptopia - then the larger this platform, more the drivers, more the transactions, more the data, more the cars, more roads and so on. The promise is one of endless possibilities.
While we (still) need buildings, settlements, and cities to do what we do, and a lot has changed around us over the last few decades, it is rather interesting to note that by comparison not a whole lot has been truly disrupted in real estate perhaps since the invention of the elevator. Innovation and invention in other sectors which in some way impact real estate have in most cases rendered the industry a reactive recipient of change rather than a proactive player transforming the status quo per se. Is the industry then ripe for disruption? Why has it not happened? Where are the innovation pockets and where can disruption come from? What will happen next? All very good questions but difficult to pin down precise answers.
It appears that like any industry not yet disrupted, the indicators seem to be ripe for real estate to enter into the exciting habitat of disruptopia. It has probably not yet happened because there is no paradigm shift in transforming the time/speed, cost/value and quality/experience of the way real estate works or is transacted. Real Estate traditionally has been a slow-moving asset class with generally conservative bearings on a cyclical outlook. Nor has there been an invention so significant in the recent past which would necessarily change the course of the how the industry functions – not yet anyway. However, given the pockets of innovation across or impacting the real estate value chain over the recent few years in context of rapidly catching on trends, the promise of disruption is not a question of if but a question of when and from where if you ask the pundits. If recent reports, the press, Elon Musk and science fiction are to be believed, we should be soon ushered into this new world of driverless cars, flying and subterranean autonomous vehicles and drones which will challenge and transform the location, logistics, experience, attributes and points of erstwhile reference for real estate across assets.
One is observing significant convergence in the sector whether it is in the form of globalization, the impact of shared economy, blurring boundaries between traditional asset classes, emergence and classification of new asset classes, and, multi/flexible use of spaces. Co-working and now Co-Living spaces are a growing reality. Mixed use and mixed income is common and in common place. Student housing is a classified and monetized asset class, also deployed for additional rental income over holiday periods. Hospitality has merged with healthcare, and Work merged with Play as examples to serve and perpetuate culture, shared economy, lifestyle, values and goals for the millennial generation. There is a general drive for reduction to eliminate what is not useful and to preserve, use and share judiciously what is scarce. Sustainability and technology are playing a key role in real estate to measure and optimally use resources, foster alternative means of powering the sector and responsibly reuse or discard waste over its lifecycle. Wasted space is seen as wasted money for lack of use or an inefficiency to monetize it effectively. On the transaction side, there is propensity to eliminate the middle man which is a raging debate in realty circles.
All of this is becoming possible with the access to digital and real time information in the form of data and analytics which was previously unavailable for informed decision making. What the consumer can do with this information and what companies can do with how a set of consumers are transacting using this is untapped potential to exponentially turn into potential revenue streams and profits. Technovation is rife in the real estate Fintech or (now) Proptech (Google it for it is yet another made up word) where many real estate companies are basing their new business models on not only providing such information but acquiring customers to own larger parts of the value chain within the industry to eventually sell more. The movement of capital also points in this direction. According to reports, venture capital deployed over 5 billion dollars last year alone in the U.S. for Proptech - a jump of 150 times over the capital deployed in 2010 which is a significant indicator bringing the time for disruption nearer in the industry. Advancements in construction technology like 3D printing actual life scale buildings or using more automated processes thereby reducing dependencies on human labour and shortening timelines are also gaining ground. Finally, mobility inventions like the Hyperloop, driverless cars, drone delivery system connecting ubiquitous technology enabled environments among others will change the fundamental constructs of the way real estate is physically organized and transacted in the city. It will in turn spawn new city forms, economic engines and ways of life.
While real estate may indeed be getting smarter and technology is at the forefront of enabling this change, the key would be how effectively the consumer is put at the heart of this enterprise to enable for true disruption. The answer is out there somewhere, and it remains to be seen what happens next. Will real estate will find prime property and its rightful place in the disruptopian habitat to help define our brave new world for future generations? Stay tuned.
