Commercial real estate owners and developers must embrace startup culture and data-driven innovation or face the prospect of being disrupted out of business, industry leaders said Oct. 12 at a conference in New York.
Among industries, real estate has been slow to adapt to new technologies, in part because the status quo has served the sector so well for so long, panelists at MIPIM's PropTech Summit said. But millennials' starkly different workplace expectations, and corporations' simultaneously changing space demands, have created a need for new product offerings, new operating models and entirely new ways of thinking about the business of real estate.
Lisa Picard, president and CEO of Blackstone Group LP affiliate Equity Office, compared real estate's relationship to innovation to the automobile industry's own response to technological change. Real estate leaders on the whole, she said, have been proficient at "adding features," but have been slow to rethink and re-engineer the business, Elon Musk-style, from the ground up.
"We spend probably more time following than necessarily being in front and having a point of view," Picard said.
Jury members listen to pitches from startups looking to solve real estate-specific challenges.
Guy Bradley, chief executive of Hong Kong-headquartered Swire Properties Ltd., held up China, where mobile technology has manifested a virtually cashless society and where applications have reorganized every aspect of modern life, as the tech vanguard and the harbinger of trends to come to markets around the globe.
"I think it's a matter of life or death for our business," Bradley said of technology. "We cannot ignore what's happening. The consumer is already there — they've already got tech. And if we as a property developer do not follow the consumer, then we'll be gone."
Attendees described numerous ways the day-to-day real estate business can and will likely change in the coming years: how drones will revolutionize property inspections; how autonomous vehicles will reshape land and property use; and how blockchain technology will streamline title transfer and potentially even lease negotiations.
Some real estate leaders in attendance resisted the characterization of the industry as "slow to adapt" to new technology. In an afternoon address, Marty Burger, CEO of the prominent New York developer Silverstein Properties, acknowledged that the scale and tangible quality of real estate makes it a more challenging venue for change. But he said the industry is evolving in the same way the software industry itself evolved over time into an "on-demand" service.
"Our industry is starting to look at real estate as a service," he said. "We are designing our new buildings in a way that will allow easy upgrades and innovation in the future. We are investing heavily and introducing services around our fixed assets. Services will not only improve our tenant experience, but also increase the efficiency of our operations, will be better for the environment, and will allow us to provide future-compatible environments."
In the areas of operational efficiency and financial performance, real estate has been "on top" of innovation, Ric Clark, senior managing partner and chairman of Brookfield Property Group LLC, said.
"We've been investing in innovation for 20 years or so," Clark said. "We've got great systems to manage energy, and there's new innovations that come along all the time, and we're keeping an eye open for them."
Silverstein Properties' Marty Burger gave a keynote address in the afternoon.
Owen Thomas, CEO of Boston Properties Inc., described a kind of crystal ball approach that the company has adopted around technological innovation, which he said has materially boosted the company's performance in recent years.
"We spend a lot of time trying to figure out what is the latest technological advance, who is going to be involved in that, where is it going to happen, what kind of space does that user want, where do they want to be in cities," he said.
Clark, Thomas and others described the "customer-facing" dimension of the business as a new focus and priority, however. Landlords can and should use technology to more finely tune real estate offerings to fit customers' specific, and constantly changing, space needs, they said. If 20% of a tenant's business is variable, landlords should have a solution for that — a co-working facility alongside tenants' permanent setup, for example — to maximize efficiency.
"I think the landlords that pay attention to that, and provide those kind of accommodations, are going to be the winners at the end of the day," Clark said. "It's starting to show up in tenants' checklists. It's definitely a plus if you have those things. Maybe you're not eliminated yet, but I think eventually you will be if you don't have them."