I’ve just taken off from Sydney on the way to see our teams in Melbourne. Aeroplane time is always good to get through a backlog or just have some clear headspace. It’s an overcast, windy day in Sydney and take-off is bumpy as we pass through a layer of cloud. I reflect on our own journey from client-server business systems to cloud platforms inside the Console Group, as we build our next generation cloud platform and prepare to help our clients on the same journey.
RealTech (real estate technology) is the buzzword in the market at the moment. Last year FinTech (financial technology) was the flavour for where to put your capital; this year it’s our industry – anything that has a sniff of combining real estate and technology seems to be a magnet for capital right now. Not only here in Australia, but right across the world.
When we think about the interest and investment in technology in and around our property management businesses there are some interesting tools and solutions coming to fruition, packed with words like automation, virtual reality, augmented reality, machine learning, artificial intelligence, chat bots, beacons, data lakes, analytics… the list goes on.
These technologies all come together to provide solutions around how we work, making us more efficient, more collaborative, giving more direct access to data and information, and most importantly improving our level of service to our clients.
An interesting question, though, is how will technology outside of our direct scope change our industry in the future? Technology continues to grow and impact other areas of our life, changing our behaviours and beliefs, and this will no doubt have an impact on the way we think about real estate in the years ahead.
We know that property is the single biggest asset class in Australia. We’ve spent decades, and even centuries, building up critical infrastructure and services to support communities, and property values in high-density, well serviced areas, typically close to city centres, have continued a steady growth in demand and value. Consequently we have our own agency assets built around that demand, and our real estate business value is heavily aligned to the underlying property values in our areas.
But how much thought do we give to how this is changing, and what impact that will have on our business? An interesting starting point is just the technology that actually exists today. Look at autonomous drones as an example. Amazon, DHL and a whole bunch of others have programs in various stages of development, testing and operation around rapid delivery of goods on-demand, straight to your door using drones. Run out of milk? No problem; a drone can have that in your kitchen in 20 minutes without you needing to leave the house. This is happening in the world right now as you read this.
Interesting, sure, but why would this impact real estate, you ask?
As we adopt more and more on-demand, just-in-time, or even just home-delivered shopping, our reliance on proximity becomes less important while bandwidth and connectivity become more important. Our reliance on our own vehicles becomes less important and our reliance on services that will get us from A to B becomes more important; thus we will shift from a need to own a vehicle to the collaborative consumption market: car sharing.
What happens when those cars become driverless? In operating a driver-based service like Uber, hire car or taxis, the two most expensive parts of that system are the driver and the fuel. Smaller, efficient autonomous electric vehicles will provide very low-cost, time-efficient direct transport options (for example, Singapore’s nuTonomy driverless taxis). This means that we can be productive while we commute and our personal investment in transportation will be greatly reduced, freeing up critical cash flow in our own personal budgets to invest in different areas of our life – say, maybe that dream house on 16 acres two hours north of the city.
So now we face the prospect of:
- cheap transportation available that costs cents per kilometre
- an opportunity to sit in a comfortable one or two person vehicle and work while we commute
- improved remote working or telecommuting capability and hot-desking, reducing our need for actual hours in the office
- A growing collaborative consumption culture, where access to something is more important than ownership of something.
Suddenly the reliance on proximity to the office in the middle of the city is greatly reduced. Our reliance on proximity to shopping malls is greatly reduced. Lifestyle choice will be a driver for where we live; a beach house north of Noosa is completely feasible if you work in Brisbane. How will these changes shift the distribution of wealth away from the hearts of our major cities and, more importantly for our industry, what will that do to the value of our real estate businesses in the areas where we are established?
The Uber business model, for example, has disrupted our taxi industry. Importantly, though, the Uber business model is already staring its retirement in the eye (if you look at the choice of investments that Uber is making, they are aware of this). Those same autonomous electric vehicles remove the need to collaborate with people who own and drive their own cars. No need for a driver any more, and less interest from the consumer in actually owning cars, means that Uber will need to own and operate their own fleet instead.
In our households our cars are usually the second or third most expensive physical asset that we own behind our property. Owning and operating a vehicle of any sort has a reasonable impact on any household budget. It also has an impact on where we live (I’m looking at you, Bondi Junction, and your lack of garages!). When that expense begins to fall away from our household budgets over the next five, 10 or 15 years, what will the impact be on real estate investment? If I don’t need to service a car in my budget, can I suddenly buy property rather than rent property? Will we see a rise in owner/occupiers, and a decline in rentals?
Or will collaborative consumerism (‘the sharing economy’) change the way we think about our home too? It’s happening with bicycles (JC Decaux/CityCycle), cars (GoGet/Uber), aeroplanes (Wingly), clothing (Le Tote/Rentez-Vous), content like movies and music (Netflix/Spotify) and even pets (DogVacay/WAG). It will happen with sporting goods, children’s toys, lawn mowers, tools, your BBQ – why not your home?
Maybe the technology and systems that enable those other sharing platforms will influence the way we think about how we live. Maybe we’ll begin to move around more. Owning less, but enjoying more. Live in one house in the city for a school term, another near the beach for the holidays, back again to a different house for the 12-week term before we take a house in the snow for the holidays again.
There’s an element of crystal ball gazing that we need to do. As an industry are we certain about which way this will go at the moment? No. What is for sure, though, is that technology is being adopted at a faster pace than ever before in history. The rapid adoption of these technologies is changing behaviours and beliefs (own vs access) faster than ever before. All of the technology that has been discussed actually exists today… this isn’t living on Mars or teleporter-type stuff. It’s right here, right now, today.
What we need to start doing is think about how aware, agile or responsive we are as businesses. How do we begin to think about strategies and prepare ourselves for the inevitable changes that technology is going to make to our industry, beyond just the tools that we use to do our day-to-day tasks?
More than ever before in this industry, we need to be going back to our business plans and reviewing them frequently. We need to check in more regularly that our assumptions about the next year or two are still true. What are the new threats to your business? They are changing, and they are changing more quickly than ever. You need to put plans in place to ensure that as business leaders you keep your finger on the pulse.
We need to check in more regularly that our assumptions about the next year or two are still true.