Future-Proofing: 5 Questions to Ask in Times of Uncertainty

Joseph Wright of Derby, A Philosopher Giving A Lecture at the Orrery, c. 1765

As the old saying goes, change is the only constant in life. And even in the sometimes rather slow moving real estate industry this is still true.

Even if not that much changes day to day most real estate projects take many years from start to finish, even a decade or more. And over a long timescale small changes compound. 

Today though we are in an odd space. Change IS happening fast. The way we’re all thinking about work, life and what matters has fundamentally changed from pre-Covid days. Just by looking at the discombobulation ‘hybrid’ working is causing tells us that everything is still up in the air and no-one is quite sure how things will pan out.

So, unlike normal times in real estate, we need to be constantly looking out for signals about where things are heading, and be on high alert for red flags that tell us that what once was certain, is suddenly, not.

It is a truism that change represents opportunity, but it can also kill you.

We are deep in a “Gradually, then suddenly” world.

Instinctively it’s hard to see our industry being the same in 2 or 5 years, let alone 10. The nature of demand is changing too fast for that.

How does one plan for such uncertainty and how should a forward-thinking, innovative real estate developer or operator feel their way to understand what to supply in X years time that customers will love?

I think, on a quarterly cadence, you need to answer, with your teams, the following five questions, and in each case record ‘Key Metrics or Factors to Track’, and ‘Action Items or Strategies to follow':

1. What emerging trends and technologies could impact our business in the next 12-18 months? Because staying informed about the latest advancements and disruptions in your (and other) industries can help you anticipate changes and seize opportunities before your competitors.

2. How are our customers' needs and preferences evolving, and how can we adapt to meet those changing needs? Because understanding your customers' expectations and anticipating their future demands is key to providing exceptional service and maintaining their loyalty. What ‘signals’ are out there?

3. What new competitors are entering the market, and how can we differentiate ourselves from them? Because keeping a close eye on new players and analysing their strengths and weaknesses can help you position your business in a unique and compelling way. And new players WILL emerge within real estate, most likely from outside the industry.

4. How are regulations and policies evolving, and what impact could they have on our business? Because staying compliant with changing laws and regulations is essential, but it's also important to anticipate potential regulatory changes that could impact your business operations. Look out for 2nd order impacts.

5. What are the potential risks and challenges we may face in the next 6-12 months, and how can we mitigate those risks? Because, from economic downturns to natural disasters, there are many external factors that could disrupt your business. Being prepared and having contingency plans in place can help you weather the storm and emerge stronger. Look out for outliers, like pandemics, or new technologies like Generative AI.

By consistently asking these questions and proactively seeking out new information and insights, you HAVE A CHANCE TO stay one step ahead of the game and ensure your business thrives in an ever-evolving market. No promises but your odds will be better than your peers who don't ....

.... Stay curious and keep pushing the boundaries of what's possible!

AI in the Office - How ChatGPT is Reshaping the Work We Do

The Houses of Parliament. London - in the style of Gustav Klimt. Antony Slumbers & Midjourney

AI in the Office - How ChatGPT is Reshaping the Work We Do

A revolution was already underway but now the turbo chargers have kicked in. We need the right real estate for this 'new work'.

For at least five years I’ve been writing that we are asking the wrong fundamental question about the future of work. Mostly the focus has been on where we work, and how we work, whereas what is most important is the work we do. 

It is the changing nature of the tasks involved in our jobs that will be the causal factor in how the office, or workplace, of the future is designed, equipped and operated. Where we work, and how we work, will change because the work we’ll be doing is changing.

And the flywheel behind that change has just been hyper scaled. The arrival of ChatGPT, and other derivatives and flavours of GPTs (Generative Pre-trained Transformers) is an extraordinary technological leap. Bill Gates, on the 21st March, wrote that he believed it was the one of only ‘two demonstrations of technology that struck me as revolutionary’, the first being the graphical user interface, ‘the forerunner of every modern operating system, including Windows’.

So this is a moment in time to note. A pivotal moment.

Why? Because GPTs enable advanced AI-driven natural language understanding and generation, which significantly enhances human-computer interactions. This innovation empowers businesses to automate tasks, optimise decision-making, and streamline customer experiences in ways that were previously impossible. This will drive efficiency and innovation across most if not all industries. At great scale and with great speed.

I used to talk about how any task that was ‘structured, repeatable, predictable’ would be taken over by ‘machines’. And this has increasingly been the case. Just look at the rise of ‘Robotic Process Automation’ over the last few years. Anything entered into a computer via a set order of keystrokes can easily be automated. And much has been.

But what GPTs are set to enable is many orders of magnitude greater than any RPO software can achieve. This technology can easily handle whatever is ‘structured, repeatable, predictable’ but can go way beyond this. 

For example, in customer service it can automate responses to routine inquiries, enhance the efficiency of helpdesks, and reduce resolution times. It can assist marketers in content generation, social media management, and targeted messaging. Within human resources it can aid with streamlining recruitment processes, employee onboarding and training, by automating repetitive tasks and providing personalised learning materials. R&D can be accelerated by improved ideation, trend analysis and knowledge synthesis. Sales in turn can be supported by automating lead generation, nurturing, and follow-ups.

Frankly this is the tip of the iceberg. GPT researchers are finding that this technology has capabilities beyond what they imagined, or envisaged. There seems to be something about the processing of language at massive scale, alongside vast quantities of training data, that is pushing the boundaries of what was thought possible in computing. A report from Microsoft Research says this in its abstract: ‘We demonstrate that, beyond its mastery of language, GPT-4 can solve novel and difficult tasks that span mathematics, coding, vision, medicine, law, psychology and more, without needing any special prompting. Moreover, in all of these tasks, GPT-4’s performance is strikingly close to human-level performance’.

So, a lot of what we did at work we’ll not be doing in the future. We must reclassify many tasks as ‘Old Work’. Work that we will off-load to machines.

Way back in 2017 McKinsey wrote that they believed 49% of the work people were paid to do in the global economy could be automated by adopting currently demonstrated technology. That was then, this is now. With technology far superior to what we had available in 2017.

Which leaves us humans with our own major pivot to make. We urgently need to concentrate far more than we have done on those skills that humans possess, and machines, even GPTs, do not.

I wrote about this as ‘New Work’ - work that required the distinct capabilities of humans. Which broadly speaking are design, imagination, inspiration, creation, empathy, intuition, innovation, abstract & critical thinking, collaboration, social intelligence and judgment.

Let’s think of these in the context of five ‘workflows’ that are likely to represent much of the ‘work we do’ in the future:

1. Critical thinking and problem-solving: Evaluating AI-generated suggestions, making well-informed decisions, and identifying complex issues that require human intervention.

2. Creativity and innovation: Leveraging AI as a tool to develop new ideas, products, and strategies while thinking, as humans, about value propositions and competitive advantage,

3. Emotional intelligence: Understanding and managing emotions, empathising with customers and colleagues, and navigating interpersonal relationships effectively. Something which AI cannot fully replicate.

4. Adaptability and learning agility: Embracing change and quickly acquiring new skills in response to evolving business and technological landscapes.

5. Domain expertise: Possessing deep knowledge of specific industries, regulations, and best practices to contextualise AI-generated content and ensure compliance and accuracy.

These are deep rabbit holes, where AI needs to be co-opted to augment our unique capabilities as humans.

Picasso nailed it decades ago when he said ‘Computers are useless - they can only give you answers’.

Humans are here to ask the right questions. That in itself might be the super skill of the future; the ability to ask the right questions.

So we have ‘Old Work’ and ‘New Work’.

The real estate issue is that much, perhaps even most, of our offices, our places of work, are designed for ‘Old Work’. Which is in the process of leaving the building.

All of this space is, or shortly will be, obsolete.

The future proof office has to be designed around ‘New Work’. It has to be somewhere where human skills are catalysed. Somewhere conducive to critical thinking and problem-solving, creativity and innovation. Where emotional intelligence is prized and adaptability and learning agility is the default setting.

Space that is at the service of these human skills.

#SpaceasaService - where humans thrive in a world of GPTs.

The inevitability of #SpaceasaService

Joseph Mallord William Turner Norham Castle, Sunrise c.1845 - Tate Britain, London

If you are in a hole, stop digging. 

And get yourself a plan.

The real estate market, offices in particular, are most certainly in a hole.

Across the world, especially in major Western cities, but truth be told pretty much everywhere globally, we are seeing low office occupancy and utilisation. Post Covid, many employees have become used to, and effective at, working from home. 

And are generally happy to save on commuting costs. 

They do need, and want, an office to socialise with colleagues, collaborate, meet customers, mentor and be mentored, receive training, and as a place conducive to individual focussed work. But, they don’t want or need to do this, mostly, more than 1-3 days a week. Plus they do not perceive the format and services of their current offices as providing what they need to do this effectively. 

From corporate occupiers point of view, according to a new report from the ULI & Instant Offices, ‘only 14 percent of occupiers believe their existing workspace portfolios align completely with their business objectives and strategies’.

So we have demand but different and less than pre Covid times.

On the supply side landlords and investors are facing problems: share prices are down, construction cost inflation is high, interest rates are much higher than the average of the last ten years, liquidity is weak and investors are pushing for bargains.

In addition they have limited understanding of what customers really want going forward and a shortage of talent with strong service and empathetic skills.

Finally banks, investors and purchasers are not yet taking employee well-being, satisfaction, or workplace productivity into account. 

So we have a mismatch between what customers want out of an office, the skills and costs needed to supply it, and a financial market that is both tight and lacking in understanding of the new realities of demand.

With all this in mind I’ve been thinking about what strategies should be adopted by real estate companies. 

Here are some suggestions as to what should be prioritised given that money is tight, and expensive.

1. Adopt a customer-centric mindset: Understanding customer needs and preferences should be the top priority. Regular engagement, surveys, and feedback collection can be done with minimal costs and help shape future strategies.

2. Enhance customer experience: Focus on low-cost enhancements that can have a significant impact on customer satisfaction. For example, improving building maintenance, offering responsive customer service, and organising community events.

3. Establish partnerships with coworking providers, HR firms, training organisations, or local businesses that can help offer additional services to customers without incurring significant costs. Not least of all, help customers make hybrid working work.

4. Prioritise low-cost retrofits that can have a significant impact on customer satisfaction. This may include repurposing under-utilised spaces into shared amenities or improving lighting and ventilation systems for better energy efficiency and comfort.

5. Focus on cost-effective technology solutions that can improve building operations and customer experience. This may include adopting more affordable IoT sensors, energy management systems, or software tools to enhance communication with customers.

6. Implement sustainable practices that don't require significant capital investment. Examples include adopting green cleaning practices, encouraging waste reduction, and promoting energy-saving behaviours among customers.

7. Diversify portfolios: While this strategy may require more capital, selectively diversifying the portfolio with lower-cost assets, such as smaller office spaces or properties in emerging locations, could help mitigate risks and provide more stable cash flow. As we know, you make your money in real estate when you buy, not when you sell. Bad times are good times to buy.

8. Attract and retain talent: although it might not seem like a cost-effective strategy, investing in the right talent can yield long-term benefits. Focus on offering competitive salaries, fostering a positive work culture, and providing professional development opportunities to attract and retain the right people. Smart people want to work with companies embracing the future, not protecting the past. Be the future.

9. Finally, play a long game of educating stakeholders on the changing dynamics of the office market and the importance of employee well-being and productivity. The wider market is still thinking and investing based on principles that were solid pre-Covid but no longer are. There is a storytelling game to be played: innovative, forward thinking and customer centric real estate companies have to persuade the market that they are where future returns will be found. Attitudes need to be reset.

Essentially everything above points towards the inevitability of a #SpaceasaServicefuture. Where customer experience is what matters, and if you don’t understand that you have a problem. Because, as I’ve repeated incessantly, the real estate industry isn’t about real estate anymore. It’s about enabling people to be as happy, healthy and productive as they can be. Everyone needs a workplace, in the sense of somewhere to work. But that can now take many forms, and be in many locations. No-one needs an office anymore. They need to be made to want an office. And this applies regardless of how the space is being procured: 1 day or ten years makes no difference. Unless the space provides the services the customer needs it has no point, no future, and no value.

#SpaceasaService will no longer be a niche, it’ll be the the norm.

Office Valuation: What will Matter?

Woman Holding a Balance, c. 1664 Johannes Vermeer - National Gallery of Art - Washington DC

I had a rant about the current way we value commercial real estate yesterday. So today I thought I’d look at what emerging trends and metrics are likely to shape the industry in the coming years. 

How many of these are likely to become part and parcel of future valuations? Could we get industry agreement on metrics covering all of these factors?

Does any of this really matter? Ultimately isn’t an asset simply worth a figure based on the revenue it can generate? Do we need to bring in consideration of all this other stuff? Can we really quantify it? Isn’t it all a bit too qualitative?

Here’s 8 groups of data points to consider:

1. Flexibility and adaptability: With evolving work styles and demands, commercial spaces will need to be designed to accommodate flexible working arrangements and be adaptable to changing needs over time. Will spaces that can be easily reconfigured or repurposed become increasingly valuable?

2. Health and well-being: As awareness of the importance of mental and physical health in the workplace grows, will features promoting employee well-being become more important in commercial office design. Will metrics such as air quality, natural lighting, and access to green spaces play a larger role in valuations?

3. Technological infrastructure: The increasing reliance on technology and remote work means that commercial spaces must be equipped with robust digital infrastructure. Will connectivity, bandwidth capacity, and smart building systems be critical in determining the value of a property?

4. Sustainability: Will sustainable design and energy efficiency become more important as businesses and investors prioritise environmental responsibility? Will metrics like energy use intensity, water efficiency, and carbon emissions be increasingly relevant in determining the value of a property?

5. Location and accessibility: Proximity to public transportation, amenities, and urban centers will continue to be important factors driving commercial real estate valuations. However, will the rise of remote and hybrid work shift the focus to locations with strong community-based amenities and high quality of life?

6. Collaboration and social spaces: As companies recognise the value of in-person collaboration, will shared spaces designed to encourage interaction and teamwork become increasingly important? Should these spaces also be adaptable to serve multiple functions, such as meetings, training, and events? Does that get factored into the valuation?

7. Security and safety: The future of commercial real estate will require a heightened focus on safety and security, both in terms of physical safety (e.g., secure entrances, surveillance) and digital security (e.g., data protection, cybersecurity). How do we value this?

8. Tenant experience: Will metrics focusing on tenant satisfaction and experience play a larger role in valuations, as companies increasingly recognise the importance of creating an attractive, engaging workplace environment to retain top talent?

In conclusion, will the future of commercial office real estate valuations likely be driven by a combination of factors that emphasise flexibility, health, sustainability, and technology? I’ve not separated out productivity, because that could be considered a by-product of delivering all the other factors. Put somebody in an environment that focusses on all the above and they’ll be as productive as they are capable of being. The space itself will maximise their abilities, or at least not impede them in any way.

Will we end up anywhere near here?

#SpaceasaService - 20 Branding Questions

The most famous Brand in Renaissance Art: Albrecht Durer 1471 - 1528

What operational capabilities do you need to create and curate a strong #SpaceasaService Brand?

Here’s 20 to get you going. Each is a rabbit hole worth diving down.  

You could do it yourself but best to assemble a diverse and multifunctional team to jointly investigate and analyse.

As with all brainstorming you’d probably be well advised to facilitate an individual idea generation process first, collect and group responses, and then use these as the kick off point for an all hands on deck collaboration session

So, in no particular order …..

1. What are the key components of a successful #SpaceasaService brand, and how can you ensure you are delivering on those components

2. How can you create a consistent brand experience across different properties and locations when offering #SpaceasaService?

3. What kind of training and development programs are needed to equip staff with the skills and knowledge required to deliver #SpaceasaService?

4. What kind of technology infrastructure and systems are necessary to support the delivery of #SpaceasaService?

5. How can you effectively measure and track the success of your #SpaceasaService offerings?

6. What kind of feedback mechanisms should be in place to capture tenant satisfaction and make improvements to #SpaceasaService offerings?

7. How can you use #SpaceasaService to build stronger relationships with tenants and increase retention rates?

8. What kind of staffing models and resource allocations are necessary to deliver #SpaceasaService effectively and efficiently?

9. How can you effectively communicate the value of your #SpaceasaServiceofferings to tenants and other stakeholders?

10. What kind of partnerships and collaborations are necessary to build a strong #SpaceasaService brand in real estate, and how can these partnerships be nurtured and maintained over time?

11. How can you effectively communicate the unique value proposition of your #SpaceasaService offerings to potential clients?

12. What kind of marketing strategies and tactics are most effective in promoting #SpaceasaService in real estate?

13. How can you leverage social media and digital marketing channels to build brand awareness and attract new clients?

14. What kind of content marketing strategies can be used to position #SpaceasaService offerings as the solution to the changing needs and preferences of modern tenants?

15. How can you differentiate your #SpaceasaService brand from competitors in a crowded market?

16. What kind of branding and visual identity elements are needed to build a strong and memorable #SpaceasaService brand?

17. How can you use customer testimonials and case studies to demonstrate the value of #SpaceasaService to potential clients?

18. What kind of thought leadership and industry expertise can you showcase to position yourselves as leaders in #SpaceasaService?

19. How can you use events and experiential marketing to create buzz and excitement around their #SpaceasaService offerings?

20. What kind of metrics and KPIs should be used to track the success and impact of #SpaceasaService marketing and branding efforts?

These are all very Brand specific. Clearly there are many other real estate and operational questions to answer but Branding is a weakness within real estate. 

Mostly because it has not been an important input into the success of an asset. 

But today and in the future your Brand will be massively important. 

All the answers you get from asking the questions above will feed into the user experience of your spaces and that will be what defines your Brand.

And ultimately, in the future of real estate ….

UX = Brand & Brand = Value

So it matters!