Automation, Airports and Americana

By Richard Pickering, Head of Futures Strategy

Trucks and tractors – A report by Sky News this week reveals how local authorities across the country are preparing for our exit from the European Union, each putting a nuanced view of how Brexit will manifest itself in their region. The report reveals that both Dover and Kent councils have made plans for a 13-mile lorry park just off the M20, which could be in place for years to come, (a significant opportunity for greasy spoon pop-up operators?). Meanwhile, the Shetland Islands have expressed concerns about falling agricultural land prices, estimating that 86% of sheep farms in their region will become loss making after Brexit.  The ante has upped in recent weeks, as the previously-unlikely prospect of a no deal exit is, to use Jeremy Hunt’s words, ‘increasing by the day’. It is the shifting sands and uncertainty, rather than a specific outcome of the Brexit negotiations that is causing the most difficulty for local authorities. With delivery of some public services needing to be planned well in advance, and with eight months to go until a potential no deal exit, this is looking to be an increasingly challenging task.

Reading the market – The proportion of online sales to total sales in the UK is currently around 18%. However, this average figure disguises significant variations within the various product categories. Online grocery sales remain stubbornly low at 6%, whereas the majority of music sales are now online. Why is this? For information goods (music, video, e-books etc) the product can be trialled instantly from the comfort of your living room, can be easily found and reviewed at one of the mega-marketplaces (App store, Amazon) and is delivered in seconds. Hence, for these products online purchases are quicker, easier and cheaper than in store, and therefore more compelling. Why then is the city of Beijing proposing to spend $15m on subsidising rent for bookstores? It has a vision for 200 24-hour bookstores in the city located in ‘densely populated residential areas and near scenic sites’. The stated reason is to support public reading and to play the role of public libraries. The stores also typically incorporate coffee shops, host lectures and run classes. Would we in the UK also see this as a key part of urban infrastructure that should not be allowed to fail? As both libraries and bookstores continue to close, the combination of the two, coupled with a service offering seems logical, and one which might sustain each of them longer than their current trajectories.

Day and night – Have you ever wondered why most high street shops are open in the daytime (when most of us are at work) and closed in the evening (when surely more of us have free time)? It has always struck me as odd. Availability and cost of labour presumably play a part, as does convention. If so, as automation takes hold, could we see this change? Shopping is not the only activity that is more convenient after hours; so is going to the doctors. Most of us will pick an early or late appointment if possible to minimise disruption of the working day; however, a recent analysis by the BBC shows that over 5 million people are still unable to see a GP out of working hours. The consequences for commercial real estate of us all lining up our activities within the same 8-hour block is that property is largely unused for two thirds of the day. The challenge to using the same space around the clock for different uses is that businesses have equipment and stock to store out-of-hours that would be incompatible with a shared user. However, as shops start to stock less products in store, business services are digitised and move into the cloud, and fixed desk settings become less popular, space becomes more flexible and might present new opportunities. Could for instance office meeting rooms be used as out-of-hour GP consultation rooms?

UK tops tech  – A new report by KPMG puts the UK at the top of the leader board for Fintech investment in H1 ($16bn); ahead of both China and US.  The majority of this investment was focused on relatively mature companies (particularly B&C stage rounds). The UK’s Fintech success is more impressive when you consider that the UK is a relative minnow in terms of the wider economy (UK GDP:$2.6tn, US:$18.5tn, China:$11.2tn). Government policy has been a significant support to the success of the sector; the publication of its first Fintech Strategy in March this year being an example. There are parallels between the finance and real estate sectors in that they are both mature markets, with relatively few dominant players, complexity which creates high barriers to entry and limited innovation until relatively recently. Fintech’s challenge to the finance sector and recent changes in regulation towards more open banking have helped to facilitate this rapid growth, as has a cohort of incumbents willing to disrupt their own market. Whilst there is a lot of industry noise around Proptech, total UK investment is still comparative low (£0.25bn in 2017) and the scope for further investment significant.

Snacks, cigarettes and holy water – The automation of retailing might be perceived as a relatively modern invention. The shift from cashiers to self swipe checkouts has happened very quickly, with the number of self-service tills almost doubling globally over the past 5 years. Amazon’s Go concept is the next evolution of this, dispensing with the till entirely in favour of a single RFID enabled check-out at the door. However, of course automated retailing is not new; we have been doing it since the 1880s in the form of vending machines (and technically since the first century AD when Heron of Alexandria developed a coin-operated holy water dispenser). The challenge since then has been one of vision, with vending machines typically reserved for snacks and cigarettes. However, a new breed of vending is much more ambitious. An example of this is a new machine at San Francisco International Airport, which dispenses Uniqlo vests and jackets. They clearly know their target audience of VC and coders. But herein is a benefit of small scale vending – the ability to hit niche or well-known customer segments with targeted offerings. If this works in airports, why wouldn’t it work in office campuses, where there is ample employee data to support stocking decisions, and where the vending machine footprint might be otherwise unused?

Everything must go – As a company that is in the business of finding new premises for occupiers and selling their buildings, a by-product of our service is the collection of miscellanea left over once the building is vacated.  The deal to relocate the US Embassy to ‘off-location’ Nine Elms, has been catalytic on the development that has followed, and has provided a robust and secure new home for the US Department of State. As to what’s left behind at Grosvenor Square, the US is now having a clearance sale. This apparently includes thousands of loo rolls, a circular saw, and a black Volvo S80.  Quite why the loo rolls won’t be needed in the new home is not immediately clear, and there may be a question as to whether a tariff duty will now apply to the importation of the Volvo.  If you fancy bidding for your own slice of Americana, click here.  However, if you were hoping to become the new owner of the large golden eagle on the roof, I’m sorry, that’s staying put as a condition of the planning consent.


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