By Richard Pickering, Head of Futures Strategy
Festival of Brexit – When things aren’t going well, what better way to keep the people happy than to throw a party? Maybe Theresa May had in mind the Plebeian Games, when this week she announced a £120m ‘post-Brexit festival’. The games of ancient Rome created enduring physical legacies (the Circus Flaminius, the Circus Maximus and Vespasian’s Colosseum) and there is reason to hope that a ‘Festival of Brexit’ might have similar effects. Festivals like this are not new to the UK. The Great Exhibition held in 1851 was designed to showcase the UK as an industrial leader. A ‘pop-up’ glass building in Hyde Park used to host the exhibition was relocated to Penge Common and ultimately became known as Crystal Palace, and the proceeds from the exhibition were applied to build ‘Albertopolis’ including the V&A, the Science Museum and the Natural History Museum. In 1908 the Franco-British Exhibition (celebrating the Entente Cordiale) resulted in the development of White City; whereas in 1951 the Festival of Britain (driving a new post-war vision for UK cities) resulted in the development of the Royal Festival Hall on the Southbank. More recently, the turn of the last century resulted in the construction of the Millennium Dome, which has catalysed development of the Greenwich peninsula. However, if the ‘Festival of Brexit’ is, as stated, to promote ‘national renewal’ then it will be important that the benefits are distributed more widely than London.
4-Star – Our world is shifting towards a model of decentralised trust, with expert opinions giving way to the power of aggregated popular opinion. The online retail experience is rich with user generated product reviews, which according to Deloitte, 81% of us read before purchasing a product. Presently this is a competitive disadvantage of physical retail, but new models which merge the two are in prospect, including Amazon’s latest bricks and mortar offering: Amazon 4-Star. Opening in New York last week, the store will only stock items that are rated 4-stars or more in their online store and will stock certain areas of the store with products that are specifically trending in New York. In-store displays include online reviews, latest deals and items typically bought together, bridging the gap between offline and online experiences. The question of how valuable the online score is remains. Most people are likely to trust an objective consumer who has actually used a product, over an incentivised salesperson. However, online reviews tend to reflect a narrow group of consumers (~1% of all consumers); motivated to post through either a really positive 5-star experience, or a negative 1-star one, and these are increasingly boosted by fake reviews. Hence, whilst a 4-star rating feels like it should be above-average, it is in fact below the Amazon average of 4.4 stars.
Prime Housing – Last week Amazon’s Alexa Fund invested in Planet Prefab, a company that uses sustainable construction processes and materials to create both single and multi-family houses. The move reflects the deeper level of integration of voice-controlled technology in our homes, with more than 20,000 Alexa compatible devices now available. It provides Amazon with the opportunity to sell houses specified with Alexa from the outset, creating significant switching costs to subsequently moving to a different platform, and therefore locking into downstream purchases. In the modern world it is often these aftersales activities that are more valuable. For instance, printer manufacturers typically make more of their profit from selling cartridges than they do printers. Although there is little precedent, technology companies are well placed to develop real estate, due to the level of big data enabled personalisation and lifestyle integration that they can offer. Increasingly we are likely to see their names on tender lists; case in point being Sidewalk Lab’s development in Toronto. It will be interesting to see whether this new breed of tech landlords bring with them the commercial models learned in their core business. How long before your monthly rent gets bundled with your Amazon Prime subscription?
Meanwhile, in London – A report launched by Centre for London this week identifies 24,400 empty commercial properties in the city, of which ~95% have been vacant for more than 6 months. It would be simplistic to conclude that this is the solution to the housing crisis, or other long-term challenges. There are many reasons why these premises might remain empty, including physical issues, difficulty attracting a decent tenant, or that they await the economic conditions or planning consent that optimises development returns. However, the report points to the potential for short term, interim uses that could benefit all concerned. Access to cheap commercial premises provides opportunities for cash-strapped start-ups and charities to operate, provides cashflow for landowners and security for their empty premises, and provides activation and community benefits for local authorities. So why isn’t this happening already? Landlords have concerns about creating short term tenancies, such as how the tenant will leave the space and whether they will in fact leave when the tenancies end (the report believes that these concerns are overexpressed). Further, finding quality short term tenants isn’t straightforward. Technology could have a role to play in the solution, by pre-qualifying tenants, and by matching landlords with space seekers using platforms similar to Airbnb.
Proptech – KPMG’s annual Proptech survey highlights the continuing gap in the industry between the understanding of the change ahead and the actions being taken to respond to this. 97% of respondents stated that technological innovation will impact their business somewhat or very significantly. Interestingly, three quarters see technological innovation as an opportunity, whilst only 1% see it as a pure threat (the rest having mixed views). Meanwhile over half of respondents rated their businesses at less than 5 out of 10 for innovation maturity. For all the noise around blockchain and automated vehicles, these factors were weighted as minor compared with the more functional but less exciting areas of automation and big data. How should we read all of this? The property industry has been cosily insulated from change for many years, and for many, ignoring the prospect of change and hoping that it won’t happen might seem an expedient solution. That so many respondents recognise the opportunity around technology is encouraging, and this may become a self-fulfilling prophecy for those willing to take corresponding action. What is clear, and matches my own discussions with various organisations around the subject, is that the opportunity to take first mover positions on tech driven change in real estate is still very much on the table. Don’t make the mistake of thinking that it is either too late to gain advantage, or equally, that it will be possible to catch up at some point in the future.
Triple word score – Our language is in constant flux and, in an effort to keep up, US dictionary company Merriam-Webster announced that they have added 300 new words to the US version of Scrabble. Some of the latest additions include: frownie (the opposite of smiley), bitcoin (a Ponzi scheme), sheeple (investors in bitcoin), twerk (how people in Hull say they are going to work), facepalm (the response to most of my intended humour) and ew (as in: Ew! This cappuccino speculoos tastes disgusting). Despite the cornucopia of linguistic options, the headline grabber was the inclusion of ‘OK’, which according to the Merriam-Webster editor at large ‘is something Scrabble players have been waiting for, for a long time’. Meanwhile, another board game stalwart, Monopoly, also had a refresh last month, courtesy of mortgage lender, Proportunity. The revised version which replaces pricing with the past five years’ growth sees Mayfair and Old Kent Road trading places. Finally, in case you haven’t played Cluedo for a couple of years, poor old domestic help Mrs White has now disappeared (‘after 70 years of suspicious activity’) in favour of Dr Orchid who has a PhD in toxicology. Many disrupted professionals can no doubt empathise.