Real Estate In 2030 Will Be Radically Different. Here Are The Skills You’ll Need To Survive
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How do machines think? How do you talk to them? What kind of answers should you expect back?
Don’t worry if you don’t know the answer. Worry if you haven’t thought about the question.
Over the next decade or so, technology will be able to do huge swathes of what brokers, advisors, investors, developers and asset managers can do today: write reports or contracts, analyse leases, undertake valuations, enable viewings, even trade assets. So what’s left?
At the big-picture level, everyone knows that technology is going to make commercial real estate unrecognisable to the industry today. But it is hard to envisage what this means at the micro level, what your job will entail in 10 years’ time, the skills you will need, who your company should be employing, and what those people will be doing.
Creativity, complexity, curiosity and empathy will be key watchwords — if that doesn’t sound like you, the time to start adapting is now. For companies, the issues might be more challenging.
Managing change is a difficult process, and real estate’s chief executive class might not be up to the job. If they don’t watch out, today’s leaders might be replaced not by robots, but by more innovative thinkers from other areas of business.
The job queue won’t get any longer
Now seems like a good moment to point out that this is not one of those apocalyptic scare pieces predicting massive redundancies in real estate brought about by automation and machine learning. Evidence from other sectors suggests the opposite may be true.
“If you think about how a real estate trade was underwritten 25 years ago, it is fairly similar to today, even with the arrival of computers,” Cadre Investment Director Dimitrios Pilitsis said. “So when you talk about it being disrupted, it is not in the sense of there being huge job losses. If you look at Airbnb, there is no evidence of thousands of job losses in the hotel sector. So in real estate, you are just talking about tools that allow people to make decisions more quickly and with more data.”
In the world of banking, junior analysts used to spend weeks running the numbers on deals, using huge rolls of paper and slide rules — literal spreadsheets. Computer spreadsheets meant the same calculations could be done by a single person in a few hours.
But between 1979, the year the first digital spreadsheet was invented (exactly 39 years ago this week to be precise), and 2018, U.S. financial services and insurance employment rose from 3.3 million people to 6.3 million, according to the U.S. Bureau of Labour Statistics. Real estate employment has grown in the same period, though much more slowly, from 1.6 million people to 2.3 million (including residential brokers). Increasing levels of automation and technological sophistication clearly hasn’t held finance back.
The devil is in the data
But just like in banking, real estate jobs will change dramatically. Perhaps most revolutionary will be the need to utilise complex data, often of a sort that has not been readily available or applicable in real estate.
Don’t worry. To be a good real estate professional, you are not going to have to take a night school course in data science. But you will have to change the way you think and understand the way that data is collected, managed and analysed. And most of all, how it can be applied.
“I don’t necessarily think that real estate professionals will need to undertake the process of data gathering and analysis that a data scientist would do — it’s a very technical process and a skill set in itself,” Pilitsis said. “But in the same way that you have real estate research groups within firms, you could see a subset of that [with] real estate data science groups.”
So your in-house data scientist and their algorithms might do the legwork of gathering data and producing reports. But you will have to understand how those teams and their tools work to maximise the benefits they can bring. It will involve a way of working quite different to that common in real estate today.
“It is easy for us to interpret what humans say, because we understand how humans think,” PropTech consultant and co-founder of data platform Unissu James Dearsley said. “But machines are different; they are binary. They produce outputs, but you need the right inputs. You will need to be asking the right questions to get useful information back.”
“We have a technical team who provide information and reports to our advisory and sales team, who are client-facing,” online coworking search portal Hubble co-founder and Chief Executive Tushar Agarwal said. “But for that client-facing team, we have looked for a particular type of person, someone who can be a product manager and can feed back to the technical and product team in a specific way so that the product can be improved.”
That mindset of thinking about products, a combination of technology and service, is radically new for the real estate industry.
When you get it right, the possibilities are endless
Once real estate professionals have a handle on the best way to work with data and the technology and people that can analyse it for them, new realms of possibility open up in terms of assessing what buildings will be profitable or unprofitable to own, and the best way to manage them.
Pilitsis gives the examples of hedge funds using satellite imagery to assess the number of cars in a Walmart store car park to get insight into trading ahead of earnings reports, or scraping online data from Airbnb to get better insight into the competitive landscape and leasing performance of hotels in a given area.
“In retail, you might have a leasing agent telling you that a fall in trading or footfall in a shopping centre is just a temporary blip, and now there are different ways you can analyse if that really is the case,” he said. “And I don’t think I ever go into an investment committee meeting for a hotel asset without some sort of discussion of Airbnb data. Some of it might not be applicable to real estate, but the opportunity is there to access new data sets and use them to underwrite investments.”
But here is the catch: your data science team or platform isn’t necessarily going to tell you what new data can be looked at or how it can potentially be used in a real estate context — that kind of lateral thought will have to come from you.
Know how machines think, but understand how people feel
As machines free up time from laborious work such as collecting data or writing contracts, that time must be spent thinking creatively.
“We look for people who are able to see around corners and look at where the world is going, not just where it is today,” Blackstone Global Real Estate co-head Kathleen McCarthy said. “It is important to look at history, but if you take a sector like logistics and look back at patterns of supply and demand, what happened 15 years ago is almost irrelevant to what is going on today. We look for people who can see what is changing, why and how to capitalise on that from a real estate perspective.”
“What humans can do is understand how real estate makes people feel, combine that with data and interpret it so it can be translated into a business plan or a strategy for a company,” Cushman & Wakefield Head of London Markets Toby Ogden said. “It’s a complex process, and people are still better at complexity, especially in commercial real estate, where what you are dealing with is not a homogenous product."
An example: technology today can’t adequately describe the difference between an asset on Regent Street or Fifth Avenue and something that is only 100 yards away, but a real estate professional will know that there is a world of difference.
“You need empathy about what the client really needs and the creativity to provide it,” Ogden said.
“People are never going to sell a $1B building online,” digital investment platform Cloudscraper Chief Financial Officer Matt Webster said. “Those large transactions require an element of complexity that needs to be overlaid on data and technology.”
In this changed world, the best real estate companies are going to be even more focussed than they are today on hiring people who can think laterally and creatively.
How to be a survivor
So what does this mean for the people and companies active today? If you are a 40-year-old working in real estate today, the new capabilities required might not fit your current skill set, but you probably have at least 20 years of your working life still to go, a period in which change will be huge.
On the individual level, mid-career learning to develop new skills will become increasingly important.
“We used to talk about people pivoting once in their careers — now I think people need to start thinking about reskilling every 10 years or less,” techUK President Jacqueline de Rojas said.
British Land Head of Campus Juliette Morgan is a decent example: she recently undertook a 10-week online course to better understand carbon economics, a topic she felt would become increasingly central to the development sector as climate change becomes a more pressing topic for governments and individuals.
“I felt I needed to be better informed in order to make better decisions,” she said. “If we are going to make decisions on buildings that impact the next 50 or 60 years, then we need to be better informed.”
Companies can support employees pursuing mid-career learning, and the nature of real estate employment patterns can help to facilitate this.
“Something that is quite unique to real estate is, once people are within a company, they tend to stay there for a long period of time, and it is not unusual to find people who have been in a company for 20 years,” Cushman & Wakefield Transformation Team Partner Lottie Tollman said. “That gives companies a chance to encourage training and learning. But it is up to the individual to be aware of what is going on in the world.”
What would CBRE look like if it was started today?
At a corporate level, working out how best to position a business to adapt to and benefit from change is a daunting prospect. No one wants to be the Blockbuster or Kodak of real estate.
A recent survey of real estate professionals by KPMG highlighted that companies know they need more tech expertise, but don’t know what this means in practice: the balance between tech and real estate experts, the best technology to utilise and, most importantly, how to get from where they are today to where they need to be.
“When we set up Hubble, we asked ourselves, 'what would CBRE look like if it was started today?'” Agarwal said.
The coworking search portal he founded has a staff of about 25, about half of whom are software engineers or data scientists. The other half are client-facing in the form of sales or advisory staff.
“If you look at where real estate service companies will go, it will be like the travel agency industry today," he said. "The easy stuff has all become digital and online, but if you want a bespoke trip to a particular part of Ghana, you might go to an advisor.”
The balance between digital and traditional real estate professionals outlined by Agarwal might not be right for every existing real estate company, but for some, it is the direction the industry needs to take.
“A brokerage firm or asset manager in 2030 will need an entirely different set of skills, which they don’t have today, based around data and analytics being used to support business decisions,” VTS Head of Product Brandon Weber said. “Real estate companies will need to hire these people and create a new layer of people within their organisations. Goldman Sachs today employs thousands of software developers to support their traders. That doesn’t mean the traders have become software developers, it means they are making their trades based on analytics. But you need to hire the people to be able to do that.”
This process will not be cheap or easy. In the U.K. for instance, salaries for experienced data scientists start at around £60K and can run to about £90K, according to Matthieu Pirouelle, director at Prime Insight, a recruitment consultancy that specialises in data analytics and technology.
Salaries for AI experts run from £60K to as high as £150K. The average salary in real estate is £58K, according to Macdonald & Co., the property recruitment specialist, meaning tech staff are paid more than the real estate average.
That is because they are in demand in all sectors of business.
Some industries, like banking, insurance or e-commerce, are farther along in their transformations than real estate. If CRE firms want to hire someone with proven experience, they have to look in different industries to maximize their added value, Pirouelle said. “Which obviously creates a lot of competition across industries."
The pace of technological change is likely to lead to consolidation — larger companies will have a greater ability to invest in technology and hire the best staff, and technology tends to create outsized winners, like Amazon or Google, Weber pointed out.
No real estate company can ever dominate the investment or development world in the same way as those companies do because real estate is inherently more fragmented, but consolidation is clearly occurring: WeWork is giving the idea of becoming the Amazon of offices a go, companies like Blackstone and Brookfield are outstripping their peers in terms of capital raising and the largest agency firms are snapping up smaller rivals.
“In efficient markets, what you have is greater specialisation and division of roles within businesses,” C&W Head of Futures Strategy Richard Pickering said. “That makes it harder for the small, niche firms to compete, and that is why we have looked to be at the forefront of consolidation in the industry.”
The profession most at risk: the real estate CEO
The big problem with enacting this change might just be the people in charge of the process. According to a PwC global survey of CEOs from all business sectors, just 10% of real estate chief execs thought technology posed a significant challenge to their business, compared to 46% across all business sectors.
“If I look at the CEOs I deal with, there is a range, from those who think this is a real priority to those who don’t at all,” PwC Global Real Estate Leader Craig Hughes said. “Often it comes down to the time frame of the role. Some of them think, ‘this change won’t impact the time frame when I’m in the role,’ so they don’t want to rock the boat and think it’s not for me. Some of them know that, even if they are only in the job for a short time frame, they need to adapt.”
Hughes points to the young leaders boards PwC has put in place, bringing together young staff from across the world to provide ideas for change to the firm’s global board, as a way of bringing in the perspective of a younger generation. Knight Frank has recently put in place a similar programme.
“I’m a white Welsh bloke in my 40s; there is no way I can know what is affecting young people in sub-Saharan Africa or Asia,” Hughes said. “The job of the real estate CEO today is to work out how their customers feel about the world and adapt to that. There is no fixed model — the model will change again and again, and that flexibility needs to be built in.”
Ultimately, the classic real estate CEO, who came into the role after being a star investor, developer or advisor, might become extinct.
“The real estate profession has always had a tradition of bringing property people through to run businesses, but I think that will change,” property recruitment specialist Macdonald & Co. Managing Director Peter Moore said.
“I think people will start coming from outside real estate to run the largest organisations in the sector. The more forward-looking companies are already looking at it, and it will happen soon. They will start bringing in people with experience and skills from the tech and data sectors. The property sector has always brought the same type of people through the system, but organisations are looking at what their customers are doing and what their future profit base will be. They don’t want square pegs for square holes anymore.”
A whole new business model
Charting a course over the next decade is of course easier said than done, especially in real estate. Dan Hughes, founder of real estate technology consultancy Alpha Property Insight, points out that the slow pace at which real estate has previously moved makes companies in the sector particularly inflexible. The entire business model of real estate needs to be altered to properly adapt to change.
“If you look at the business plans of real estate companies, they typically come up with a three- to five-year business plan and then stick to it," he said. "Tech companies are different. They make strategic decisions on a daily, weekly and monthly basis. That is partly because they have shareholders that want growth, not profit, but real estate needs to learn to incorporate some of that speed and agility.”
“Managing periods of complex change is incredibly difficult,” Unissu’s Dearsley said. “You need the right skill set and people, you need a vision, you need to communicate that vision, you need people to be incentivised and you need the resources to put all this in place. If one aspect of that is missing, then it is very hard, and breeds anxiety within a company.”
When it comes to technology, we have a tendency to overestimate the impact of change in the short term, and underestimate the impact in the long term. That is even more the case when it comes to ourselves and our work. But no area of real estate, no company and no individual will be immune to change.
To hear more about the future of working in the real estate profession, come to Bisnow's London State of the Market event on 1 November.