Monday and Tuesday of this week, The MIT Center for Real Estate held it’s annual “World Real Estate Forum” at the MIT Media Lab in Kendall Square.
The purpose of the forum is to bring together industry leaders, MIT’s own research, and relevant professionals to investigate real estate technologies from their very initial concepts to market reality.
Everything real estate is covered - from the things we know well (skyscrapers, convention centers) to the things that fill you with wonder and consuion (robotic moving buildings, indoor vertical food farms).
It is an incredible opportunity to hear from professionals and researchers who spend all their time focused on the future of real estate and how the industry is changing, and as the HqO team was fortunate to have a few team members there yesterday, we thought we’d put together our biggest takeaways.
Co-working is in the “Pure Disruption” and “Peak of Inflated Expectations” stages of its lifecycle
It might not be all that surprising to see co-working listed in either of these categories - WeWork and friends are certainly disrupting the industry and there’s a ton of hype (and disagreement) around what this means for commercial real estate. One thing is for sure, the market's growth rate is staggering:
But what was most interesting about co-working's position on this graph is what comes next. Notice they are the peak of inflated expectations.
This stage was explained to me as such: when new technologies or ideas emerge in a market (like shared or flexible office space), they tend to have inflated expectations. Every industry looks at co-working and thinks “Wow! That could be a game changer for us!” (see also: blockchain).
Then, as more and more companies test the waters, they come to the painful realization that these new offerings might not be a great fit for their business. This leads to slowed growth or even regression and a huge correction in expectations. This deflating stage is referred to as the “Trough of Disillusionment”, (I prefer “pit of misery”).
This idea seems to be supported by a some of the bigger companies who have been ahead of the game with respect to flexible work policies and working from home. Remember, IBM touted their flexible work policies for over a decade by announcing their cost savings and increased productivity statistics, but now they’ve ordered just about all those employees back into traditional offices. Not every trend works for everybody.
It should be noted, however, that there are varying timetables for when the shift from hype to disillusionment takes place for every new technology, and co-working still only makes up about 1.4% of urban office space, so there is likely more growth in the near future before this correction.
Technology integrations represent the biggest hurdle (and opportunity) in commercial real estate tech adoption
On a panel with Hans Neubert (Gensler), Eric Graham (Crowd Comfort), and Erica Chapman (Akamai), we heard some amazing comments and questions around the UX/UI of a building and how it can affect workplace experience.
All of the panelists agreed that there was an enormous economic opportunity for technologies that can make an employee's day-to-day life better but also referenced how important data integrations were to creating this experience.
Erica, in particular, noted that Akamai’s goal, as a global company, is to create a unified global experience (with an awareness for difference in cultures), and this means that every new workplace experience technology they implement has to integrate with numerous systems across countries and offices.
Rather than have to do this with 10 different tools, the best option, according to Erica, is an application or tool that can collect all of the necessary data on employees and perform all of the necessary actions employees require in one place. This type of solution is certainly a technical challenge, but there is a monster upside to proper execution.
Creating exceptional workplace environments will help win the talent war
Oxford’s Lachlan Macquarrie did a phenomenal job talking about why smart buildings/offices are such a priority for Oxford.
In short, Oxford believes that smart buildings have two notable advantages as they:
- Create exceptional customer experiences
- Drive operational efficiency
Operational efficiency, of course, gives Oxford an advantage in that it drives down their costs (oh, and it's good for the environment).
Creating exceptional customer experiences - which, in the case of commercial office space, means creating exceptional workplace experiences for tenants and their employees (AKA TeX) - attracts and retains tenants while allowing you to charge more for rent. Not a bad combo.
In fact, Lachlan mentioned a case study that we’ve actually written about before here at HqO: The Edge - Deloitte’s Amsterdam office. In short, the Edge has successfully realized the aforementioned benefits of smart buildings, and it has paid off significantly for their business. Since Deloitte opened the office in 2016, open positions at The Edge have received 4X the number of applications compared to any other Deloitte office on the planet!
If you create an incredible workplace experience by perfectly combining the built environment with technology (both tenant and non-tenant facing), you will win the talent war.