What determines real estate success? It used to be strong tenants, great assets and the right partnerships. These days that’s not enough.
I wrote on this page 12 months ago that the requirements for enduring success in property had shifted. “The future is about branding, tech and transience,” read that leader.
A year on, the industry has made pockets of progress. Branding is driving the PRS and serviced offices. Googling proptech yields 146,000 results. And transience? Well, the Northern Powerhouse is pushing on, the Midlands Engine beginning to purr.
And bear in mind what Brandon Weber, founder of software company Hightower, told Estates Gazette earlier this month: “The idea that property never innovates, never adopts and never embraces new technology is entirely false.”
But strong tenants, great assets and the right partnerships – even combined with branding, tech and transience – are already not enough. In themselves none of the above will ensure the intelligent use of data and analytics, a key determinant of success. And here the industry still has a long way to go. (Click here for one way to engage at an early stage.)
Three-quarters of the world’s biggest real estate businesses believe that investing in tech to support asset and portfolio decision-making is a major priority for their organisation. Two-thirds acknowledge that comparative data and metrics are needed for effective benchmarking against the market. Yet more than one in four admit they do not benchmark at all, according to a survey from Altus Group.
The survey paints a picture of an industry convinced of the need to do more in this space but struggling to do so: 44% of respondents said they lacked “sufficient executive sponsors who are actively involved in exploring innovative ways to leverage technology and data in the organisation”.
Tackling this is a necessity for the property business. For those who have the skills and disposition, it is a career-building opportunity.
• Whether you like the rhetoric emanating from government these days probably hangs on whether you like your Brexit soft or hard. (Sadly, over easy doesn’t appear to be on the menu.) But there is one area where the full machinery of government is working to the benefit of UK plc.
Earlier this year trade and investment minister Greg Hands set a target of £5bn of inward investment into real estate. And at an investor event at Downing Street last Friday, he threw his weight behind £3bn of regeneration projects in Sheffield, Glasgow and Newcastle.
Given that negotiations with Europe will dominate the next two years at least – and fresh trade deal talks the years after that – it is essential that every lever is pulled in the drive to attract project-based investment.
For the three cities represented at Downing Street, the MIPIM UK fringe event offered a gift-wrapped opportunity to promote projects to an audience of almost 40 investors. China’s Wanda and Fosun Groups were there alongside Hong Kong’s Gaw Capital Partners, Dutch pension fund PGGM and Qatari Diar. UK investors and advisers included M&G, BNP Paribas Real Estate, Brookgate and Legal & General Investment Management.
It is worth questioning the measurable value of events like these, but it was following a Downing Street event in 2015 that Legal & General agreed to back the £350m Newcastle Science Central project.
Newcastle Council leader Nick Forbes will be hoping for a repeat performance. His peers will be hoping to emulate that success. And they need alternative sources of funding desperately. In 2010, councils were 80% dependent on central government grants. Barring a ministerial U-turn, by 2020 they will be 100% funded by council tax, business rates and other local revenues.
All this and more is on the agenda of EG’s development summit in Birmingham next month. Conservative mayoral candidate Andy Street – until this week chief executive of John Lewis – is the latest big name to join the line-up (do sign up at www.estatesgazetteevents.com/development2016). Those like Street who can combine business experience with (potential) political office will in large part determine the success of local government’s financial rebalancing and joint venturing with this industry. And that will, in no small part, determine the fortunes of UK plc.
• To send feedback, e-mail damian.wild@estatesgazette.com or tweet @DamianWild or @estatesgazette
