A journey to real estate’s future

Craig Hughes, CEO Partnerships of The Instant Group, shares his views on the challenges and opportunities commercial real estate is currently facing. At a time when technology and data have a lot to offer, businesses should focus on leveraging useful data to really understand consumers’ needs and expectations.

Hughes is very optimistic about the future of CRE, but insists on the importance of making decisions considering environmental and social issues: “The industry has to play its role in helping society become more inclusive and more diverse”.

Which are the real challenges the commercial real estate industry is facing?

I think there are a number of challenges the industry is facing, but there are also opportunities as well. Historically, there’s sometimes been a gap between the industry and its customers. And by its customers, I don’t mean tenants. I mean the people who move within the space each and every day. And I think the industry is getting closer and closer to those customers.

The challenge is how you get really close, understand what they need and deliver on what they need. But as you get closer, you have the opportunity to provide not just the spaces, but the services and experiences that people need, then that will allow you to really move forward as a real estate business.

How is digital transformation helping to adapt to new commercial real estate business models?

I think technology and data are absolutely key to the challenge and the opportunity of getting closer to your customer. We should bear in mind that survey data, for instance, only shows a picture from a particular moment and it depends on how comfortable people are with giving open answers.

Actual real data, on the other hand, demonstrates what people do, what their behaviours are. And I think data sources aren’t just from your own business. You’ve got to look outside your own business to access third parties and other types of data that allow you to assess what customers do. How do you create places where customers want to be rather than they have to be? And when I say customers, I don’t just mean retail. It could be leisure, it could be offices, it could be residential. Gathering data on that and using technology is absolutely key because any data driven decision needs to be updated as that data changes. You need to adapt using that data.

“Any data driven decision needs to be updated as that data change changes”

Are CRE companies incorporating digital processes and toolkits to their structures?

Yes, and people are at different stages depending on when they start on this journey. Across the industry, everybody recognises that this is a challenge, and this is also an opportunity. It is not just the data, but it’s what you do with the data, how you analyse it, the decisions you make.

Also, there’s a lot of technology and data out there that isn’t necessarily going to. It’s about bringing people and technology and data together so that you can make the right kinds of decisions.I’m seeing a major step forward in many organisations that recruit the right kind of people to help them solve the challenge. So yes, they’re all moving forward. They’re a different stage on that journey. But I think there’s overall recognition that this is a journey everyone needs to be on.

“It’s about bringing people and technology and data together so that you can make the right decisions”

What do large companies in the real estate industry want from start-ups? What are their expectations regarding these solutions?

I think any journey like this needs you to work with organisations that are at all ends of the spectrum, from the start-ups to the much more mature businesses. The key point is what is the problem that that start-up was trying to solve in a different industry with successful outcomes, for instance, or what was the opportunity that start-up was trying to grasp, and what does it have in its DNA to make it a better option for solving it than some other route? I think start-ups do play a key role here

One of the challenges we have already observed is how to bring those two cultures together and set working practices, decision making together. Mature organisations tend to have a set business plan, while start-ups are really lean, really agile. So it’s important to understand the way in which more mature businesses can work with start-ups.

How do you imagine the evolution of the shopping centre industry will be?

There’s been a lot of headlines over the last three, four, five or more years saying retail is dead. Amazon is retail, so retail isn’t dead. Yet, when you’ve got the convenience that you can just sit there, order something and have it delivered, what makes you go somewhere to purchase that rather than actually do it from home?

That can be created in places, as we said, where people want to be. Many people are social and they want to go and do that activity with somebody else. Do you actually access dining or other pleasure experiences while you consume? And also, I think shopping centres per se in different countries operate in different ways and different cultures look at shop incentives in different ways. I think there’s a place for all forms of retail.

One thing that is crucial for every aspect of real estate and every aspect of retail is the environment, because it could be an unintended consequence. You order three things in one day online and three different vehicles turn up, which could be electric vehicles, but maybe they’re not. And maybe your journey to somewhere to buy it would have been on mass transit. Every time you make a choice, what’s the kind of carbon footprint of that choice? And do you always realise that actually the decision you’re making could have a bigger carbon footprint even though you initially think it doesn’t? So how are you making sure that customers can understand the impact of their decisions more broadly than just on themselves?

“Many people are social and they want to go and do that activity with somebody else”

How important are sustainability, social commitment and mobility?

When we talk about ESG, I think the Environmental and Social aspects are fundamental for the industry. Let’s consider the environment: it is not just about how operationally efficient a place is from the carbon perspective, it’s also about embedded carbon, but then it’s also what you are offering to a customer, what is the wider footprint of that? Overall impact considering mobility, like we mentioned earlier.

From a social experience, inclusion is really important. When bringing people together, be it shopping centres, offices or leisure, you bring people together from different backgrounds, with different perspectives. The more we engage with people who are different from us, the more we are able to remove conscious or unconscious bias and be a more inclusive society.

What was the original purpose of real estate? It was to provide shelter: to live in, to work in, to be educated, to consume, to enjoy. So we should allow all these to happen in a way we are helping with the environmental issues and we are also helping society become more inclusive and more diverse. It is not the industry’s job to solve all these problems, but it’s the industry’s job to play its role in solving these problems.

“The more we engage with people who are different from us, the more we are able to remove conscious or unconscious bias and be a more inclusive society”

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