No industry is immune to the effects of these unprecedented times, and the Real Estate sector is no exception. Either we are already experiencing the impacts, or we will discover them after a substantial period of time. In the immediate-short term, we are already seeing imbalance and loss: supermarkets and hospitals are overpopulated, while pubs, restaurants and sports venues cry out for attention. Operations at distribution centers are running at a 200% capacity, while activity at airports and offices is reduced to almost nothing. But addressing the hidden impacts of this crisis is even more important than the things we can see clearly. Our attention should not only be on the financial aspects of Real Estate, but also the accompanying psychology and sociology.
This article outlines a selection of early observations that show why and how to reconsider your business focus. Whether you are directly impacted, a C-level within an industry other than Real Estate, or merely interested in what we're facing, the outcome concerns us all.
‘Trust’ over ‘Surveillance’
Whenever I have a question for any customer service – e.g. on the latest invoice from a telecom or energy provider – I imagine myself calling someone who is sitting in a huge call center. Today that person is most likely working from their home. And it works just as well as I’m used to.
Working from home has many benefits; it enables a better work-life balance, it allows for a flexible schedule, cuts out the commute, not to mention you can wear comfortable clothes. Now that all the home offices have been set up, VPN-systems installed, and virtual coffee breaks scheduled, many organizations are making the transition to virtual co-working spaces. But working from home has never been the standard practice and was usually limited to a few days a month. This inevitable shift might make some organizations uncomfortable. Surely, they feel, some of the employees require more education on work ethics. Lack of visibility or taking outside activities like doctor’s visits into account when setting the work agenda leads some companies to believe their staff is less productive when working from home.
COVID-19 offers us a chance to alter this mindset, shifting from a social workplace surveillance culture to a culture of trust.
Trust, both in people and in technology, enables a more flexible work environment to better accommodate the needs of your workers and your business alike.
Setting proper ground rules, combined with trust in your people, will allow your company to keep its performance up to speed, even if people are working from home. While some companies have already embraced this shift, those that fail to change their mindset from surveillance to trust will find it hard to adjust to the new reality.
Chances are that not only employees will adapt to this fairly new way of working, their clients will make the move too. With people regularly working from home, companies need less space to accommodate all of their employees. Our call center’s management can easily monitor its employees, whether they are working from the office or from home. But the need to accommodate everybody all at once simply disappears. Flexible lease contracts, combined purposes in large traditional office buildings or shared workspaces will become the new normal.
Rethinking your value proposition for developing office space starts by redefining the purpose of office spaces. Does your client value networking among co-workers, exploiting power of physical meetings, upholding an image or creating an external voice?
To build a successful real estate strategy, you must first understand your client’s corporate strategy.
With an increased focus on working from home, your client’s viewpoint on the need for office spaces will change. If your real estate strategy doesn’t follow suit, your clients will look elsewhere for office spaces.
On the other hand, the residential market could adapt to this change as well. Large housing projects, with dozens of apartments could soon be accompanied by a shared, but closed, workspace that is outfitted with necessary work equipment, along with tailor-made software to book your spot for the day. A successful real estate strategy takes innovations like these into account.
Invest in collaboration, and use ‘trust’ as a driver for change.
Introducing: Social Real Estate
It’s times like these that put everything into perspective. Our full schedules, together with the tremendous number of tasks we undertake each day have been reduced to the absolute bare necessities. Breaking down the essentials leads to an exhaustive list of only 3 major necessities: shelter, food supply, and healthcare. In the real estate sector, these needs are respectively translated to residential, logistic and healthcare real estate.
Currently, we are able to have these bare necessities met, thanks to modern technology. We stay indoors, have our consuming goods delivered at the nearest pick-up point and buy our clothes online. We adapt to disruptive events so we can live our lives as close as possible to our normal ways. The one thing that is a giant threat in succeeding to fight the virus, is our need for social interaction. In addition to the three vital needs cited above, we see that there is a hidden, fourth, necessity: people need a social getaway.
As Yuval Noah Harari taught us in his excellent book, ‘Sapiens’, human beings have survived throughout history thanks to the fact that we are social creatures. While our social hunger is historically a strength, it’s currently our greatest weakness in our efforts to fight the virus. Whether through sports, having dinner with friends or shopping, people have a fundamental want and need to get together. Knowing this, how can we make our retail stores and similar properties future proof? Again, the answer is collaboration. Initiatives that have already been put in motion include partnerships between local bars and large retail chains to create one-stop social shops, and restaurants that offer store discounts to visitors.
Similarly, instead of resisting online shopping, embrace it, and integrate it into your retail property. Make or reserve space for full body 3D-scanning devices that your customers can use for identify a better product fit in your physical or online store. This way, your retail space offers an additional social aspect to shopping, something an e-commerce company can never offer.
Be creative, uplift the social aspect of your property and don’t be afraid to align your property with your client’s social values.
To combat hospital overflow, the state of New York brought in “The Comfort”, an enormous Naval Hospital ship. The ship takes in non-Corona patients, alleviating the pressure on regular hospitals. Similar events are happening in India, where train coaches are transformed into isolation wards to prepare for the fight against the virus.
These sudden shifts encourage the real estate business to reconsider the concept of “single purpose for a single space”. Real estate, when viewed as agile object, can contribute to their communities and different sectors or industries in unexpected ways, on top of their ability to create beneficial yields. By taking the wider environment and community into account, an estate can become multi-purposed, delivering value in more ways than one.
An extraordinary example of multi-purposed land is the Hindu festival of Kumbh Mela in India that takes place every 12 years. After the monsoon, the water of the Ganges and Yamuna rivers recede and the sand banks are exposed. Between the 15th of October and the 15th of January, a complete megacity emerges on these sand banks. This impermanent city has in fact all the characteristics of a real megacity: it provides accommodation for 100 million people, with at least 7 million people living there for 55 days. It replicates all physical as well as social infrastructure like water supply, sewage, electricity, security cameras, community services, clinics and hospitals. Some impressive numbers:
- 100 hospital beds
- 834 medical staff
- 10,500 sweepers
- 22,000 electric poles
- 253,000 streets lights
- 163km metal plate roads
What is also incredible is that only 5 materials are used to build this settlement: 8 foot tall bamboo, strings or ropes, nails or screws and a skinning material (fabric, metal or a plastic). Each one of the materials used to build this vast urban space is returned to its former use after the festival ends.
Just like the people in India, we should be able to use specific land and buildings for different purposes, whether temporary or permanent. The ability for replication, in any sense of the development process, is a key for success. Imagine, at some point, there is a sudden need for a substantial amount of hotel accommodation, office space, utilities, sports venues or healthcare facilities. It could be because our region will be co-hosting the next world expo, the Olympics or is being attacked by a vicious virus. How are cities or private developers preparing their properties and land in a sustainable way? Do we need an independent supervising entity that makes cities, buildings, space, people and innovation connect with each other in order to be future proof? Although there are no clear-cut answers to these questions, real estate developers and communities willing to consider these opportunities will always be one step ahead.
Real estate is more than bricks and yields
Organizations should never see or treat real estate merely as an isolated part of a balanced portfolio. The COVID-19 outbreak is having a huge impact on our industry and there is a lot to learn from our shifting behavior as we attempt to control and recover from the damage caused by the disease. The ways we adapt our lifestyles results in new insights as to how to manage our property and our physical space. We see that trust in people and technology has emerged, and that after this crisis employers and employees might be less inclined to be at the office 5 days a week.
During a crisis we return to the essentials. To survive we need shelter, supply of consumer goods, healthcare and a social outlet. The latter is a key ingredient for players in heavy-impacted real estate submarkets who are willing to re-think their business models.
Finally, it is important to address how we assign different purposes to a space or building in the planning phase, whether that is on a project or at urban scale. Aside from the horror that the world is experiencing today, we need to embrace the unique opportunity to learn from current events, picture the world post-crisis and look for the hidden impacts that will shape our future.
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