Notes from the Toronto Real Estate Forum 2016
I attended the Toronto Real Estate Forum which was held from November 29 to Dec 31, 2016 in Toronto. Herewith are the notes I took on the Panel that talked about tech disruption awaiting the Real Estate Industry.
John Ruffolo, Chief Executive Officer, OMERS Ventures
Sheila Botting, Partner & Canadian Real Estate Leader, Deloitte LLP
Amy Erixon, Principal & Managing Director, Investment, Avison Young
Dave Kim, Co-Founder & CEO, Harbr
Chris Matys, Chief Analytics Officer, Georgian Partners
Though the moderator tried to keep a focus on real estate but due to pervasive nature of technological disruption, the discussion was wide ranging (read: all over the place)
Opening Remarks by each panelist
If you do not believe tech is going to disrupt the real estate industry, your head is in the sand. Like the frog in boiling water, by the time you realize that market is changing, it will be too late.
Construction industry hasn’t been disrupted so far. What Harbr and startups like it are bringing to the market is how to disrupt the construction industry by having sensors, data analytics, 3D models, Just in Time (JIT) for goods as well as labor.
– Canada is 26% less productive in US and Canada spends 56% less on tech than US. Canada is not prepared for the future.
– Deloitte carried out a study which found out that 40% — 60% of time there are no “bums on the seat” in Deloitte’s offices. So now Deloitte has 4,500 people with laptops with no dedicated workspace in their new office building. They come in, set up their laptop at any available place and then move out. This makes Deloitte more agile and nimble.
– Capital savings that Deloitte made from the above step was reinvested back in technology and that is what others are doing too
– The office is evolving from a place of paper pushing to place of collaboration and transfer of knowledge. Deloitte’s new office is greatly suited for this.
People talk about technology disrupting low wage work such as drivers, cashiers etc. But technology is coming very rapidly for the white collar work such as lawyers, doctors, bankers etc. Technology is coming for the stuff that requires vision i.e., sorting, handwriting reading, visual inspections, site visits etc. Going forward all such activities will be automated using drones, robots, AI (artificial intelligence).
Real estate due to its long term nature (60 years of life for a building, 10–15 year long leases) likes status quo and is not open to change. Millennials don’t like this:
- They don’t want to be stuck with the 25 year mortgage for a place
- They want to have the flexibility to move to a different location (city, country etc.) quickly if the job changes
- They want to work from home one day a week
- They are looking for experiences
- They don’t like email just as the generation before them didn’t like snail mail. They are into messaging/conversation. Initially the conversation will move to services such as Slack, WeChat etc. It may be something entirely different 5 years from now.
Real estate industry and other industries have to change to accommodate the millennials. Allowing them the option of remotely working, working from home, and have offices like Deloitte which allow for collaboration etc.
This will mean that these companies will require less office space and lesser employees. Deloitte saved 25% office space and associated maintenance expenses. In a few years, other corporate entities in downtown will eventually do the same. They are already downsizing. This may lead to glut of office space in downtown.
Breather is a company that is working on short term commercial sub-leasing for 1 to 30 days. They have just started and raised around $20 million in Series B round. They have just started out and are flush with cash. Pretty soon other companies will jump into fray. 5 years down the line you can bet that these companies will be disrupting the commercial office leasing market as AirBnB and Uber are disrupting hotel and taxi markets respectively.
Downsides of technology
- Very distracting: Emails, messages, Snapchat, Slack, chat rooms are all fighting for attention. Just grabbing attention isn’t important, but also how to continue holding it. People need to know when to “turn off”.
- Current training and education system not set up to cope with technological disruption. Urgent training and education reform is needed to counter the following adverse impacts:
– Remote working/working from home can employees make less collaborative. They need to be educated on how to collaborate when not sitting face to face.
– As seen recently during elections that when people hide behind technology such as social media accounts etc., their filters come off. They are more aggressive and abusive. Education and constant reinforcement will be required to keep people and environment conducive to work
– A different ecosystem needs to be developed to measure performance of employees and their output. If they are working remotely, measuring work punching in and punching out 9am and 5pm will not work.
Immediate disruptions / trends on RE horizon
- The lowest hanging fruit is brokers. There will always be room for brokers but not this many brokers. Think of brokerages as travel agencies before Expedia arrived on the scene.
- Crowd sourcing of investors for commercial real estate is picking up pace in US and UK. You have Breather on tenant side and crowd sourced investment in CRE on the landlord side and a layer of intermediary brokers is no longer needed.
- Retail — As many bank branches and shopping stores no longer needed. People may go to shops to try stuff but will not carry it. It will be delivered to their home directly from warehouse or manufacturing facility
- Internet of Things (IoT) and Artificial Intelligence (AI) — Doesn’t need to be ground breaking inventions. Small stuff like the NEST thermostat which constantly monitors the environment, learns and changes its behavior. Jobs that will be destroyed due to this: drivers, administrative assistants, and those requiring visual inspection such as radiology, site inspection, sorting etc.
- AR / VR: Kids don’t like to read anymore. AR / VR will be used for education, training, real estate model visualizations etc.
- Technology will make suburbs popular again with Millennials. They like downtown living when they are young. Once they start a family, they would like to move to the suburbs. They don’t have to commute anymore as they would be working from home.
- AI is coming for white collar jobs. As a closing statement, MD of Avison Young recommended that we read the article that appeared in fastcompany website These Will Be The Top Jobs In 2025 (And The Skills You’ll Need To Get Them)