Property is generally a closed and backward-looking industry. Beyond these walls, companies are increasingly the opposite: looking outwards, embracing the new.
"Why would anyone launching a property business today take their inspiration from property?"
To illustrate how the world outside is changing, it’s become fashionable to point out how Uber, the world’s largest taxi company, owns no vehicles, and how Airbnb, the world’s biggest accommodation provider, owns no real estate.
But what about Ikea, the world’s largest furniture retailer? Ikea owns millions of tonnes of stuff. Yet the company recently claimed that the market for home furnishings was hitting saturation point throughout Western economies. People are reaching peak 'stuff'.
Such boldness could be viewed as a Gerald Ratner moment – a blundering admission that everything Ikea does is actually 'crap'. However, I’d say it’s anything but: it’s a promise that in order to stay relevant, the company is willing to observe societal changes and adapt accordingly.
Where does property come into this? Well, at the most basic level, our sector has to acknowledge the extent to which – beyond the usual boom-bust fluctuations – developed economies are undergoing massive, unprecedented structural and cultural shifts, which can’t be ignored.
Consumers are savvy and promiscuous. They are questioning old models, harnessing their buying power and searching for meaning. The internet has connected everything. It is shifting us from a material world to an immaterial one, where people crave experience over consumption.
We can’t depend on macroeconomic, cyclical trends alone. Until very recently, prime and super-prime London residential was supposed to be the hottest one-way bet in UK real estate, with demand from overseas seeming insatiable. Then the tide turned at the start of this year, as it was reported that prices across numerous prime residential schemes were being suddenly and drastically cut.
This should remind us how, if we become dependent on one sector or one trend in capital markets, the music will eventually stop and there’s nothing we can do: by chasing after trends in global capital markets, we are essentially surrendering control.
So if the pace of change is quickening and market volatility is disrupting patterns that the built environment has traditionally clung onto, is there anything we can, in fact, control?
Yes – we can re-focus our energies on what actually counts: real people. They will be a developer’s final judge, jury and executioner. We can view systemic shifts in their thinking and consumer habits as an opportunity rather than a threat, using mixed-use development to respond to their changing needs.
Property might be a slow-moving sector, but consumer trends do have a seismic long-term impact on our business. By 2025, London’s population will be made up of 60% renters – a 20% rise on 15 years ago, according to PwC. Similar shifts are happening in the other geographies where we operate.
New models and platforms are emerging not just in residential renting, but in things such as desk hiring and pop-up retail: urban populaces are newly transient, with a rise, for example, in the number of serviced office providers in London, as flexible leases and co-working become standard. Office tenants, residents and retailers flex, grow and shrink rapidly.
We can no longer simply cross our fingers for a golden 20-year institutional-grade office lease. And as Peter Williams suggests on page 20, retailers are entirely reinventing what they want from their physical stores. Commercial tenancies of all kinds are more fluid, and real estate is increasingly about operating cash flow, rather than quarterly rent cheques.
End users of property are therefore becoming more influential in their decision-making. Consumer choice magnetises them towards honeypots in the physical realm: happy places that offer vibrancy and a diverse mix of activity.
While there is no simple blueprint for such a place, there are good approaches and bad ones. The best approach involves thinking long-term and always acting sustainably. It means planning for a mixed-use future and recognising how people have rejected living in silos. It means engaging with people, incubating growth and acting with integrity.
Ordinary people are rightly sceptical of our intentions: developers’ claims of social benefit are so often just platitudes, designed to assist with a planning application – solving the housing crisis, creating jobs. Instead of alienating people and provoking them into protests and online petitions, we should actually engage with them properly in the first place.
These values must be engrained across everything we do. If we are the company delivering the best places and the truest regeneration, repeatedly, then we will propagate a virtuous circle of goodwill, making us partner of choice for public bodies, funders and, ultimately, the man on the street. Our values will also ensure higher talent retention, loyalty and productivity.
As Richard Upton says, we all have to crack eggs to make omelettes, but at the very least we can choose the right ingredients, carefully and sustainably sourced.