Real Asset Insight #6 June 2020

Pandemic is a ‘flywheel
of change’ for real estate
The feeling that innovation was unnecessary during 10-year
bull run has been swept aside as change now seen as critical
‘People will not
simply ask but
they will demand
something
different in
the future.’
Antony Slumbers,
PropAI
The coronavirus pandemic is upending
real estate and accelerating change.
‘The pandemic represents the greatest
opportunity for the real estate industry and for
proptech in particular,’ Antony Slumbers, CEO of
PropAI, told Real Asset Insight. ‘It is a flywheel
of change, compressing five to 10 years of
evolution in 12-18 months.’
In such a fast-moving environment, as Charles
Darwin noted, it will not be the strongest
who survive but those who are most responsive
to change.
‘The crisis means that it is possible to do things
today that people had been trying to do for 10
years and hadn’t been able to,’ says Slumbers.
This includes innovating, changing business
models and adopting technological solutions.
At the beginning of 2020 climate change
was set to become the dominant issue,
driving a profound reassessment of risk and
leading to new and tougher regulations for an
industry that uses 40% of the world’s energy
and is responsible for 30% of its greenhouse
gas emissions.
‘Coronavirus has changed everything,’ Slumbers
says. ‘People will not simply ask but they will
demand something different in the future,
like up-to-date air quality monitoring. The two
zeitgeist-changing norms are that outside can
be a scary place and that the entire world is in
it together.’
INDUSTRY COMPLACENCY
After a 10-year bull market, there was some
complacency in the real estate industry and
a feeling that innovation was not needed, as
things were going well anyway.
Now ‘offices are empty, occupiers are scared
of them and maybe companies don’t need
them anymore’, adds Slumbers. ‘The traditional
industry response of cutting overheads, capex
and expenditure and hunkering down to survive
the storm will not work this time, because it is
not a cyclical market issue but an existential
health and safety issue.’
In the aftermath of this crisis landlords will have
no choice but to invest in a broad range of
things, from upgrades to ventilation systems to
new fittings and furnishings, from new cleaning
regimes to data and analytics, Slumbers says.
‘The only way out of the crisis will be through
spending money.’
‘Technology will be the great differentiator’
Technology will become the great
differentiator that will allow some
to thrive while others fall behind.
‘There will be a massive amount of change
over the next 12-18 months,’ says Antony
Slumbers, CEO of PropAI. ‘You can make
a lot of money or lose a lot of money, but
you cannot stay still.’
But there is still a long way to go, he
adds, as ‘within the real estate industry
most people still don’t have a good
understanding of what technology can
do. There’s a lack of imagination, fuelled
by lack of knowledge on what the value
proposition and the possible solutions are.’
(see chart).
It will be a gradual process, as industry
players first learn what tech solutions are
available and then choose the ones that
are most suitable for them.
‘Proptech can be overwhelming and scary
if you don’t know much about it, so you
should focus on what you need, start with
the cloud and keep going, focusing on
the opportunities,’ advises Tom Wallace,
founder & CEO of Re-Leased.
Neal Gemassmer, vice-president,
international, at Yardi Systems, agrees:
‘Begin by moving into the cloud, enable
people to work from home, start with the
basic building blocks and grow from there.’
The result will be a more efficient and a
more competitive business. ‘The transition
to proptech is a process, not an event,’
says Yasmina Darveniza, investor at Round
Hill Ventures. ‘It takes time for people to
realise what it is they need and then get it
implemented. In the next few years we’ll
see more solutions pop up, but change is
not happening as fast as it should.’
58 Real Asset Insight | Issue 2 July 2020