Grow Places

GP 32: Will your business survive the future? With Richard Pickering of Cushman & Wakefield

• Grow Places • Season 1 • Episode 32

Share episode

Be as provocative as you dare towards the Real Estate Industry ... Will your business survive the future?

Discover the future of real estate with Richard Pickering, the Head of Innovation for Cushman & Wakefield in the EMEA region. Explore the critical role of strategic foresight in real estate, as Richard shares his journey from consulting to leading innovation. Gain insights on translating visionary concepts into tangible strategies, and ponder the challenge of merging long-term planning with immediate execution in an industry poised for transformation.

Join us as we tackle the pressing issues at the intersection of sustainability, technology, and real estate. Richard underscores the importance of data-driven approaches to sustainability, the shift towards hybrid work models, and the potential of multi-use spaces to optimise efficiency and eco-friendliness. Listen to our exploration of how evolving work and living patterns are reshaping urban areas, prompting a reimagining of asset utility and sustainability in the real estate sector.

Anticipate the "blockbuster moment" looming over the real estate industry, with Richard likening it to the finance sector's seismic disruptions. We discuss how the slow evolution of physical infrastructure contrasts with the rapid pace of digital technology, urging developers to anticipate future trends. Through collaboration on sustainability, diversity, and technology, the industry can embrace change as an opportunity, rather than a threat, and enhance both our lives and our cities.

Speaker 1:

Hello and welcome to the Grow Places podcast, where we explore the virtuous circle of people, growth and place Brought to you by Grow Places and hosted by our founder, tom Larson.

Speaker 2:

Richard, I've got a bit of a bones pick with you, oh dear you didn't tell me this before I signed up to this podcast.

Speaker 3:

I didn't your podcast.

Speaker 2:

Futures Cut to this podcast. I didn't your podcast futures cut, which is over 200 episodes I just checked back yes, was so valuable and I really really enjoyed it. Um, so I want to say thank you for that first, but also call to action to maybe, at some point in the future, if you can do, do some more. I'd be really, really grateful for that.

Speaker 3:

Um absolutely, absolutely, look, it's been a big part of uh, of what we've been doing here at cushmans for a while now, and I've taken a bit of a break to concentrate on some of our uh internal stuff, but I'm pleased to say that that's kind of approaching a crest now. So watch this space, tom. Uh, it would be my advice and hopefully we'll get that going again in the next few months.

Speaker 2:

Awesome awesome, thank you so. So what have you been doing at cushmanman Wakefield then?

Speaker 3:

Yeah, so my job title is Head of Innovation at Cushman, wakefield, for our EMEA region, and that obviously has a link to the kind of stuff that we've been talking about futures and where the industry is going.

Speaker 3:

I think if you don't know where, don't have a clear view of where your industry is going, it's very difficult to innovate in that context, to innovate in that context. But then also what my day job is, I guess, at Cushmans is trying to figure out how we as a business should respond to that emerging new context for our industry and trying to set the change pathways that allow us to evolve our business in line with how we perceive our clients' needs of the future and our competitive landscape. So that covers quite a wide range of sins, but I kind of am portfolio owner for things like digital transformation in Europe. I also have a responsibility for our analytics group, which is quite significant in size now, and I work with business leaders to set transformation strategies. So that keeps me out of mischief or in mischief, depending on your position on that most days, and obviously keeping on top of how change is happening and helping guide our clients through that change as well is another part of my role that I really enjoy.

Speaker 2:

Yeah, amazing, and I'm really looking forward to diving into this in a bit more detail with you. Sure, as you know, I really enjoy. Yeah, yeah, amazing, and I'm really looking forward to diving into this in a bit more detail with you. Sure, um, as you know, I really enjoy our conversations whenever, whenever they arise, and, um, I wanted to ask you a question, just to hold in your mind, that we'll kind of come back to at the end of the conversation, if that's okay, and I want you to. If I was to say, you know, be as kind of provocative as you kind of dare to be within the realms of what you can and directed at the real estate industry, what would be your response to that, given where we are now and everything that you're passionate about and interested in?

Speaker 3:

So let's hold that in your mind that's part for the end. Is it Come back to that one? I'll have a think about that. I don't mind being provocative, that's good. That's good More provocative the merrier.

Speaker 2:

So so then, in terms of what you just described, then your your role, because you, part of it is is sort of thinking, isn't it strategizing? And part of it is is doing, and that's quite a fine balance, isn't it that we all have to face in in in our daily lives about? You know, how much do we look forward and how much do we sort of focus on on doing now. So so how do you see that for yourself and for the business and maybe for other businesses out there? What are the big things that people should be really?

Speaker 3:

focusing on at the moment? Sure, I mean, I think that's a kind of a paradox for all businesses, isn't it? It's the kind of the need to think strategically in the long term but also to get some things done in the shorter term. And, you know, most businesses have reasonably short term horizons that they need to respond to as well as developing a long term strategy. I think I've personally probably had a little bit more luxury to develop a longer term view at Cushmans.

Speaker 3:

That's been part of my role. You know, I mean I have come from a background in the business. You know providing, you know in, I mean I, I have come from a, uh, a background in the business. You know providing, uh, you know, agency and then consulting services to our clients, um and um, and and then have transitioned through a role in kind of research and futures through to a strategy role and then and then to my current role in innovation. And I guess on that journey um, certainly in the strategy role and the future role particularly sorry, my job was all about the future.

Speaker 3:

In the strategy role, I had to take some of those concepts that we developed about the future and translate them into how we arrange our resources in the platform and, I guess, in the innovation role. That's a sort of. I guess the implicit brief from my my leaders was uh, less talking and more and more, um, more doing. And look, I think every person who is a strategist, who likes to think longer term, doesn't just want to leave it there. Most people don't. They want to actually implement those strategies in a way that is impactful. And uh, that's, I guess, what I've been focusing on for last year or so, just to make sure that we sure that we're delivering on the way we're thinking and putting our talking to the walking. That's not mixing my metaphors.

Speaker 3:

But yeah, and so that's why I've been really focused on that in the last 12 months, particularly.

Speaker 2:

Yeah, yeah, and I think that's really important, isn't it for real estate? Well, for any sector. But when you look at real estate, um, we're obviously in the development space and that's obviously particularly long term. But in a way, you're kind of you're looking at the, the 10 year, and you're looking at today in the same breath, because what you, the decisions you make, now have that impact, um, at the product you're going to be creating over, over sort of five, ten year period, um, so what, what are those kind of? What are those kind of you know, big waves? You've used that term with me in the past.

Speaker 3:

You know what are the big waves that people should be, yeah, riding, doubling down on sure I mean, I think, I think, firstly, I think you raised an interesting point on the time horizon. Um, so you know, if you, if you think about mean, when we do things like futurology, we're thinking kind of 10 years plus, usually on that horizon, and really that's the only accurate or reliable way of predicting beyond that horizon, or at least creating scenarios about it. Me today, and I think the thing I would say to people is is things don't happen overnight. You know, we're not going to wait for nine years and 364 days and then suddenly all these changes are going to manifest. We're on a long burn path of transition towards that, that horizon.

Speaker 3:

If I was to ask, you know, if you ask me what, what are the, uh, the, the big waves that I see at the moment and the?

Speaker 3:

There are two top ones which I think stand above all others. One is sustainability, which has really gained some traction in the last five years. I would say I think we figured out as an industry quite late how important sustainability was going to be, not just from an ethical perspective but on the impact on how we run our businesses in real estate, particularly given how much of an exposure we have to carbon emissions, et cetera, in our industry and that is being I think that's very palpable here and now trend, but it's going to continue to develop probably more. The topic area is going to expand more, you know, from more initial focus around environmental factors to, you know, other, more social factors over the next sort of five years. The other wave, which we've again seen palpably in the last five years but is going to accelerate significantly, I think, in the next five years, is technology, and technology is a very big subject, right, and you know my lens I've got a couple of lenses on this now.

Speaker 3:

There's one lens, which is a macro one, and if you think about how people use real estate or move around our cities um, a kind of topic celebra of mine in the last year um, you know, technology is ameliorating the impact of distance. You know communication technology, the internet is changing the impact of distance. You know communication technology, the internet is changing the nature of distance. And if you consider how important distance or proximity is to real estate I mean, you know the phrase I think it was a Lansac phrase came about 50 years ago location, location, location. I think it became a TV show after that. But if location becomes less important because people can move ideas and information more readily across larger geographies, then that starts to reweight the balance of real estate. So, from an economic perspective, that that kind of particular element of technology, it also kind of substitutes the type of assets you might need and that's obviously a kind of vicarious trend on that first one. But then, if you look away from the kind of property market dynamics and more to industry dynamics, it's going to revolutionize how we do business. Uh, all players in the market, whether they're, you know, service providers like ours, or developers like you know yourself, or, uh, or investors. We're gonna we're gonna um see a very different way of operating in the next 10 years particularly.

Speaker 3:

I think if internet was the first wave, probably AI is now the next wave of that. So I think between those two trends we've got a lot of change to absorb in our industry. I think the other one is probably just the kind of people who are in the industry. It's less my topic, but it's an important topic to our business more generally is do we have the right skills? Do we have, uh, people in our business who reflect the diversity of the communities that we, we work in? And that's going to be an increasing focus, I think, for all businesses in our industry over the next, over the next five years yeah, yeah, and I completely agree.

Speaker 2:

And, um, and just with regards to those, those first two kind of macro factors that you talked about, sustainability technology, yeah, um, where do you see the interlinkages between those two and and directly with the effect on on real estate? Because I think that's that's where there's actually a huge amount as well around the speed of some of these impacts and how actually there's going to maybe be positive correlations between those two strands but that may create more existential risk actually for some aspects of real estate as well as, obviously, some opportunity.

Speaker 3:

I mean, I think the most obvious intersectional point is data. You know, most sustainability initiatives are data heavy. You know it's about tracking, monitoring and then improving and then retracking and monitoring, and I think we're getting much better at that in the environmental space. I think on the social side it remains a little bit more intangible at the moment. But you know, arranging our industry data in order to provide standardised metrics on sustainable achievement and the ability therefore, to hit targets and communicate those to stakeholders, whether they're your prospective tenants or public authorities. I think that's going to be an incredibly important vehicle to deliver on sustainability initiatives in a way that proves our ROI. So I think that's a critical area that's going to. You know, if we get our data house in order as an industry, which we haven't yet, in my view, then it'll shine a clearer spotlight on failing assets and drive the business case forward for redevelopment of those assets or repositioning of those assets in a way that delivers against those targets. That would be the main one. What do you think, tom?

Speaker 2:

Yeah, no. Well, I agree definitely with that on a kind of operational side, something which you know. In preparation for this, I was listening back to some of your podcasts that you'd done and you were talking about on the sort of the urbanistic scale, on the city scale of things as well. I think there's two aspects to that, isn't there?

Speaker 3:

And maybe on the latter then, how's your view on on how those things interrelate there? Good point, yeah, look, I mean again, you know, if you look at um, if you look at uh, what uh is creating, uh, global warming or climate change, should I say um, it's largely comes from real estate and transportation. You know those two factors in themselves are the two biggest factors and obviously those are related. If you think about how we work as a society, it changed quite fundamentally. About 150 years ago ago most of us lived within 10 minute walk of where we worked. Then the train came along and suddenly everybody made a choice to escape kind of difficult conditions in our inner urban areas and live in leafy suburbs. And particularly that was accelerated by the advent of the service industry in the mid-century last year. And so you've got this kind of gradual shift over the last sort of 300 years, but picking up in the last sort of maybe 70 years, towards working in a very different place to where you live. And that's been hugely destructive of cities in many ways, and particularly the kind of more modern cities like in North America or Australasia where they've designed their kind of cities around this kind of principle of commuting. Now obviously that's been quite clearly thrown up into the spotlight in recent years. I mean, first of all, through e-commerce, you know, the ability to get stuff delivered to us. Not sure that helps sustainability, to be honest, but in a better programmed logistic environment maybe it could.

Speaker 3:

And obviously more recently, in working working from home, our hybrid work model, um, fewer days, commuting means, um, means less emissions, uh, less floor space. Ie, you know we're very wasteful, uh, and I'm not saying it's the wrong thing, but it's inherent in endemic in our system that we waste buildings. You know, if you think about the building we're in today, this is going to be intensively used for 12 hours of the day and for the other 12 hours it's going to be not used at all. Basically and the opposite is pretty much true of my house at home so it's going to be not used in the daytime and then it's going to be quite intensively used in the nighttime. Now, what working from home has done is allow us to coincide and get more utility out of the home. Now your point is and get more utility out of the home.

Speaker 3:

Now your point is will that precipitate an acceleration of obsolescence in real estate stock? I mean, on the face of it, yes, it will do. I think the impact will be more tempered than some have given cause for concern about, because it's very difficult actually to rationalise the amount of office space, particularly you're. If everybody's turning up on wednesday, right, you've still got to have a lease that's full capacity for the week. Um, what that doesn't do is help. Your sustainability argument and I think there'll be people looking quite hard at that um across the world in the next five years is is how do we gain greater utility from our assets in a way that matches the demand more readily to the supply? Very difficult, I mean. I'm not going to sleep in this off. I've done it once.

Speaker 3:

I should probably say that, but I'm I'm not going to make a practice out of sleeping in this office. Yeah, I probably find it easier to work at home as a trade-off, but you know other things like how to, how to, how to shops turn into restaurants at night. There are definitely crossover concepts there that provide us an indication of where we might go to get greater utility. But I think as a world, as an industry, we can't be in the business of creating very, you know, carbon intensive assets that we only use for a small part of the week.

Speaker 2:

Yeah, yeah, no, absolutely, that we only use for a small part of the week. Yeah, yeah, no, absolutely. And you mentioned the theme around distance earlier on in this discussion and simplicity from my mind, what technology does is it collapses distance in terms of how we could relate to each other. You know, we could have a FaceTime call with someone in Australia and you feel like you're in front of them. Or if you look at what meta are doing, you know, with the vr and other things, you can literally actually feel like you are experientially in the same room as each other.

Speaker 2:

so so the technologist version of collapsing distance is through technology very much, whereas in our industry, we talk about the need for connection, the need to be together, um, uh, the need to collaborate, and these, these themes are definitely at the forefront of the narrative around the why to cities and the why to office buildings and to other things. It's about bringing people together, so they're they're almost like the same narrative run in different, completely different ways, and probably they're both.

Speaker 2:

True, you know there's an element of that, but but how do you see some of that panning out when you think about the, the way that cities are operated, but also fundamentally, as you say, how we, how we live and work, and um and where we, where we do that?

Speaker 3:

yeah, I mean, first thing I said I don't think they're dichotomous uh, uh kind of uh theories there. I think that they they work in harmony with each other. I think what technology does very well is ameliorate the cost of distance for things that don't require proximity. Um, but not everything doesn't require proximity. Still, right, um, and there are some things which we, we as humans, find more valuable to do in person. Certainly, it would be my, my take on things. I think probably you need to draw that line of where, but you know quite clearly, on a typical day in the office it's not full of collaborative activities. Still, there's still a lot of admin associated with most office jobs that can be more readily done, or it can be done anywhere, and we make a choice then about where we want to do it.

Speaker 3:

Um, I think, um, there's quite a lot of evidence now building up post-pandemic about why, uh, why you know what is the right thing to do in what location.

Speaker 3:

Um, I think what was clear coming out of the pandemic is actually people adjusted pretty well to administrative work, you know, particularly, you know, you know we don't have paper files in professional services anymore. You don't need access to the infrastructure and technology in the same way you do, because it's all in the cloud now and also actually, interestingly, one-on-one conversations with your line manager actually work pretty well in a hybrid environment, often because, actually, managers were forced to put in one-on-one meetings to address the fact they didn't have the tap-on-the-shoulder opportunity anymore that they used to have. What is equally true, though, however, is the fringe network connections just fell off a cliff completely, so if you weren't planning to see somebody, you're not going to bump into them on a Teams call, like that's not the way it works, right, and we saw some exploratory kind of ideas about the metaverse kind of coming out a couple of years ago, but I think they're probably 10 years too early, right now.

Speaker 3:

Now, of course, what will happen over time is technology will continue to improve. That is a, a truism. Um has always happened. Um and will always happen, um and as as it does. So the uh fidelity, the fidelity differential between the real world and virtual worlds will start to reduce, which might encourage more activity in the virtual worlds. So I think we've got to watch out for that as a progressive trend in our industry.

Speaker 3:

I come back to when we were doing some thinking about the future of cities and why cities were valuable. I kind of posited three factors as being important. One was amenity, the second was agglomeration and the third was serendipity. So amenity means I'm near source of my wealth. You know, I'm near a shop or near a train station. Those kind of things are valued.

Speaker 3:

That's being killed by the internet largely. Agglomeration means not being near a thing but being near other people, a group of people who can coalesce around an idea, and I think that still has a strong resonance in today's economy and social culture. But it's definitely softening because you can now have agglomerations of people online. I mean, I work in a team of multinational people in my role and we work through a team. You know we don't see each other every day and we make it work, but serendipity is the thing that I think is going to really drive the performance and value proposition of cities going forward, and that means providing reasons to bump into other people, or creating the conditions where people will bump into each other.

Speaker 3:

At the moment, I don't think the digital world can offer that, and I think that that will remain a strong value attractor for businesses to encourage people into offices as part of their role in the future. I guess there's another kind of bigger question about distance, though, which is you know the way you frame that question question, I think rightly so, is it's the immediate impact is, and. But the way a lot of people frame that question is does that mean people can work at home now and then commute less often to an office? Or, to take that to another degree, like people might not need to be in the same country anymore, and I think that that that in itself could be a far more impactful outcome of this than people working a couple of days from home a week.

Speaker 2:

Yeah, no, I agree, Thank you. That's super insightful. So what is the you mentioned value proposition there for cities, this kind of this attractor, this almost like the brand of places, whether it's cities or whether it's towns or whatever. So how do you, fundamentally, how do places attract and retain people and businesses?

Speaker 3:

yeah. So I think again, like most things in life, they've got to do two things. Uh, they've got to um, uh, you know, they've got to deliver well on hygiene factors or ameliorate the, the negative factors of failing to hit hygiene factors, and they've got to provide a wow factor, a pull.

Speaker 2:

So so it's a joke. Can you just define what you mean by hygiene? Yeah, wow factors, yeah, yeah sure.

Speaker 3:

So hygiene factors would be things that people take for granted, that you know, not that, um, not that necessarily. You know you're not going to go out and buy something because it delivers against the hygiene factor, but it's the kind of thing you get pissed off about if it's not done well. Um. So if you go on your train in the morning and the seats are squeaky and there's not enough uh room to sit down and you can't get good internet, those are hygiene factors that people now bait into their expectations of how that would work. And typically there was um. Who was it? It was um. I've come back to me.

Speaker 3:

One of the kind of big um, um kind of management thinkers described that if you don't hit hygiene factors well, people are likely to complain, but they're not necessarily likely to buy as a consequence of that, whereas in order to drive motivation, you need to then provide something that people get excited about, something that makes them feel their life has got better not that from that baseline rather than got worse. So if you think about that in a city context, hygiene factors are things like housing costs. You know, if people can't afford to own a home or rent a home, that is going to be a problem and it's going to create, therefore push factors away from our cities. But I remember I'm from Yorkshire originally. I came down to London in my early 20s. I was happy to accept whatever house I didn't need a lot of space and the reason I came down to London was the Dick Whittington story of the bright lights and the fun, and a lot of people do choose cities around that.

Speaker 3:

Still, I think people choose cities because of the wow and they leave cities because of the hygiene. And you know, I think cities like London, where we are today, you know, have performed hugely successfully over the past 10 years and they still perform really well on some of these wow factors, you know, excitement, et cetera. But they're starting to show a little bit of challenge around the hygiene factors housing, pollution, well-being, free time and it's those kind of things that the big cities around the world, the global megacities, are going to need to put real focus on in the next 10 years, whereas may be the smaller, second tier cities where there's not many as many issues present in that regard. They're the ones that are going to have to compete on the wow factors. That'll be my take on it.

Speaker 2:

Yeah, yeah, that makes total sense. Yeah, um, and there's also. There's also stages of life in that aren't there, because the younger you are, typically, the more wow you're after, the higher hygiene you will accept and as you move through life and that sort of changes, doesn't it?

Speaker 3:

completely. Yeah, I mean obviously, again, the biggest dimension comes in housing. So when you have kids living in a 500 square foot flat in central london which might have worked in your 20s, 30s, suddenly becomes, uh, less appealing um and um, yeah, you put a different stall on that um. And so, if you know, look, I mean this particularly affects the, the big cities, and I'm talking maybe two, three mil plus in size.

Speaker 3:

You know, most cities that are a million or down have still got kind of reasonably sensible commute times and therefore housing costs, because the land cost on the edge of cities is still relatively affordable, whereas you get to a city of the scale of London but actually it's not as bad in London because we've got good public transport We've got quite high density living living. If you go to some of the North American cities where they're kind of arranged, or the Australian cities I was saying before, they're arranged in a way that promotes low density, urban sprawl and no infrastructure, that's when you've got like a two hour drive to work in the morning that you can't be productive on and that becomes probably the overriding consideration for an employee as to whether to turn up to the office that day. You know, no matter how many kind of free croissants you provide, that's going to be a difficult bar to overturn. And.

Speaker 3:

I think also you've got to think about like who, when you think about wow factor, you know to your point about age, like when I was younger I was going out every night. Now you know. I go out. I'd like to say once a week, but I don't. If I'm honest and I'm, I go out. I'd like to say once a week, but I don't. If I'm honest, yeah, and I'm home. I'm home by 10 o'clock that's.

Speaker 2:

That's sorry. I'm pretty quite sad now. I was gonna say 10 o'clock, you're living the dream. Yeah, I mean I need to.

Speaker 3:

I need to rethink my life, maybe, but, um, but you know when that's your modus. You're happy to accept a good night out in a big city less frequently than you are when you're younger, which means you probably prefer to, you're prepared to live a bit further away, but you don't have all access to that. I mean, it's the on a day-to-day basis in order to get the private amenity like a garden or two extra bedroom or garage or something like that yeah, yeah, definitely, because it's, because it's interesting, isn't it?

Speaker 2:

when I was just thinking about this, when you were saying that it's the inertia around changing places, transport networks, buildings, is so high? Yeah, you know, it's slower, it's much slower. The pace of change in the digital space, in these other spaces, is so much quicker, isn't it so? Historically, as you've said, big shifts in how people live, fundamentally, and work has been driven by infrastructural changes as much as it has, by, kind of at least, information technology. But now the information technology side of things is so much quicker that those companies companies, you know, whether it's microsoft teams or or others they see that as a opportunity to capitalize on. So let's, let's sort of solve those pain points by producing a product that makes it quicker to do that. But now those things are, as I say, move at a quicker pace than the ability to build affordable homes or build new towns or or change a commercial district into a vibrant mixed-use district yeah so do you see anything in in that?

Speaker 3:

yeah, I mean, I think you know product life cycle is a really important factor to consider in any innovation, right as well. So, um, you know, typically, if you kind of look in a book of product life cycles, you'll have like fast fashion, or you know the height, uh, you know, consumer technology at one end of the spectrum and then you'll have aeroplanes at the other end. But we're beyond aeroplanes, right. So you know, most commercial assets would have an economic lifespan of 30 years plus and a technical lifespan, you know. Well, in excess of that um and um, you know, if I look at my house as an example, like it was built in 1650, I'm still living it. Well, I wasn't living in 1650 but, um, you know, with some uh, modifications, internal modifications, electricity, you know, a toilet got moved inside, you know all of those kinds of things my house is still standing after 350 years, whereas I buy the next iPhone every year. So what that does is, if you imagine that that's the context into which innovation happens, like long product life cycle, short product life cycles if you're then faced with a period of consumer change and in the real estate industry most of our businesses are B2B, so let's say that's kind of corporate attitudes change or requirements of the workspace change or the shop, you're not going to be able to mark to market in the same way that if there's a consumer shift in the technology space or fast fashion is a great example. You know, every season, you know new fashion comes out, you put the old one in the bin, not very sustainable, but that's what a lot of people do and businesses need to therefore be very innovative in order to keep on top of that trend.

Speaker 3:

Real estate has got away with being not very innovative for a couple of reasons. One is because consumer demand for real estate hasn't changed quickly. But the second is it can't change quickly and so even if it did, there'll be a problem now and then. What we see is is every so often a disruptor kind of peeps through in our industry. I mean, we saw that with some of the flex operators in in recent years and suddenly that could precipitate if that becomes a snowball, it can precipitate massive obsolescence in assets which would otherwise maybe have another 20 years on their value from them. So innovating in the real estate space is tough, but it carries huge benefits as well.

Speaker 3:

I mean, again, we see that through this period of change in the office market, those assets which are coming out of the ground now, which are marked to modern demand. You know, almost there's now a binary of like some corporate occupiers will only select those assets, whether it's, you know, the way they're kind of configured or the sustainability features of the asset, and that risks putting a whole other genre of stock out of business overnight. That's a real watch out for investors at the moment. And of course you know, obviously my business is not a property business, it's a professional services business and so we can mark to market a lot quicker. But you know, obviously we can only. That's about the service provision rather than the underlying asset change. So you've got those two paces of change in the real estate industry. There's organizational change, technology, data, those kind of things, and then there's physical asset change, which is much more challenging, I think, at the moment.

Speaker 2:

Yeah, yeah, yeah. And so in that physical asset change world, which is effectively what space we're in, obviously, as a developer, a regeneration company, yeah, how do you, how do you see those companies being most successful, uh, on a kind of you know, on a corporate level? But then how do you see them being most impactful, really, in terms of how they improve people's quality of life?

Speaker 3:

yeah, I mean, I think, look, so if you think about it, so I, my background is in development, to kind of declare my hand here. But um, if you think about a typical like not a sort of uh, not a kind, of you know a big, a big kind of development projects.

Speaker 3:

You know, what would you, what would you be? You'd be like, uh, you, you'd need a year to buy it, or you know, and you'd need, like, um, a couple of years in like the uh, discovery and planning phase. You're then doing mobilization, you're doing development and then you let it so. So you could be like six, seven years away from the point of consumer demand, which is terrifying, like absolutely terrifying in a market that's moving quickly. So you know, particularly for developers less so for investors, who are immediately accretive day one Developers need, more than any other business, to be thinking what's going to happen in the future, because if you design your asset around what's needed today, you've almost certainly lost the game. So either you've got to design it for the future or you've got to retain inherent flexibility in the design such that you can adapt it at a later phase in the development process. So I think nimble, agile developers who can think beyond the horizon, predict future need and respond to that need in a way that creates value from a balanced scorecard perspective, I think that's going to be really important. That's important to the value proposition of those firms.

Speaker 3:

I think also you know, if I was to kind of chance a look at that six, seven-year horizon. The trends we've been talking about technology, sustainability, but particularly social sustainability is going to be a bigger factor in the future than it is now and that starts to go not just to the product type but also the funding model and also the business model of how do you go about funding and developing and investing in those assets. But you know, as I was saying earlier, this won't happen overnight. It's going to be progressive trends. If you've bought into an old value model that doesn't anticipate these trends, it's going to pose a business risk in your development plan. Yeah, yeah, absolutely.

Speaker 2:

Yeah, absolutely. And you know we talk about growth on this platform. Yeah, In all its senses, but in a, you know, recognising that there's some downsides to growth, but also trying to be optimistic and talk about it in a really positive sense. So how do you see that? I don't know whether it's kind of inclusive growth or however you want to describe it. Some of these factors that we're talking about around affordability, around access, yeah, yeah.

Speaker 3:

I mean I think you've got to start with a baseline, which is cities inherently promote inequality. I mean I probably should explain myself with that. But if you think about how land allocation works in our cities, you know, not in a kind of artificially constrained market like a government controlled country, like a communist regime or something like that you know the land is allocated with preference to those people who can afford to pay the most and that's why our high streets are full of chain stores that have the most efficient operating model that allows them to kick off the highest residual rent. And similarly, the people who can afford to live in the most advantageous locations in our cities are the people who do best, and then the people who can't afford that then suffer systemic disadvantage in other areas. So if you can't afford to live in next to Hyde Park, you know most of us can't right. But let's say you're now forced out to, you know an estate on the edge of town. That means probably your commute time is almost certainly going to increase, which carries social penalty, carries a financial penalty as well for people commuting in it. Also, those locations because cities get less dense as you move out tend to have more dispersed, dispersed infrastructure. So you've probably got a longer walk to the shops. You've probably got less shops. You're not going to have an opera house on the edge of the city if that's your, your bag, um. So other disadvantages, and also in the edge of cities tend to have worse pollution, um, and they tend to have higher housing-related health issues. So cities force people in, they penalise people who can least afford to be penalised.

Speaker 3:

How do you solve that? You know, very, very difficult. In the most part it comes through conscious placemaking. In my mind. In the most part it comes through conscious placemaking. In my mind, it comes through having a long-term view on estate management. It also comes through building more housing right, because that's the biggest challenge to people at the moment and our housing stock of the last century isn't going to stand the test of time, in my opinion. So how do we create sustainability or social sustainability going forwards through real estate? I think it needs needs greater concerted effort with large-scale placemaking and partnerships with the public sector to create more thoughtful developments. I think it also requires, um, probably more willingness to be interventionist from our government perspective. You know I've worked across the country and abroad actually on a number of big regen projects and the willingness of the local authority to compulsory purchase assets in a way that unlocks the future.

Speaker 3:

Development value is critical to the viability of those schemes. Development value was critical to the viability of those schemes. You know, if you look even at somewhere like Milton Keynes that was purchased for agricultural value, which then allowed them to build a city on there that had enough economic residual to invest in placemaking initiatives, you might not consider the roundabouts to be good placemaking now, but at the time it was groundbreaking. They planted a million trees in Milton Keynes before it even set up. And unless we can acquire land at a value which allows us the economic surplus to reinvest in the community, it becomes quite challenging to deliver that. That's part of the broken economic model that we live in.

Speaker 3:

I suspect a lot of property investors listening to this might not agree with me because obviously is you know, you want certainty of the value of your asset, um, and you want to. You want to basically allow to be a land speculator. But land speculation does carry a cost to society and that's something we're going to have to decide our position on as a society yeah really interesting and and, um, no, I agree with a lot of what you're saying there.

Speaker 2:

But if, but, if I was to try and play like maybe the devil's advocate or maybe the public's view on this as best I can, it would be that, well, if you look back over history, you look at, I mean, garden cities may be an okay example but you look at some of the other big broad brush, really optimistic sort of city-making, place-making strategies whether it's streets in the sky or whatever it might be. You know a lot of them are looked back on really negatively in terms of how they've actually affected how people live really and the prospects and opportunities for people. And maybe, as you say, you live in a 16th century house, as you're referring to, but you look back at sort of the Victorian terraces and those periods. Maybe there's some positives to how those are portrayed, albeit they've now got big issues with. Okay, you know how do they become more sustainable, more energy efficient? So I guess what I'm saying is kind of do you maybe, do you have a view on on what that sort of vision maybe looks like going forward?

Speaker 3:

yeah, I mean, look, I mean, I think the start point of this is active planning, as only it's only 100 years old, right, that's? That's how long we've been actively trying to plan our cities, unless that's in the uk, unless and we were leading the world on that in many respects and the moment you start to not let the market decide and you start to actively plan the allocation of uses, you've got to have a hypothesis for those. And we didn't really have a hypothesis. We had some poor hypotheses. I think Most of them were coming back to our previous discussion, actually quite anchored around convenience. Were coming back to our previous discussion, actually quite anchored around convenience.

Speaker 3:

They thought that people would want major roads running through city centres to funnel people out. They thought people would want to live outside cities by themselves. But what we've learned over the last century is that that's not really what people want. They want a finer grain of interaction. They don't want their cities to be dominated by cars. They don't want urban sprawl. They like living in communities. I would like to think that we now have the empirical backstory to this. That starts to point us in a direction for the future. But obviously the world continues to evolve and change. So who knows?

Speaker 3:

But I think I'm attracted to proposals that have high density, but well-managed high density. I used to when I lived in London. I used to live in Bayswater, which is one of the most dense areas of London, but you wouldn't tell that because it doesn't look like high rise. It's kind of five mid-story, five six-story housing. It's kind of five mid-story, five six-story housing. But it was, you know, nice stucco, white, stucco-fronted buildings surrounding garden squares which provided an interaction venue for people who were resident there, local amenities, like very much a 15-minute city kind of feel in Bayswater. Now is that a unique kind of privileged location in London? I don't think it needs to be.

Speaker 3:

I think that could be delivered in most areas of the world. And I look at the mistakes of the past I think I see you know I come from Hull originally I see a lot of bungalow type social housing. We see that in the Americas also. I also see the way of density being delivered being a tower block in the middle of a field sort of thing, which creates no defensible space or no venues for interaction. So I think if we can come up with a better proposition around density, a well-managed density, I think that that's on a winning strategy and then make sure the infrastructure's embedded at the outset. Again, you don't develop that well on a plot-by-plot basis, so you need master developers in that framework to secure the infrastructure that wouldn't be developed individually.

Speaker 2:

Awesome, awesome. Richard, I could talk to you about this stuff all day, but I'm going to circle back to this question that I asked you at the top. But I'm going to circle back to this question that I asked you at the top. So if I was to ask you to be as provocative as you dare and directing that to the real estate industry, what would be your sort of response right now?

Speaker 3:

Yeah, look, I mean, I think it's always easy to be the guy who says right, we're on the cusp of massive change, change is about to happen. But I'm going to be that that guy because I what I see here, um is an undercurrent of different trends developing that feel a bit like um an iceberg, and you know, there'll be a moment where that iceberg pops out the water and sink some ships, and I think that time's quite close for the property industry and I think that's true for all elements of the property industry. If you think that the product mix, in the way we've talked about, is changing, the value economic, the economic model underpinning property is changing and in the next five years the way we operate as businesses within the industry is going to change significantly. Now I think it suited most people in the industry to not change because of some of the. We talked about long product life cycles, but also personal defensiveness.

Speaker 3:

We talked to you know, alignment to the interests of the stakeholders? Not really there. Industry's misaligned in many respects and at the point, at some point, there's going to be a point where this starts to become challenged and that comes when disruptors from outside our industry pop in and say we can do this better than you guys. I think that we've seen in the finance space over the last 10 years. That's the biggest sort of series of asset classes globally, or business investable asset classes globally. We're very close second, particularly if you put residential into there. And so that attention, that kind of private equity attention that's been focused on the financial assets, is now going to be focused on real assets in the next 10 years, and those who are not willing to change, I think, will become very irrelevant. In a very short space of time there will be a blockbuster moment for our industry. You know that's why I guess my role exists. You know it's try to help figure out what's going to happen and then try and be proactive about addressing it.

Speaker 3:

But there are some things that a firm in itself can't do. It's an industry that needs to do it in collaboration. I don't think we've collaborated well enough as an industry on key factors. Sustainability is starting to get there. Diversity, tentatively. Technology we haven't really collaborated at all in terms of data, et cetera. It leaves ourselves very open to other people outside of our industry. So we can do it better than you can, and if that doesn't worry people on listening to this, um, um, you probably need to think again. Or you're doing your job much better than I, maybe, but um, but you know, I think the final point I've made, tom, is is change shouldn't be feared.

Speaker 3:

Uh, change is really good, it's really positive. You know, people can unlock huge opportunities in their life through change, and I think when you're younger you're much more open to change because you see that as part of your life's experience. But when you're older, you've got more to lose and you feel um more concerned to maintain the status quo. But you know, my advice to those listening, if they're willing to take it, is be open to change, because I think that through change and embracing it, you can unlock a lot of fear and and mistrust and actually look at ways to improve your life but also the people who you work for on the planet, and I think that's in the property industry. We've got a very rare opportunity to do that in a way that many other industries don't. So change coming, you should be concerned about it, but only to the extent that you're not willing to change would be my view.

Speaker 2:

Richard, that's a great way to end. There's a lot for people to think about, but also to really throw themselves into and be optimistic about there too. So thank you for your time.

Speaker 3:

Thanks for inviting me, Tom.

Speaker 1:

Thank you for listening to the Grow Places podcast. For more information, visit growplacescom and follow us at. We grow places across all social channels. See you next time.