Arnhem, December 2019. Last year around this time the trend article for 2019 was published. The year of vertical integration, that green becomes the new grey and we have to repair the roof digitally while the sun is still shining. Also this year I have chosen to publish an abridged version (not a summary) in the magazine Stedebouw & Architectuur (Urbanism & Architecture). You can read the extended version trends 2020 below.
2019 WAS THE YEAR OF…
The heat record in the Netherlands. The announcement of a new era and the change of the emperor in Japan. The cancelled IPO of Wework. 5G stood at the top of the Gartner Hype Cycle. The infographic ‘Anatomy of a Smart City’ is the most shared PropTech article. The biggest morning traffic jam (1,136km) by tractors and 18,000 construction projects that were hampered by the new nitrogen rules. Sidewalk Labs is allowed to continue developing in Toronto under strict data use conditions. Blockchain that seems to have disappeared after the hype and Digital Twin is ‘the next big thing‘. The search term ‘PropTech’, which is growing steadily on Google Trends. British Airways receives a record fine of €204 million after a data leak. The best-selling Dutch non-fiction book ‘Most people are good’ and the film ‘Joker’ is a blockbuster. Negative savings interest rates are lurking. The launch of the first commercial solar car. Social media detoxes’ has also become a trend. The acquisition of PropTech company Bouw7 by software company Exact. The inspiring TED talk by Bjarke Ingels about how we can live on Mars. It was an exciting year!
2020 WILL BE THE YEAR OF WOKE
2020 is the Chinese year of the rat. 2020 is also a leap year. 2020 will also be the year of (no) Brexit and there will be presidential elections in the United States. In 2020, the first Formula 1 race will be held in Zandvoort and the Eurovision Song Contest will be held in Rotterdam. The Netherlands celebrates 75 years of freedom in May. During the summer, the European Football Championship and the Olympic Games in Tokyo take place. Paint brand Dulux has chosen a cool shade of green ‘Tranquil Dawn’ as Colour of the Year 2020. This colour should provide an antidote to an “increasingly disconnected” modern society. It reflects a growing desire to understand what it is like to be human at a time when technological progress is making us feel more and more alienated from each other. 2020 will be the year of ‘woke‘. Woke means awake. It actually means that you are very aware of what is going on in society. Woke means being socially involved. Woke is an action term. Woke is becoming the new ‘cool’. How woke is your organisation and how woke are you?
1. PropTech lives – No time to die
The real estate sector is making progress with digital transformation. In 2016, the PropTech movement started its advance. Three years later, it is impossible to imagine the real estate sector without the PropTech movement. In the period 2016-2018, the main focus was on disruption and the adage was innovate or die. New technological solutions have frequently appeared on the market (already more than 7300 PropTech companies worldwide – source: Unissu.com). The established real estate companies are now also making themselves heard more emphatically. Organisational, customer and social issues have to be addressed and the established companies have three choices: do it themselves (DIY), buy an existing solution (transaction) or cooperate (partnerships). While PropTech co-founders were the movie stars, today entrepreneurs are the rock stars of tomorrow. One thing is certain, the changing real estate sector has… No Time to Die.
2. Beyond the startup mania
PropTech startups have a cuddly image and are liked to show up at events. Unfortunately, only a small part grows into a great success. For a PropTech startup, it is about creating value and solving a problem. As a start-up company (startup phase), you are looking for experiments and pilots. One of the most challenging battles that a co-founder engages in is to be considered credible. (Unfortunately) Start-ups are not always credible. It is also tempting to surround yourself with like-minded co-founders who are going through the same process, while you have to surround yourself with the customer segment of your choice. I expect ‘startups’ will distance themselves more from the ‘startup label’ by 2020. They are going to use the language of the ‘established real estate companies’ more with the aim of scaling up. Established companies will continue to scan the market for (young) PropTech solutions, and will also increasingly innovate on their own (DIY). PropTech startups have become part of the digital transformation puzzle of the built environment. The startup mania is not over.
3. Making a real profit with free money
The long-awaited IPO of WeWork did not take place in 2019 and WeWork recently announced to lay off of 2,400 employees. These blows are being dealt hard at the Wall Street merchant banks, at Softbank and at the investors in Silicon Valley. Is the Silicon Valley formula M x D = $E (Mass times Digital equals Dollars to Exponential Power) under pressure? Has WeWork heralded the end of the startup culture? No. I expect that in 2020 ‘entrepreneurship with social impact and healthy profit’ will become more important. The Silicon Valley formula will continue to exist. A lot of money will continue to flow to European start-ups now that money is almost free. Compared to the period 2015-2019 to 2010-2014, the capital invested in European companies has increased by 232% (source: Slush newsletter). The danger of ‘overfunding’ is lurking for young PropTech companies. Investments in purpose-driven companies have also increased considerably. The selection criteria ‘clear and simple route to profitability’ and ‘demonstrable social impact’ will be higher on the list of investment criteria in 2020.
4. New challenges due to data-ism
The real estate sector is increasingly linking up with media and data channels. Because they see data as the new oil. This movement – data-ism – is growing. There is a good chance that real estate organisations will be using algorithms in processes that are also authorised to make the most important decisions. The primary focus of the digital (data) operation (DigitalOps) is on process improvement (cost reduction). This focus evolves towards improving customer experience (CEX and UEX). In addition, companies are increasingly looking to accelerate the digital business transformation and to create new customer value. DigitalOps is the key for companies to fulfil their brand promise and differentiate their real estate business. In 2020, real estate companies will also develop strategies to differentiate themselves in the area of Sustainable EXperience, the experience of positive social impact. I expect that in 2020 data will not yet be regarded as labour. But owning data does mean taking responsibility. The new European e-Privacy regulation (under development) will therefore create additional challenges in the real estate sector. The real estate sector is also in greater need of (inter)national standardised real estate data and is striving for clarity in the field of data ownership. 5. Innovation theatre no longer accepted The ties with separate PropTech experiments, stand alone innovation initiatives and collaborations are increasingly being strengthened from a central point of view. Leaders in the boardroom, or just outside it, determine the direction for the rest of the organisation. Digital transformation is for doers who implement concrete course changes, invest in the future, win and retain customers, and cash in on innovations. PropTech and ROI go hand in hand. ROI can be implemented in three ways: 1) Return on Investment, 2) Return on Innovation and 3) Return of Inaction. Technology is used as a (learning) tool and not as a goal. The biggest mistake that established real estate companies can make is to do nothing (no. 3) with technology and wait for others. In 2020, the frontrunners will be looking even harder for concrete results from technological solutions. Innovation theatre is no longer accepted. Organizational redesign, innovation activities, and process reform need to be part of an overall plan. I PropTech, so I exist. 6. Shareholder value is no longer the highest goal In August 2019, nearly 200 CEOs of the Business Roundtable, including the leaders of Apple, Pepsi and Walmart, broke with long-cherished corporate orthodoxy. They issued a statementon “the purpose of a company”, arguing that companies should no longer only look after the interests of shareholders. Instead, they also invest in their employees, protect the environment, and treat their suppliers fairly and ethically. For decades, most (real estate) companies have focused their strategies on maximizing shareholder value. More and more leaders are reconsidering this role of business. Stakeholder pressure is increasing to play a more prominent role in tackling social issues (Sustainable Development Goals) such as sustainable cities and communities, health and well being, responsible consumption and production and climate change. This social pressure calls for purpose-driven organisations instead of shareholder value-driven organisations. I expect that in 2020 economic growth mindset will make more room for a prosperity-mindset. 7. PropTech for Good is Good Business
Investors have supported purpose-driven European technology companies with more than $4.4 billion in capital in 2019, 5 times more than in the past five years (source: Slush newsletter). This form of investment (Impact investing) is growing and goes a step further than sustainable investment. Impact investors/ investors identify a social problem and make a conscious choice to contribute to the solution. This is in contrast to sustainable investment, which aims to limit the negative effects of the company’s activities and in which achieving a positive social, environmental or social return is not an explicit objective. More and more investors also want to know what a company costs society. The Harvard Business School has launched the Impact Weighted Accounts Initiative (IWAI) to develop a method that measures the impact of companies. The impact of the economy will have a visible impact on the PropTech movement in 2020. Remember, PropTech for Good is Good Business. 8. PropTech is a social movement Real estate isn’t about bricks anymore, it’s about people. Just as innovation is primarily about social innovation (2/3) and technology (1/3) is the lever. In recent years, PropTech has focused on the push of technology solutions, but in the coming year, even more, attention will be paid to demand and the human factor. I don’t expect all HR departments to be renamed People & Culture. The question of what can really make people happy and unhappy (e.g. identity & attention through relationships with other people and wellness & well-being through paying attention to mental and physical health) and nudging are becoming a trend. In addition, the demand for digital knowledge (and wisdom) and skills is growing. Because unknown is unloved, and this slows down the organizational transformation. In 2020, sales departments will not be massively renamed Customer Success departments. I expect that in 2020 the pressure on what the consumer wants and what this privacy technical will mean will increase further. In addition, real estate companies will pay more attention to responsible technology (e.g. seldonian algorithm) and cyber-security in the great social quest for humanity. 9. Redefining space Space is not just about buildings, houses or the spaces in between. Space is about the experiences that people crave and the connections that people make to create a community. We need space and direction. Space to be able to recalibrate the place we occupy as a building block within the greater whole. Direction, to release energy to make these first steps to make it possible. Also in our private lives, we create more and more ‘in-between space’: meditation, Netflixing or watching others play games. We are also looking for a renewed connection with nature. Techless reflection moments and forest bathing, in which individuals ‘bathing’ in nature. The dividing lines between living, working and playing fade further in 2020. There will be more room for joint investment in the outdoor space around real estate properties. And the questions about the future of spaces will grow. If we are given this space, and in order to create these spaces, new spaces will be created everywhere in between where we can meet each other (again). 10. Hipsturbia
The ‘hipsturbia’, suburban nodes for mixed-use near large metro stations, movement is growing. This is most common among the new generations and on the other side of the spectrum, where the ageing of the population is increasing and the costs of housing and health care are rising. I expect words like people-centred urban design, social impact design, Self-learning environment, performance-based zoning, including and also words with a technological focus such as multi-experience/ experience-based and immersive workplaces to be in place by 2020.
YOU CAN DIG IT!
The real estate industry is at a turning point – in the form of the way we live, the way we work and how we are connected as a community and globally. In 2018, the film ‘Avengers: Infinity War’ was released. The theme? The need to work together. In 2019 the successor ‘Avengers: Endgame‘ appeared. The theme? Restoring the balance in the universe. If super heroes have to unite, even though they have been able to save the world on their own for decades, what about us? The consequences of inaction are far greater than the actual effect of the structural changes we face. Can your organization afford not to be alert to social developments/ movements and to do innovation theatre? When the young generation is furious, you can’t afford to be asleep and old-fashioned. If You’re Woke, You Dig It. Make 2020 a meaningful year!
Auteur: Menno Lammers