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However, his point is bigger than technology driving
change. He questions the inherent structure of the real
estate business model, and points a finger at those who fail
to add value for their customers. The real estate sector has
been largely defended by factors such as location, visibility,
accessibility, customer switching costs, access to information,
access to capital and regulatory inhibitors to competition.
These shields are being beaten away by societal and
disruptive trends, leaving incumbents now needing to
focus harder on how they serve their customers.
In particular, he asks us to look at where there are
deficiencies in our value chain, and highlights these as
opportunities for new players to not only create space,
but to capture the majority of the profit pool. A large
share of residential real estate is gradually becoming a
commodity in the modern world. Beyond location, most
of our buildings conform to similar specifications, which
are adequate, safe, and functional. In these conditions,
Leaving
traditional
property
landlords as
commoditised
suppliers
The warning is
a stark one; be
bold and or be
disrupted
Dror Poleg at The Future of Living
there is greater opportunity downstream of bricks and
mortar to capture the market by providing end-consumers
the differentiated product that they seek. In this way, the
Ubers and WeWorks of the world transition from being
intermediaries into being principals, leaving traditional
property landlords as commoditised suppliers.
The points of differentiation vary by market; however, Dror
points to a couple. Firstly, providing a frictionless consumer
experience is essential in a world of increased convenience.
Why, he asks, as a tenant would you go through the pain
of securing a traditional letting, with complex procedures,
unknown landlords, and longer commitments, when you
can spend two minutes on AirBnB and be done. The former
would in this context be ‘unsufferable’.
Secondly, the mass market is not tailoring its products
to consumer needs. He believes that developers have a
propensity to overspecify their product. Historically, higher
margins have been available at higher price points for less
effort, which is what has driven this approach. However,
in stretched housing markets such as London and New
York, there is now opportunity to be found at lower price
points, which are susceptible to low level disruption.
By unbundling elements of the traditional home, better
(more segment-specific) solutions can be provided to the
consumer. For instance, the kitchen was once an essential
part of the urban home. However, with changing lifestyles
and increasing unaffordability, it becomes an optional
extra, where there is a legitimate trade-off between
having a shared kitchen and paying a higher rent.
As a whole the presentation asks some searching
questions of the property industry, and the points
made about residential are equally applicable to other
sectors. The underlying call to action is to evaluate your
environment, spot poor performance and react before
others do. For many established property owners, which
are less nimble and operate with higher cost bases, it may
be challenging to move vertically within their value chain.
However, the warning is a stark one; be bold and or be
disrupted. Or as another Dickens’ character put it:
‘A man
can well afford to be as bold as brass, my good fellow,
when he gets gold in exchange!’
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FUTURE OF LIVING