2020: The legacies of an annus horribilis.
They say that people remember what they were doing during the moon landing, or when news broke of the 9/11 attacks. Whereas the events of this year unravelled gradually, 2020 will be for many the most memorable year of their lives. For the younger cohort in the property industry, you no longer have to listen to your boss bleat on about the financial crisis (now confined to the annals); you have been living through something much more extreme.
The rear-view mirror on 2020 will certainly feature the most severe recession in modern history, the most severe social restrictions outside wartime, and the most severe health incident for a century. However, the nuanced view will also, I’m sure, speak to how this year was a turning point for society, and the moment that we saw significant pivots in the real estate industry.
As we clear our virtual desks to allow some space for the turkey, I offer a few short reflections and personal take-aways from the year that was.
The wood and the trees For me personally, this year started with being evacuated from burning woodland in northern Victoria. It was a portent for the year ahead, but is increasingly an inescapable feature of the future of our industry. In 5 years’ time, I doubt that people will be talking about COVID-19, but instead will have environmental sustainability in full focus. Let’s not lose sight of this in 2021.
Disruption, Substitution, Transformation! This was the title of C&W’s capital markets conference in Barcelona last February. At that point COVID-19 was a whisper, but the trends that we discussed and the associated call for change now look prescient. They say that our adaption to the virus has accelerated digital transformation by 10 years. Those that have followed this blog over the past 5 years will be familiar with the potential economic impacts for real estate. This remains my top pick as a driver of structural change in the coming 5 years.
Zoonotics and antimicrobial resistance We have all been sheep-dipped in virology in the past year, but the extent to which this will be relevant post-COVID remains a critical uncertainty. We are already sighted on specific sources of potential new pandemics that have in small pockets made the leap from animals. As the development of human settlements increasingly incurs on animal habitats, this is set to become a more persistent threat. More concerning is that the tools we have to deal with biotic threats are becoming blunted. If we don’t wish to regress to a society where transmissible diseases are the main causes of death, we will need to invest a rolling percentage of GDP to prevent them in the future. Bad news for the economy; good news for life sciences and healthcare.
Caging the black swan Business and government planning largely ignores the potential for black swan events. Most leaders either can’t envisage them, or explicitly ignore threats. Few will be criticised for not having predicted the pandemic, but perhaps we should be less tolerant? The last pandemic was only 12 years ago; COVID-19 was not a black swan; it was foreseeable. The question for investors is what percentage of their short-term return should be sacrificed to guard against the generalised risk of extreme events? The structure of global investment severely misprioritises the short term over the long term. Given that most investors are matching long term liabilities, this is an irrational failure of the system, but one I hold little hope of changing in 2021.
Dissatisfaction A survey in May found that only 9% of people in the UK wanted things to go back to how they were pre-COVID. This strikes me as a shocking indictment of how things were, and one that must surely catalyse change. My assessment is that the majority of people’s concerns (over-work, long commutes, housing costs, poor amenity, inequality, sustainability) have a root cause in our approach to cities and our real estate. Join one of my webinars for a more detailed explanation of this. My conclusion is that if we as an industry do not change, then we should expect change to be forced on us in the coming years.
Inequalities COVID-19 has shone a spotlight on several inequalities, associated with wealth, background, race and location. Particularly, wealth inequalities are supported by real estate. In the words of preeminent economist, David Ricardo: ‘the interest of the landlord is always opposed to the interest of every other class in the community’. Read more here: Real Estate & Inequality. Meanwhile, coronavirus has exposed health inequalities associated with race, which can largely be traced back to economic opportunity. Racial tensions bubbled up in the US this year and spread globally with calls for a society based on equality of opportunity. Our industry continues to lag others in attracting a diverse constituency, which both feels wrong, and makes for poor business. At C&W we have elevated diversity as a key strategic driver for our business.
Diminishing distances Because people value time, and driven by the development of digital technologies, the concept of distance is disappearing. We can now carry out team activities in a way that is remote from each other. Not everyone prefers that or finds it as productive, but there are nevertheless benefits for the business and the individual. In the short term many now feel better connected to national or global colleagues, and some digital nomads have used the past year as an opportunity to hop around the world. Going forward, however, this could lead to profound change in the distribution of our workforce, and how our cities coalesce. Put this on both your business and personal risk registers. You are no longer competing for jobs with the best person in your local market.
INTP Starting with toilet rolls and ending with the US election; we’ve seen an increase in herding and tribalism this year, fuelled in part by social media. However, the workplace discussion has also cast light on underlying differences. ‘INTP’ is my Jungian personality type (introvert, intuitive, thinking, prospecting). I am, it seems, quite differently minded to many of my colleagues. And that shouldn’t be a surprise. We are all different, and how well we have adapted to the reduction in social contact over the past year has a significant dependency on our mindset. The lesson? As a society we don’t expect to be successful by treating everyone the same. And yet in real estate, a one size fits all philosophy still largely prevails, (same size desk, same fit out, same ‘experience’). In a world where individual choice is being unlocked, strategies that recognise difference, (e.g. through activity-based working) will win through. Find out more about yourself here: Personality Test
It’s not over till it’s over Predictably, at the date of writing, Brexit remains unresolved. However, those readers who are deal makers will doubtless attest that an earlier result would have been a sign of weak negotiating by one side. Hopefully there will be a resolution before the New Year. Despite the vaccine, resolving COVID will take a bit longer. Currently estimates for the duration of vaccine roll-out point to a return to a more normal society by early Autumn 2021. This is still an upside to the position forecast earlier in the year. To estimate when you’ll be getting the vaccine, click here: Calculator
A new language for 2021 We enter the new year with an expanded lexicon, including the resurrection of old words, the massive increase of others, and some genuinely new ones. To name a few: furlough (a Dutch military term), superspreader (formerly ‘Typhoid Mary’), and workcation (a regrettable addition that is neither one nor the other).
Some things might never come back To name a few: (1) the tie – an anachronism to cover shirt buttons; a gradual progression this year from suit to hoodie will pitch business casual at a new level in 2021, (2) handshakes – an ancient tradition to demonstrate that you weren’t carrying a sword; people will flinch handshakes post-COVID, (3) 9-5 x5 – we are moving to a truly flexible work schedule; (4) telephone calls – video is the new norm, (5) season tickets?
… and some things are making a return – To name a few: (1) making your own lunch (no Pret in your village?); (2) bad coffee (ditto); (3) being woken up by the sun – missing the train by a minute no longer matters on home-working days; (4) spending time with your family – perhaps even going for lunch with your partner or walking your children to school? (5) going for walks – a reconnection with nature as urban pursuits have been constrained, (6) scotch eggs.
…and finally – In a year where coronavirus has dominated everything, you may have missed the following: the Pentagon released three clips of actual, verified UFO footage, Poland inadvertently invaded and occupied a parcel of land in the Czech Republic (diplomacy quickly prevailed) and a massive star (of the astronomic rather than I’m-A-Celeb type) suddenly went missing without explanation. And in proof of the hopeless futility of the human condition: those in lockdown were offered the opportunity to ‘Let it Out’ in the form of a recorded scream that was subsequently played over a loudspeaker into the Icelandic Wilderness. And in Australia, Qantas offered passengers a ‘flight to nowhere’. The 7-hour circular flight which cost up to AUD $2,765 and didn’t land anywhere sold out in 10 minutes. Roll on 2021.
Have a fantastic Christmas, and let’s hope for a better New Year, when we’ll be picking up Futures /Cut again on a bi-weekly basis.
We trialled a new format for Futures /Cut this year, based on a long article format around a single theme or topic. (Previously, we have run 5 ‘snippets’ focussing on how current news, events and innovations fit into longer narrative for real estate). Which do you prefer / find more useful? Provide this and other feedback to me directly: email@example.com. Thanks for your continued support.