Fossils, fashion and footwear
Tightrope – The coming week has been described as the most significant in UK politics since the EU referendum. Theresa May’s tightrope walk between the conflicting positions within her own party, her colleagues in the Commons, and her counterparties in the EU is a wobbly one, but she hasn’t fallen off yet. Setting aside the possibility mooted by some in the Labour party to negotiate a better deal with the EU, the outcomes fall into three camps: a no-deal Brexit, May’s proposal, and no Brexit. Choice architecture theorists would say that the middle option in a series of choices usually presents as the most popular (few choose the cheapest or most expensive wine on a wine list). However, Amber Rudd suggested today that the former is off the cards, and few from either ideological camp like the middle one. With May having so far survived a backbench rebellion, Rudd’s position is that Parliament would not if it came to it permit a no-deal outcome. Of 650 seats, the Conservatives currently control 315. Assuming Sinn Fein (7) don’t take theirs, then armed with DUP support (10), the Tories have 50.5% of Parliament. The DUP’s support is however now looking questionable, as is that from both hard-line Brexiteers and Remain-leaning Conservatives. Hence, with a minority position, the Tories may well be reliant on an element of Labour (257) support to push a deal (or no deal) through, although this may well come at the cost of their own ambitions for power. Since last week, odds have fallen from 2/1 to 6/4 for a second referendum, with a General Election next year now on evens.
Fossilised – As industrial and wealth patterns shift, so real estate can be left behind. The fall of Rome left the walled city of London deserted for 400 years. As industrialisation took hold in the eighteenth century, agricultural areas depopulated. And as globalisation took effect in the 1980s, many of our manufacturing zones were hollowed out. An efficient planning system seeks to reallocate use to match demand, but this week research by the Country Land and Business Association (CLA) found that this has not been effective in the case of many villages (8% of population), which have instead become ‘fossilised’. Disappearing amenities such as shops, schools and pubs is part of the cause. However, the CLA also points to a lack of housing development and infrastructure such as broadband, which has led to 2,154 villages across the UK becoming unsustainable in their view. In the first industrial revolution, people moved or they starved. In today’s society, significant social buffers exist that instead lead to stagnation. As the effects of the digital revolution take hold over the coming decade, villages might not be the only clusters that start to lack relevance. Perhaps we get a glimpse of that already in some retail segments. The lesson from history is that planning systems need to predict that change now, and local authorities need to be proactive about change if they don’t want their towns and cities to wither.
Rent the Runway – For most of us, the only time we rent clothes is for special events, such as a wedding or graduation ceremony. However, for the 10 million users of Rent the Runway, renting clothes is a regular occurrence. The online platform, founded in 2009, initially served high-end rentals for low frequency events, but it seems that renting clothing is moving into mainstream markets. Their ‘Unlimited’ model (founded in 2016) allowed users to rent any four pieces of clothing at a time for $159 pcm. Now ‘Update’ (launched in 2017) allows users to rent four pieces for 30 days at $89. Historically, Rent the Runway operated much like a traditional retailer in that they owned all the stock on their platform. This week they announced a partnership with various brands (e.g. Levi’s) who can list their own products on the site. For Rent the Runway this moves them into classic platform business model; whereas the attraction for brands is the ability to trial new products and derive rich customer preference data (a satisfaction and feedback survey is completed after each rental period). The option to rent means that users are more likely to pay for items that ‘don’t feel rational to own’. Clothes-as-a-service is the latest variant of the shift away from ownership and towards a subscription / sharing model that includes media (Netflix), transport (Uber) and of course space (WeWork).
Accelerated learning – I could have happily stayed at university for much longer than my three-year degree permitted (in fact I have now been back three more times). However, in today’s era of low fee-subsidy and low graduate earnings, many prefer to get to the workplace as quickly as possible. For that reason, the advent of 2-year degree courses, combined with the government’s approval this week for universities to charge 20% more pa for such, paves the way for shorter, but more intense durations. Let’s face it, most students don’t study 24/7; I think I was required to attend 15 contact hours per week on my law degree, and so the scope exists for a more rigorous schedule. Holidays are also long, and at the moment this leads to low utilisation of student accommodation, compared with leasehold residential. This gap will be closed by a proposal to move to 45-week years for the 2-year model (currently 30). Theoretically, if two-year degrees were to be fully adopted, there will be a third less students on campus at any time. Investors may therefore question what the impact of this reduction might have on housing demand in the sector for future cohorts. This will need to be offset by the potential for more students to be attracted to university (avg. saving on tuition fees: £5,500 + accommodation and living costs), and at present the government’s estimate for take-up of 2-year courses remains modest.
Organic buildings – The growth of the Internet of Things is projected to significantly outpace other connected devices over the next decade (~30 billion connected devices by 2020). Real estate is a key recipient of this trend, with sensors for air temperature, light, noise levels and occupier density becoming commonplace. Each sensor responds to these inputs and makes minor changes to the environment of the building without human intervention; almost as if they are living and breathing structures. Microsoft has taken this one step further this week with its patent for ‘a continuously growing physical structure…that is similar to a living organism’. Through the use of AI and 3D printing the building will be able to autonomously expand to meet the requirements of its occupiers. In the first instance, Microsoft anticipates this technology being used in data centres and warehouses, where dynamic human use is less of an issue. However, downstream, they believe that the same technology could also be applied to offices and residences. Presumably the AI will also make the planning application(s) for the new floorspace, achieve landlord’s consent and get the building regs signed off…?
Virtually moving – One of the biggest barriers to walking around an expansive virtual reality environment is that to make it work the user also has to take the same steps in the real world. This tends to be shorter on space and interspersed with objects that hurt if you walk into them. As with most complex conundrums, sometimes the simplest solutions are the best. Google must have had Deep Mind whirring for years to devise the patent that they registered this week for ‘Augmented And / Or Virtual Reality Footwear’ that will ‘allow the user to walk seemingly endlessly in the virtual environment, while remaining within a defined physical space in the physical environment’. A set of the motorised shoes can detect when you are running out of space and initiate a mechanism to allow you to move in the virtual world without moving in the physical world. Essentially, they have invented moonwalking on roller skates. It follows that the offices of the future might be a series of 10m x 10m white boxes filled with moonwalking employees. Viewing tours just got a whole load easier.