This is the second of five articles in a series addressing the opportunities available in a rapidly transforming marketplace. The series has been pulled from a speech I gave on June 9, 2016 in Calgary at the Real Estate Strategy & Leasing Conference.
In part one of the series, which can be found here, I introduced the fact that this moment in time, right now, is rife with opportunities created by market confusion and disruption. In part two, I will look at the two key market disruptors: millennials and emerging technology.
Using office space as an example, let’s look at millennials and emerging technology as two key market disruptors.
Millennials are messing up the traditional ideas about how many square feet per person are required for office space. They like working in clumps and changing their mind and working at home sometimes and then moving to a new city because they are bored. Those are all gross generalizations of course, but we are seeing the impact of these new attitudes.
Look at the massive popularity of companies like WeWork – which is a huge success in the USA but hasn’t really hit Canada in any meaningful way. If you don’t know about them, I urge you to Google “WeWork.” They have it figured out, and their growth is all the proof you need. It’s basically the very old idea of small office spaces sharing an address and a receptionist. But it’s entirely disruptive now, and rethought for a new generation.
We spent a day meeting at the WeWork in Seattle, and it blew my mind. Long library tables. Small glassed-in offices. An indie-coffee-shop lounge. The receptionists are the baristas at the front check-in-counter-cappuccino-bar and the whole thing just felt like the most giant, fun, work-related-theme-park I’d ever been to.
I am so excited to be working at home these days, having sold my company. But after my day at WeWork, I’m waiting for them to open in Vancouver and I’ll be first in line; home-office be damned.
There are companies like LiquidSpace and PivotDesk and Sharedesk who all offer variations on the theme. Basically, they are like the AirBnB of office space: you can have an office when you want and then ditch it when you don’t, or you can grow into three times as much space overnight, and then ditch that the next week.
What else are the Millennials doing? They are showing us all that the old ways are not necessarily the only ways. They are moving around at lightning speed. They are leaving behind concepts like working hard until they amass a bunch of stuff and find a mate and buy a house and have kids and settle down – they are mobile and nimble and fickle – and happier than most of us old-timers ever were or ever will be because of it.
They are also, as of the last year or so, the largest demographic group on the planet. That’s right, the Boomers are now in second place.
So what the Millennials want is going to happen, just like when the Boomers created markets before them. The Millennials are coming at us like a train with no brakes and they are going to be our overlords. This will change every single industry in ways that we can’t fully predict except to say it is going to be huge.
In terms of our commercial real estate case-study, I think it means nothing less than the death of the long-term inflexible office lease. Everyone in office sales or leasing should really think about that. Everything you know about marketing your business is based on the idea that you are selling five-year legal contracts that bind the buyer to a space commitment in a very inflexible way for an extended period of time. The Millennials want none of that. It’s going to change the world of office-leasing. In fact, it’s going to cause all kinds of disruption.
Now let’s look at industrial real estate, as another example of the massive opportunities in store.
We’ve all heard of “The Industrial Revolution”, and anyone with even a vague memory of high school history class remembers how much of a game changer that was. People started going to work in factories. The 9-5 work day was born. Mass production meant mass consumption. Short vacations. Slave labour. The creation of the entire concept of upward mobility. Child labour. The invention of a middle class. The invention of the working poor. The need for large industrial buildings. The need to move goods and services all over the world on trains and boats and airplanes: most of which had not been invented yet.
Well, call me crazy but I think new technologies are pushing us into another industrial revolution and that the impact on commercial real estate, and the world, will be just as big if not bigger.
For example, the Blade is a car that goes from 0-60 in about 2.5 seconds. That’s faster than a McLaren P1 supercar. But it isn’t made in a massive factory with specialized equipment for producing supercars. It’s printed on a 3D printer.
3D printing technology allows small startups to enter the auto-manufacturing industry without all of the typical barriers involved. It is estimated that the cost of developing a traditional car factory is US $1 billion, while the cost of a “micro factory” to produce these cars would cost roughly $20 million. So emerging tech, in the form of 3D printers, has completely altered the auto-manufacturing landscape.
Here’s another example. The UN estimates that by 2030, approximately 3 billion people will require housing, and 3D printers are being considered as a possible solution to that. A Chinese company, WinSun, has a 3D printer that printed 10 houses in 24 hours last year. The process saves between 30-60% of construction waste, decreases production time by 50-70%, and labour costs between 50-80%. That’s the entire residential construction industry up-ended.
Still not convinced?
Wedding rings can be customized to the finger, at far lower cost than traditional wedding rings. This is now a common practice in jewelry making.
3D printers can make steaks and sausages by replicating stem cells taken from live donor animals, which is more sustainable, ethical, and practical.
This 3D printing stuff – most people think it’s sort of fun and cute and wacky. But really, it’s the next industrial revolution. You won’t need a factory to sew those t-shirts and you won’t need people to pack them up and you won’t need to ship them to the airport and then across the world to warehouses that hold on to them for a little while until it’s time to ship them to the retail store where someone unpacks the boxes and hangs them up on hangers until consumers walk into the store and buy the sweater and pay for the sweater and then go back home.
You need NONE OF THAT.
You need a piece of programming that consumers download so they can print your product on the 3D printer in their kitchen.
Here’s a bust of me, done on a 3D printer in my friend, Douglas Coupland’s dining room. He scanned me with his cell phone. It took about 30 minutes to print. It’s made of cornstarch. The printer cost less than $500. So it’s a toy version, for now, of what is being used in the real-world, right now, to make all kinds of things happen.
Admittedly the consumer versions of this technology are at the dot-matrix-printer stage. But give it a year. Soon we will all have a rudimentary 3D printer in our homes.
And they won’t be rudimentary for long.
Part three of “Technology is Going to Change Everything for Everyone Everywhere: Sooner Than You Think.” will focus on what these market disruptions mean for marketing in commercial real estate as well as across industries.