Antony Slumbers

Real Innovation Academy

“Is Software Eating the Real Estate World? »

Please find below my talk with Antony Slumbers, an expert on PropTech, and #SpaceAsAService and consultant in real estate boards on Transformation, Technology and Innovation. Our conversation started during the FUTURE: PropTech at Vienna. We talk about the transformation of the real estate value chain. Antony thinks of real estate as software. That’s probably why he is ahead when he imagines the future of real estate. A future that will be disrupted by the creation of a complete brand – a kind of real estate Apple. The next Big Shift after the « uberization » of WeWork.

Bernard Michel: Could you give us your analysis for the proptech ecosystem for this year? For instance, recently Fifth Wall – a main VC actor in the real estate investment ecosystem – was at the PSFK Retail Conference to talk the next retail generation, omnichannel retail and the link between the real estate and retail sectors. Is it a hot topic for real estate this year? 

I think this year is going to be extremely interesting and perhaps the most important year in modern proptech because if you go back one year, certainly two or three years, most of the doors to proptech were quite firmly shut, and three years ago, they were locked. Now, I think the doors are ajar and they’re about to be opened, primarily because across the wider tech scene, technology is impacting every business at every level. I’ve always had a problem with Proptech being thought of as a standalone technology. It is very much just an integration and an iteration of all the other technological trends that are happening in society.

All the proptech that may or may not be needed in retail is purely a consequence of retail changing because of technology in the wider society. We shop more online. We research online. We’re less interested in going to a store to find new things because most of the times, we already know the new things, so we want a different experience when we’re there. Therefore, proptech has a need for how it can help people who operate within the wider built environment to respond to this.

If you take the industrial side, you have a situation where the absolute imperative for the likes of Amazon is as fast delivery as possible. The faster Amazon can deliver to you, the stronger they feel their position is. And in major cities, they are absolutely looking to see if they can deliver to you within a day or even within an hour or two, which means the need for warehouses and logistics changes and becomes much more localised.

“Amazon has been eager to grow its fulfillment center coverage”, explained CB Insights in a recent report. “As of 2016, 44% of Americans lived within 20 miles of an Amazon warehouse, compared to just 5% in 2015. In addition to expanding its warehouse coverage, Amazon is now offering its own shipping services to external parties — namely, its third-party sellers”, reported in the same report CB Insights.

You also have a really interesting trend in industrial that because of the nature of robots: robots are used more and more in logistics and warehouses, industrial warehouses are tending to be vertical nowadays, rather than horizontal.


Typically, you would have a big warehouse twenty miles outside of Paris, for example, and it would be huge, and it would take up a massive amount of space. Now, the real need is to have a vertical warehouse as close to the customer as possible. And Amazon reflects this strategy and even much more when we see Amazon’s patent portfolio into futuristic logistics network, for instance with « Airborne Fulfillment Center” (AFC)!

The interesting thing is people like Amazon, or if you go to China, Alibaba. Those sorts of people know so much about demand in the local area that they can be much more accurate in what they need to stock at a local level.

So you have this interesting situation in something like logistics where historically, over here we always used to call industrial units ‘sheds’, which is rather a derogatory term, just a big building with a roof, but these are very high tech buildings now so the whole way they operate and the amount of data that you need to mine from your building to understand how it’s being used is a huge opportunity for proptech but it’s a consequence of the wider market.

Now you get an interesting loop start to go round here. So I suggested that warehouses in city centres are likely to be vertical. Now, they are quite likely to take over offices that become obsolete. Because of all this technology, and because so much of our work is being automated in one way or another now, the nature of the work we do when we come into the office is different. We’re having to do much more human work in the office. Paradoxically, as the world becomes more technical, we actually have to become better humans because we have to do what the machines cannot do. The nature of the office is changing dramatically because you’re not coming into the office to just sit there and do your work, typing away – you’re coming to do much more human work. So there’s a lot of old office buildings that just are not suitable and cannot be repurposed for this type of work, and those are the ones that are going to turn into industrial units. So you start to get this flow through the asset classes, where technology is impacting one because of societal changes. That, in turn impacts another and that in turn impacts another.

Now, this is happening at such a speed and scale now, that the industry can no longer put off getting very very deeply involved. Over the last few years, they’ve been able to be interested and have conversations about it, but not really do anything. Not that much has changed for them.

Over this year, I think you’ll find a lot will start to change for them, particularly if we get a downturn in the market.In the UK the market has held up well since the Brexit referendum but who knows what might happen after it becomes reality? (PwC and the Urban Land Institute analyse it in Emerging Trends in Real Estate®: Europe 2019).

Either way we are many years into an up cycle and, as we all know, they never go on forever.

When you’ve got plenty of demand, it doesn’t matter what your real estate is. When you’ve got a difficult market, people are going to become much more conscious of “What do we want to spend our money on?” and “Who provides us with the type of service that we want?”.

Now, the fundamental thing under all of this, which I think is the major change within real estate, is that today and historically, real estate has been all about selling a product. “I buy a site, I build a building, I sell it or I let it – that’s it”. In the future, real estate is going to be all about delivering a service, but not only delivering a service, thinking about the nature of the customer is changing so dramatically because historically, the customer was whoever signed the lease.

In the new world, everybody in your company, everybody who comes into your office, has to be your customer.

I have to be thinking about what user experience I am offering every single person in that building, and that’s going to be the differentiation between buildings that stabilize at their possible income and those that can possibly gain a lot more income.

Income is going to start being made up, not so much just rent – at the moment we just think the income of a building is the rent – now, it’s going to be the income of a building is the rent, and then I might do some catering, I might do some pop-up stores, I might sell you business insurance, I might sell you all manner of things on top. In order to sell you more things, I need to understand you better.

That then changes the industry from being one that is just interested in a product, and selling that, to needing to understand, “What does everyone do all day?” What types of spaces does she need? What services does she need? And the better I understand you, the better chance I have of optimizing my building to suit you.

Bernard Michel: the Real Estate influencers know you as the top of the list because – and it’s my personal opinion too – you see real estate as Marc Andreessen saw the world in 2011: « Software is eating the world ». Could you tell us more about this conception?

Yes, it’s true I try and think of real estate as software. For 25 years, I’ve written software. I ran a software company for a long time. In the software industry, nothing is ever finished – there is never a finished product. It’s always, you build it, you measure what works, you learn from that and you change it. In software, there’s a term everyone uses – build, measure, learn – and it’s a circle, it just keeps going round. In real estate, we, at the moment, don’t get beyond ‘build’. We build something, we don’t measure it, and we don’t learn anything about it. That’s what’s got to change.

I do a lot of work in artificial intelligence and if you look at the artificial intelligence world over the last six years, it has become utterly transformed for three reasons.

•         First reason is that the algorithms that are available and that have been designed are more powerful than ever. Artificial intelligence goes back almost seventy years. It’s been around for a long time, and a lot of the algorithms we still use today are ones that were designed 10, 20, 30 years ago. But there are new ones that have been designed over the last decade that change the whole nature of the capabilities. The algorithms have gotten better.

•         We are now in a world where we have access to incredible amounts of data and the key points about these new algorithms is that they learn from data. It’s the difference between artificial intelligence and machine learning. The only way that works is with huge amounts of data, and historically, even though a lot of these algorithms have been around for a while, we’ve never had enough data. Now, we do have enough data.

•         So you’ve got stronger algorithms, almost unlimited amounts of data, and then the third huge difference is, at a technical level, the amount of compute power – literally the speed and power of computers – has advanced dramatically from the period of around 2013 till now. One of the most important things is training these algorithms. And in just six years, from 2012 to 2018, the power of CPUs, GPUs, and TPUs used for training neural networks has increased by over 300,000 times. (Below is a visualization of the compute boom.) It’s extraordinary.

So, we’ve had this combination of better algorithms, more data and much more computing power and that is enabling things to happen today which were simply impossible five years ago, and so the speed of progress gets faster.

All of this work is coming now. All of the changes in real estate, and therefore proptech, are actually a by-product of changes in wider technology, business and society. We are adapting to satisfy the new needs of everybody, and that’s, I think, the crucial point.

You’re quite rapidly getting to this position where certain assets that you have, which historically you could pretty much say “It’d be worth this, this, this, then it’ll go down a bit, then it’ll go up…” might well go like that, because it could suddenly become “Nobody wants them.” Well, this is happening with lots of retail.

In Benedict’s Newsletter: No. 267

There’s lots of retail now. It doesn’t really matter how much the rent is dropped, “it’s in the wrong place”, or “it’s the wrong size”, or “it doesn’t enable us to use this technology”, and it just becomes worthless. So I think one of the really interesting opportunities for proptech is going to be understanding the changing nature of demand in the industry, and then understanding how the supply side, what we build has to change. That is a huge opportunity, I think.

All of this is coming together at one time, and no one can ignore it anymore. I think one of the really interesting things is, in technology terms, things tend towards monopoly. In technology, people who really get it right, win most of the market. If you look at, for instance Facebook and Google represent 90% of the growth in online ad spend (even more according to Brian Wieser, former senior analyst at Pivotal Research), which is extraordinary. You see all those thousands of adtech companies, trying to do technology for the advertising world, but they’re all fighting over what’s left.

Real estate will never be as concentrated like that, but I think there will be a number of operators of real estate who start to develop a brand where that brand is known for really understanding my needs. I will go and shop in their shopping centres, I will let space in their offices, If I need a warehouse, I will try and go to their warehouse because I know that they are combining the hardware of the building with the software to run it, and then services on top.

Bernard Michel: Could we make this comparison: An Apple brand conception for the future of real estate ?

If you think the iPhone has 18% share of the world smartphone market, but it makes 87% of all the profit, a Wall Street firm estimated, which is amazing. The reason it does that is because Apple in particular are known for hardware, ‘plus’ software, ‘plus’ services, all designed to create a user experience that people will pay a lot of money for. And I think real estate companies that start to deeply think about who their customer is, who are they aiming at, what are the needs of that customer, and what’s the total user experience that customer needs – will have a very strong market. To an extent, you’ve already got it with the likes of WeWork. WeWork aimed at a very particular audience they went for – tech startups and that sort of thing – and they designed an experience around them. But I think you’re going to get lots of different brands aims at particular types of customers. The fascinating thing is it then becomes a very different industry because the types of people needed in the industry are different.

Proptech has got to just become part of the real estate industry.

It needs to be – not that there’s the industry here and we add some proptech – what the industry delivers needs to be designed with proptech people. I think they’re going to become much more central, a core part of the argument and the debate about what we can develop.

Bernard Michel: Let’s talk now about the real estate VC ecosystem. Opendoor, Compass, Katerra, but also View (smart window app) and Wag (on-demand walking dog) and obviously WeWork: SoftBank seems to « eat the VC RE ecosystem ». Are they a threat?

SoftBank is a really interesting company. They’re almost being wildly irrational in that their argument is that they’re aiming at huge markets that are global and their argument is if you get big enough, then you can really make a difference and you can carve out a very significant part of a huge market, which is why they’ve invested so much in WeWork. On the other hand, a lot of people are very critical and very sceptical (for instance according an analysis by the Financial Times) because “Is WeWork worth 40 billion dollars? This is madness – they’re just letting space.

What I think is really interesting about SoftBank is they are applying software industry thinking to the real estate industry.

So for instance, lots of people mistake WeWork for being purely in the office rental business. They think that’s all they do.

WeWork is really in the network business and the ecosystem business. What they are trying to do is trying to build a big enough network of users, that they understand their needs, wants and desires, and then they’re trying to build an ecosystem of products, and services and partners to provide that to them. So that might be an office, it might be they’ve just opened a retail store in New York, it might be an apartment, it might be education, it might be training – it doesn’t really matter.

In the same way as a social network – the pure strength of a social network is the size of its network and the bigger the network, the stronger it becomes.

Obviously, in software, you don’t have to buy hundreds of millions of square feet of space to do that – it’s all virtual. That, potentially, is difficult, but essentially what WeWork and SoftBank are trying to do is build a big enough network that they can build an ecosystem and they can serve the needs of their market.

If you also look at Softbank (Vision Fund) and their investment in construction – they’ve certainly invested $865 million in a company called Katerra in America, and they’re a construction company. What they did was, they looked at the construction industry (which is even stranger than real estate, in that maybe 30% of the construction industry is very very advanced), 30% could’ve been building Versailles (it’s so outdated) and there’s a bit in the middle. A lot of the problem with applying technology to construction is you have to deal with all those different types of people so you end up being only as fast as the slowest person. So with Katerra, what they’ve tried to do is they said we will design, we will build, we will manufacture, we will construct – they’ve tried to do the whole thing.

So SoftBank’s game is networks, ecosystems, huge scale and trying to approach construction more like the software industry.

Who knows, it might blow up – I don’t know.

I’m sort of 50-50 with WeWork. I think WeWork’s biggest enemy is potentially themselves, that they get too carried away, and just do too much and they’ll drop their standards. That’s a problem, if they don’t maintain the quality. Bit like a hotel chain. If a hotel chain over-expands, and it loses its standard, it loses its customer. But against that, I think they are the most innovative company in real estate. The technology they are using actually fits in with a lot of these patterns and it’s all about understanding your building, understanding how it’s used, understanding who is using it, and then understanding their needs.