Susan Freeman
Hi, I’m Susan Freeman, welcome back to our PropertyShe podcast series brought to you by Mishcon de Reya in association with the London Real Estate Forum where I get to interview some of the key influencers in the amazing worlds of real estate and the built environment. Today I am delighted to welcome from New York, Dror Poleg, author of the acclaimed new book, Rethinking Real Estate, a roadmap to technology’s impact on the world’s largest asset class. Aaron Block, Co-founder of New York VC fund MetaProp says, “If you need to understand the future of real estate, read this book now! It weaves together deep research with timely insights and observations about evolutionary forces in our society and explains how these changes have (and will) impact the entire real estate industry.” Dror is Co-Chair of the Urban Land Institute’s Technology and Innovation Council in New York. His insights on the future of cities and buildings have been featured in publications and events by the Wall Street Journal, Forbes, Business Insider, Moody’s, PwC, KPMG and many others. Dror advises senior executives of multibillion dollar companies, industry organisations and venture-backed start-ups such as Breather, Bumblebee Spaces and Carson. His work draws on his experiences as a real estate and tech executive in the US, China, UK and Australia, as well as on his formal training at the LSE, INSEAD and Swinburn University of Technology. So, now we are going to hear from Dror Poleg on how technology is reshaping our cities and buildings and the people within them to find out if you are ready for what’s coming.
Dror, welcome to London, it’s really exciting to have you hear for the London launch of Rethinking Real Estate and a brilliant opportunity to have you talk to our listeners about this amazing book. So, just starting with your background, how did you become a proptech guru?
Dror Poleg
So, I don’t know if I am a guru at the moment but my intersections with real estate have been twice in my life, both of them almost by accident so one time I finished my military service in Israel the Government was encouraging young people to go and work in manual labour jobs that no one else wanted to do and one of them was construction and they gave you like a special bonus if you managed to survive for six months doing that work, so I went ahead and did that, it was my way of kind of saving money for my studies overseas and kind of getting back in shape so that’s when I got my first experience in real estate, really building actual houses and you know then managing a few construction workers. Fast forward a few years later, I mean most of my early career including in middle school was building websites and doing online marketing campaigns for myself and kind of parties and music events that I would put together with friends as well as for some other local businesses and I found myself in China, skipping a few stops along the way, as a partner in a advertising agency that was helping local businesses with their online marketing and a lot of these businesses were real estate companies, developers or hotel chains or retailers including large international ones, and increasingly they kept asking me for help with their real estate stuff and not with anything that we were actually serving or offering the companies, so, you know, “Come and have a look at this piece of land and tell us what your think” or “How much do you think we should charge here?”, “Who are the relevant tenants?” and then “Can you come with us to the bank and convince them that this is a good idea” or “Can you help us put together a presentation for investors” and gradually I got sucked into the business where developing shopping malls among other things and developing shopping malls in China always entailed the understanding what’s happening in the technological landscape so whether it is things inside the building such as sensors or all sorts of systems that are used in retail or the general kind of ecommerce and mobile payments, location based services landscape. So, I continued to develop expertise in that and then five years ago I tried to escape both from China and from real estate and founded a start-up that built a location-based social network on app that basically allows you to make friends with people that are nearby so like a dating app with no sex or a friendly app and through my work on that, I found that I couldn’t escape again because the only people who were interested in the app were people that owned actual buildings and wanted to use it to create some sort of engagement within a constrained physical radius and as I started researching that question more deeply I realised that there was many more interesting things that are happening at the intersection of technology and real estate that are more interesting than my own app and also that I realised that I actually know quite a bit about particularly because of my experience in China so I started writing about it and somehow people started inviting me to advise them and to help them and then a whole book came out.
Susan Freeman
So, you have a real overview of you know working in Asia obviously the States, Europe, your book really starts off by saying that no real estate asset is safe and then you go on to explain, you know, what’s been happening and the direction of travel. Do you think culturally the way real estate is dealt with in different parts of the world is different or does it come down to the same thing and is anybody further ahead in terms of, you know, realising what technology is going to do to real estate?
Dror Poleg
I think it is definitely different, I mean I will start with China because that’s where my career started. So, China is ahead on certain things, I mean, definitely in retail, partly in hospitality and now in housing it’s kind of pulling ahead but it’s pulling ahead because it was so far behind so they are leapfrogging a lot of other countries because, for example, they don’t have a multi-family or like a build to rent industry at all so now it’s starting to come into life and it’s coming into life with much more technology built in from day one so unlike in the US or here in London which is kind of in between where you have all the companies that are trying now to kind of bring more flexibility and use apps and learn about design and online marketing, in China it’s often companies that actually understand technology better and consumer markets better that go suddenly into real estate and try to reinvent housing, with retail as well, you know, many of the brands that open stores in China even in our shopping malls, they were selling online before they opened the store including large international brands, you know like the Zaras and Mangos and H&Ms and Uniqlos, they would know which city to go to next based on online sales and sometimes even informal online sales so even when they didn’t have an official website in China, people would buy kind of second-hand stuff or stuff that someone travelled and bought overseas and then went ahead and sold it on Taobao, like on China’s eBay, and then Zara said, “Oh, our stuff is popular in that city so we should probably open a store there” and then you go online and so, in terms of the difference between New York and the UK which is probably more interesting to you, I think there are definitely differences, I mean, one, you know, the two countries have very different histories and very different zoning and planning regimes so that helps create differences and I think in London first in terms of interest in proptech and kind of a deep intellectual discussion in it, I think there is much more, like I might even have more readers here than I do in the US and I think the large developers seem more openminded and maybe also because the projects here tend to be smaller, there’s much more experimentation, I know that you probably feel that, you know, people are not doing enough and that’s true but I see many more architecturally interesting buildings and projects in London as well as in Tokyo that I don’t see in New York, you know, when friends visit New York and they tell me “Oh, what is the must see architecturally or some innovative thing?”, I am kind of embarrassed to say that, you know, I don’t think there is anything too exciting, I mean there is a lot of things happening but there is not one thing that you can go and visit that will blow you away. And also in New York because the projects are larger, they tend to move a little slower and the attitude is much more business-like and transactional so, like, “What are you going to sell me?” or “What am I going to sell you?” but not going into kind of broader discussions about longer term things, where in London I see, you know, I had the opportunity to speak to probably most of the large CEOS of you know the local realtor estates which in itself says something, you know, that they got to me and they were interested in the work and they seem much more curious and openminded but still in terms of investment and innovation, New York is still much more of a centre in that sense.
Susan Freeman
Well, it’s interesting but I read what you said in the book about Related and Hudson’s Yard and about experimentation there and I thought, you know, that sort of indicated that that was more general but maybe that is a particular example and then you talk about projects being slower but, you know, if you look at something like Kings Cross here, you know, it really is a sort of a long project so I think we probably have problems but this point about experimentation is interesting because I think the real estate sector is not terribly good at spending money on R&D or in fact doing something that’s not guaranteed to be a success. I mean, do you think that is going to get in the way of, you know, really grasping what technology has to offer?
Dror Poleg
Definitely and it’s already getting in the way and I think it’s not just that people are culturally averse to innovation, I think structurally real estate kind of inhibits innovation or incentivises people to focus on the bottom line, to focus on the short-term, to focus maybe only on the asset itself unless like the business or the added things that could built around the asset so, there’s that hinderance and then we are seeing that real estate is already behind but we also seeing that because of the changes in demand and the changes in expectations from the customers themselves whether it is in retail or in office or in apartments and even in warehouses, that real estate now has no choice because what landlords wouldn’t be willing to do, other people are coming in and doing and they have their own alternative sources of funding, I mean WeWork is a great example of that, when they come in they have a great idea, they understand that something is missing in the market and they are able to raise the cash to deliver it and even if they are on a suicide mission and they are burning too much cash and they end up failing, they changed the market forever, you know, they come in and bring a new product and then all the landlords have to respond so instead of leading, they are kind of following but at the end of the day they are changing and they are becoming more openminded.
Susan Freeman
And, you also emphasise in the book the importance of defining strategy and also the importance of brand, and again brand is something that the real estate sector certainly here has been a little bit slow to embrace, I mean I don’t know if it is different in other parts of the world where you have worked that that is something I think that real estate has got to come to terms with.
Dror Poleg
Yeah I don’t think it’s different in other parts of the world, I think you know, real estate companies, first often many of them, not only that they don’t want the customer to, you know, to remember their brand they are almost trying to make sure that it doesn’t remember, it doesn’t know who they are and to own the asset through all sorts of entities and kind of shadow structures, but even those that do have a nice brand and, you know, you have some great ones here in the UK, you know British Land or Great Portland Estates or Landsec or the Crown Estate even, and then in the US, you know we have other great names but even the ones that have a great name, they have a great kind of business to business name so it’s a name that makes sense for people in capital markets or the CEO of the tenant or the CFO of the tenant but it’s not a consumer brand. Me, as a person who works in that building and probably not even aware of who the owner is and if am aware, their name doesn’t really say anything to me, I don’t know what they stand for, I don’t relate to it in any way and I think we will have to see more and more of that evolving, just like we have seen in the world of hotels and retail.
Susan Freeman
And, it’s interesting, I mean, in the book you start off with retail and you talk about the tectonic shift in real estate with retail factually first and, you know, we are all seeing the problems that retail is facing at the moment and are there any particular lessons that the office sector, the hotel sector, you know residential, should be taking from what’s going on in retail at the moment?
Dror Poleg
Absolutely. So, I mean almost anything that is happening in retail, I think will also happen in office and residential. Not in the say way, I mean people are not going to live in the Cloud but a lot of the guidelines for how to make retail better apply also to office and residential so starting from thinking beyond the asset itself through an omnichannel strategy of, you know, interacting with your customers, multiple touch points and also in multiple physical locations, you know, people don’t want just a desk or an office, they want the ability to access a network of spaces including a variety of spaces within even a single building to that focus on building a brand that is actually meaningful and invites people to participate, that taps into their aspirations, that makes them feel like they are part of something that, you know, just by being in this building, just by being a customer, they are doing something for the environment or for society, to feel like they are part of a movement which again is something that WeWork has done very well and it doesn’t mean that every landlord should become, you know, a guru and grow long hair, there’s different values out there for different customers and then, you know, bringing technology into the assets and building that flexibility as part of the product, you know, retail had to respond and move some of the activities to industrial facilities but then make the front end of the business much more customer oriented, much more service maybe employing people that are trained a little differently, automating whatever can be automated, measuring whatever can be measured and drawing insights and building a company that is able to iterate based on those insights and respond constantly which retails have been doing forever, they just forgot how to do it well so more and more of that is coming into office and apartments.
Susan Freeman
Okay, so we should all be looking very closely at what’s going on in retail. And the thing that mystifies me a little bit is department stores so, you know as you say in the book when the first department stores opened, it was a watershed moment, you know, they were the innovators, they really created new experiences for customers but, I mean, what went wrong? Did they just lose sight of why they were there in the first place? And what do you think the future is for department stores?
Dror Poleg
So, what went wrong I think is that the economy itself, the twentieth century was really governed by mass manufacturing and mass media so the retail projects that we have started, were shaped in that image, they started all having the same goods, looking the same, having the same brands, marketing themselves through the same channels, so they just became the same because this is what the twentieth century was about but at some point it started breaking, partly because of technology, partly because globalisation and China coming along where suddenly anyone can go and manufacture anything and then all sorts of smaller brands appeared, all sorts of value big box retailers appeared and started tearing apart the department stores and then as the internet came along and kind of gave life to a whole new media landscape and enabling all sorts of much smaller and narrower channels to come along, including individual people who suddenly have a lot of followers and then go about and, you know, start their own brand which starts online and then end up even having stores or going public as we’ve seen with some of them so, the department store basically just fell behind, didn’t respond and whether it could be relevant again, I think it could, I mean in a way some of the best innovations that we are seeing inside shopping malls or on the street are really department stores which are basically saying, “Hey, instead of bringing a large tenant, I am just going to curate a bunch of interesting brands, share the revenue in some way, build most of the infrastructure for them so they don’t have to spend too much time fitting out the space and then keep tweaking them and replacing them, you know, until I figure out the right mix and maybe I’ll never figure it out, I have to keep changing it and again I am going to collect the data, I’m going to facilitate the payment, I’m going to provide credit, I’m going to help them with logistics”, it really sounds very much like a department store but something that got lost along the way and needs to be rejuvenated.
Susan Freeman
Yes, and it seems to be people who are getting excited concept stores but actually, you know, some of the concept stores aren’t that different from the idea of department store, they are just better curated. So, I think the consensus, you know, from your book is that retail has to get more customer focussed, it has to get more exciting and do you think it will be the property companies that are able to manage that change or are other disrupters going to come in and say, “Right, you know, it’s not actually a property issue, this how, you know, we make retail exciting again?”
Dror Poleg
So, it will be a bit of both, I think it will be driven by new companies that are innovating and experimenting. We are already seeing some of these, I mean, whether it is the kind of popup enablers such as Appear Here which I think you had on your podcast a few weeks ago, to another company we have in the US called Showfields which is really just reinventing the departments right now, they lease the whole building and they keep filling it with these mostly online brands. We are seeing even Brookfield or larger landlords experimenting with different things or even on the street, like not other departments are but buying multiple stores and then finding influencers or people that have small brands online and inviting them into the space and saying, “Hey, I’m going to give you a store for three months. Let’s see how you do. If you do well, you can stay, if not, let’s see what else we can do for you or we’ll bring in someone else” so I think it’s a mix but the landlords themselves are usually the followers, they are not the ones to come up with the new concept, they’ll see someone else doing it and either try to copy or more likely to try to partner or even just bring them in as a tenant.
Susan Freeman
So, you describe Amazon as “delightful, perplexing and menacing”, that’s good combination of adjectives so…
Dror Poleg
I went to school in England.
Susan Freeman
LSE? I mean it is quite intriguing, they are now taking obsolete shopping malls and they always seem to be on the move and doing something new, I mean, what’s next for Amazon do you think?
Dror Poleg
So I think, I mean, they are fairly much more a physical presence for sure in the logistical world but also in just really retail, you know, groceries, I Tweeted a quick analysis that I ran a few weeks ago which I think this year Amazon, just AWS, the Cloud business not even the retail business, is going to sign more leases and buy more property than WeWork will so, you know, they are managing probably close to 20 million square feet just for the servers which also makes you realise how important real estate is always at the end of the day so even the Cloud needs to live somewhere and pay rent to someone, obviously it’s not very expensive rent because it’s in all sorts of sheds but still makes you think about it. So, I think we’ll see much more presence from them in the physical world, we’ll see them moving more into categories that are difficult to digitise especially grocery and kind of fresh produce and we’ll seem them doing anything that helps reduce transaction costs, that helps streamline certain things that are currently moving too slowly or that are too fragmented and not run properly and, you know, they’ll keep everyone on their toes as long as the Government lets them, it looks like they are going to have some struggles on that front as well, they are already.
Susan Freeman
And the problem is, keeping some of the smaller independent retailers on the high street and in shopping centres because people say they want the independents but unless the independents can get together somehow and get the tech platform together they can’t afford to do it individually so are we likely to see more of that? The independent stores being grouped together to survive?
Dror Poleg
I think what we’ve seen when technology touches industries and when digital distribution kind of touches industries, usually there result is a bifurcated market so, on the one hand very, very large giants and on the other hand empowering a lot of much smaller companies and even individuals to sell and to participate and to use all sorts of platforms that take a little piece out of their business and I think that’s what we’re going to see in retail as well, we are seeing that already so, you know, the giants get bigger, all sorts of small people can go and launch their own direct to consumer brands or even just sell directly on their Instagram channel but everyone in between that don’t control their own infrastructure and on the other hand are too big to be able to survive economically by paying so much of their revenue to all sorts of third parties, they end up struggling because they are not fast enough to respond to those little actors that are kind of biting at their heels and they are definitely not big enough to compete with people like Amazon on margin and on speed so, the middle disappears and I think even on the developer side we are going to see the same thing both in retail and in office and in departments, we are going to see the big ones, giants continue to emerge and continue to consolidate, we see that already in hotels and in housing and on the other hand we’ll see all sorts of smaller operators that now have access to amazing tools, to amazing marketing capabilities that can bring creative ideas to life relatively quickly and everyone in between that, you know, some of them relatively large companies but that are not big enough to compete with the Brookfields and the Blackstones and the very large REITs and on the other hand have to also compete with those smaller operators or with kind of even non-traditional landlords such as the WeWorks and Convenience and Industrious’s of the world, they will fall behind.
Susan Freeman
Yeah, in fact it’s one of the things that came through quite clearly in the book that we are likely to see more consolidation if only to give the scale to actually invest in technology because it’s quite, it’s a big commitment so, are we going to see more of the Westfield-Unibail-Rodamco type consolidations?
Dror Poleg
Yeah, I think so, I mean you know, people have been flirting with it as well, you know, with Intu now that keeps kind of, I want to get off again and in some other markets we’ve seen the same things and, again in hospitality we saw the Marriott Starwood, the IEG, everyone is consolidating to try to respond to each other and also to try to respond to new competitors that are pressuring them so the online travel agents or Airbnb, they realise that, you know, in the past if I was Marriott and I had five thousand buildings with my flag, that was enough for me to pressure all the landlords that I work with because, you know, I had the distribution that can sustain five thousand buildings but then Expedia or Booking.com come along and say “Hey, I have two hundred thousand hotels so I can outspend you in marketing and you have to go through me if you want to get anyone to book anything” and the Airbnb comes along and says “Hey, I can list six million buildings plus all the hotels that you have so maybe I can outspend you” and they are all battling it out so being a Marriott with five thousand hotels is not enough so now they are trying to get to fifteen thousand or twenty thousand which gives them more leverage and more ability to compete but it will not end there.
Susan Freeman
Across the board we seem to be seeing like the convergence of different uses so, work is merging into leisure, hotels have workspace, workspace has gyms, shopping malls are looking at you know residential and workspace. Are we likely to see more of this merge because one used to be able sort of say right this is retail, this is office, this is, you know, this is residential and now, everything seems to be coming together, is it going to get more merged?
Dror Poleg
I think it’s going to get more merged, again like you said, we are seeing already office buildings with healthcare facilities in them and childcare and sleeping pods and artificial forests and I think soon we’ll have some animals as well that people can hug and relax there throughout the day…
Susan Freeman
Office dogs.
Dror Poleg
…no but more, you know, goats and cows and something more exotic than a dog, I suspect. And, yeah you know, shopping malls getting filled with co-working spaces and industrial facilities getting filled with all sorts of amenities in order to attract and retain employees there so I think the picture is going to get more and more blurred but just like life itself, you know work today is no longer about, you know, going to the same place, doing the same thing every day, sitting next to people who have gone through the same type of training, it’s really much more dynamic, it changes every day and real estate use reflects that and, you know, so life is getting harder for developers but also creates opportunity to squeeze much more revenue than ever before and to really build more businesses on top of the assets themselves but only those that are willing to do that are going to benefit those that just want to give people and empty box based on the old designations are going to fall behind… are falling behind.
Susan Freeman
And it’s interesting just looking at what’s happening in China at the moment because effectively there is enforced working from home for millions of people so it will show what works, what doesn’t work and it may actually change the future of how people work because they’ve flirted with the idea of working from home and now there isn’t a choice. Do you think that will have a sort of ongoing permanent effect?
Dror Poleg
I do, so you know, last week I think the most popular work app in China, so the video conferencing and video chat app, had 200 million people on the same day using it for video conferencing. Now, that’s one app, it has two other competitors, let’s say about 250 million people maybe use those apps in one day. China’s whole labour force is about 770 million people so a third of the labour force working from home and if you look at the white collar labour force is probably about half of all the people that would work in an office are actually sitting at home, the other half are on holiday anyway, they weren’t in the office either and I think it will definitely have a lasting impact, I am not saying that no one will go back to the office once the virus has gone but people already understand that, you know, it’s an option for them, it is feasible and I think that’s really another lesson for offices from retail, retail stores they still exist but they exist more as flagships, as experiential spaces to show people what the brand is and to onboard them and then to bring them into the online universe and I think the office will be increasingly like that, it will be necessary but it will be an optional component where, you know, you can onboard your employee, you can infuse them with culture, you can do certain things but around it there will be a lot of other things that don’t happen in the office at all and that, you know, you have to convince people to come in if you want them to come in.
Susan Freeman
And also if you are the employer, if you have the option not to have to pay for everybody to have a desk every day, it makes a lot of sense. So, then the question is, what will workspace look like in five years’ time because we’ve got different models emerging and, you know, will the WeWorks and The Office Groups be more like landlords and will the landlords be more like the flexible workspace operators or will people just go their different ways and just choose different models?
Dror Poleg
So, I think in terms of the product itself, it will be much more of a network, much more of an access product than an actual physical space so people will pay in order to have access to multiple locations whatever their employees need in order to be productive in that specific day or for that specific project which means sitting some of the time in the same place but also having access to a lot of other places within the same building or elsewhere. I think in terms of the structure of who owns what, the office industry definitely has a long way to go and I think over the next five years they are going to figure out new standards and new models on how to finance what the customers actually want so we kind of know what customers want now but we also know that the WeWork approach to it is not the correct approach. I think The Office Group is slightly closer to the correct approach, you know, to have the backing of a large owner like Blackstone, to be much more discerning in terms of your expansion. I think Industrious are already doing great things with their partnerships, I think over the last year or so 80% of their expansion was actually with revenue share with landlords and only 20% were signing leases so we are definitely going to see more of that and we will have to see new financial products that emerge in order to fill some of that gap to help take some of the risk away both from the operators and from the landlords because neither of them, I mean, the operators are comfortable with the risk but it’s not sustainable, I mean, WeWork was happy to go and sign those leases but we all know how that ended and landlords most of them will not be willing to go into a really deep partnership and understandably, you know, that’s not their business so I think we will start to see a bit more like in the hotel world where you have companies that specialise just in owning, companies that specialise just in operation and often the owners will just own, they’ll get a smaller piece of the revenue but it will be more stable and with less risk and the branded operators will take a bit more of the risk but also share some of it with other types of investors that are willing to share it and willing to sign the leases for them or willing to finance their expansion but not venture capital investors, more like traditional real estate debt and equity.
Susan Freeman
It will be interesting to see how that evolves. And then, everything is changing in residential as well. We have I think you know, the same problems in New York, you know, as in London and other cities that it is not affordable for a lot of people to actually live in the cities and we just don’t seem to be able to quite work out how to provide the right sort of living space and obviously planning and zoning get in the way but, I mean, just reading, you know, what you had to say in the book, it seemed that co-living certainly in New York is moving into the mainstream and people are actually now looking at it for family living as well as just, you know, single young people so, how is that evolving?
Dror Poleg
So, I think, I mean with housing, most of the problem unfortunately I think is about policy so it’s not, I mean, there was a lot of great technological innovations and business models but they alone cannot solve the problems, I mean, the solutions are out there, it’s mostly Government limiting supply or even local residents that already own property that don’t want more stuff to be built but what’s interesting in the residential market is again that move towards consumerisation and towards like building a real customer facing brand and experience so it started with co-living just because that was an underserved part of the market and also involved young people which are more openminded to new things but we will see that continue to move upmarket into, you know, families even people that buy houses will increasingly want to buy them from an actual entity that is professional, that can manage it and provide some sort of after service and maybe some liquidity down the line so a lot of these processes will be streamlined. To say that they will solve the housing crisis, I don’t think they will, I think it will continue to be unaffordable for the foreseeable future. I think what might break that gridlock will actually not be a real estate innovation but maybe something in the world of mobility and transportation, you know, if it becomes easier for people to move around, if new areas will be unlocked and become productive, if people will work more at home or age differently, that will definitely reshuffle the deck. I don’t know if the outcome after that will be better or worse but it will be different than what it is today.
Susan Freeman
You’ve mentioned different methods of transportation and one of the things I wanted to ask you about was drones, you know, for goods and for passengers because we seem to be sort of slightly in denial about how quickly, you know, they are going to be used and I don’t know where you are in New York, you know, whether you expect to see drones being used sometime soon but I am not sure that we have actually thought about, you know, the air rights and regulations that we would need over here.
Dror Poleg
So, I think that over the next ten years, even seven, flying things will have a much bigger impact on real estate and on cities than, you know, autonomous cars. I think there will be little autonomous devices that you know move goods around or that help people kind of push things along but I think just things that drive people around on their own will take some time and I think even when they come about, they will look too much like what we already have, you know, so they will still use the same roads, the same types of cars, I don’t think that’s going to revolutionise the world. I think the air around us is so open, there’s so much of it, it’s so much easier to navigate, we already see, you know, these toy drones that cost $50 that can really go wherever you tell them to and come back and navigate around whatever they come across and, you know, they can be flown by a seven year old kid so I think the possibilities there are amazing, I think it is a matter of regulation but regulators are starting to come along, I mean in the US the Federal Aviation Authority recently said that, you know, they are planning in the next few years to have, to basically allow delivery of packages by drone, there are already some pilots that are in place that the Government allowed mostly on top of private land but even if you just use private land there is a lot of land out there that can be used for that so I think that these things will really transform cities and transform the way goods move around and even the way people move around, I mean, it’s much easier to just fly in a little helicopter assuming that it’s cheap to build, it’s safer, it’s cleaner, it’s more fun probably as well.
Susan Freeman
Are you ready to travel in a passenger drone?
Dror Poleg
Yeah, I am.
Susan Freeman
Your wife would be happy with that?
Dror Poleg
You know, cars kill millions of people every year, we kind of just take it as a sunk cost by now, I don’t know why but almost everything other is less dangerous than just driving in a car.
Susan Freeman
It’s true. There was somebody on the news this morning saying there was a report that actually if use a scooter or a bicycle that actually it’s much, much safer for everybody else.
Dror Poleg
Alright. The plane and the train and you know.
Susan Freeman
Okay, so from what you said, you are not expecting that much from autonomous vehicles anytime soon and I think one of the things you said in the book that we’re not actually thinking outside the car enough, the people that are actually working on this are thinking about, you know, how do we enhance the existing car and maybe we should be thinking completely differently.
Dror Poleg
Yeah, and also even if autonomous vehicles will suddenly have some kind of a leap in all become possible in three or four years, I think a lot of people, again they extrapolate forward in a very linear way when they try to evaluate the impact and say, “Oh, okay no, we’ll need less cars and less roads and there’ll be no congestion and people will not need parking”, you know, history has taught us that usually when you build more capacity it gets filled very, very quickly so, I mean, we kept building more and more roads, we kept building faster cars, we have Waze and Google Maps today to channel traffic as efficiently as possible, we are not seeing congestion become lower because of these, we are just seeing more traffic and also another thing, once cars are really cars or whatever it is, devices are completely autonomous, they are going to unlock all sorts of new passengers that don’t currently use them so, you know, I could send my 94 year old grandma on her own in a car and then my six month old baby in a car and my dog in a car and everyone will be in a car on their own driving around so, I am not saying that this is what will happen but this is as likely as, you know, people assuming that everyone will just share cars and traffic will flow and we could all move to the suburbs and get to the office in the city in twenty minutes.
Susan Freeman
Yes, this is what I find quite concerning when I talk to people who are involved in this and I say, “Will there be less congestion on the roads? Will these cars just circulate when, you know, somebody goes to dinner?” Nobody seemed to be quite clear how it’s going to work so, I guess, you know, real estate has always been about location, location, location so, from what you are saying, that mantra is probably going to go, it’s going to depend on mobility and the way people work and the way people live.
Dror Poleg
Yes, so location still matters and will continue to matter, it will just matter less. Just like again in the world of hospitality and retail, it already matters less. I mean, the main driver of traffic is not always exactly where you are, obviously you have to be in the ballpark, you have to be nearby but even in the world of office, we see WeWork and The Office Group, you know, they don’t take the biggest building, kind of Grade A on the avenue in the best location, they take something that is slightly off but has some character and with their marketing channelling and with their specific appeal, they are able to draw people there and get sometimes more revenue per square metre than a building that on paper seems to be in a better location and kind of has better bones or is more visible so, the brand and the distribution capability is pulling people towards other assets just like when I choose a hotel, the location matters but I would choose a hotel that might be slightly off because it has something else in it that makes my time there more comfortable or because it’s, you know, incentivises me to do so because I am part of the network of the hotel and I am going to come back again and again. So, location still matters but matters less and it’s not sufficient anymore so you need a good operator so, you know, buy land and not make any more of it, maybe we can say “Buy land and then find a good operator” so you can actually make money.
Susan Freeman
So, in our brave new world of real estate, people are going to have to be really thinking outside the box because the rules that have applied before aren’t necessarily going to apply anymore. So, do you think that real estate’s lack of diversity and sort of cultural aversion to change is going to make that possible or are we really going to have to bring in people from completely different sort of backgrounds, people who think differently to actually make all this work successfully in the future?
Dror Poleg
So, yeah, I mean we will need more diversity, we are seeing that becoming more and more of an issue and people are more aware of it, you know, whether it is, you know, gender, racial, backgrounds academically or professionally, I mean, even strange people like me, you know, I am kind of… I spent a long time in real estate but I arrived to it after studying, you know, sociology and media and literature and then researching the economic development of all sorts of countries and, you know, started in the online world and found myself bringing my skills into the offline world and there was more and more people like that, whether it is that the industry is starting to become a little more open to these type of people or that they just take, you know, whatever is out there without asking for permission so like these new operators that are coming and saying, “Hey, we don’t need your permission, we are going to raise our own money and then we are going to go ahead and do whatever we want to do and, you know, you can come with us and you can just keep doing whatever you were doing but you are becoming less and less relevant.”
Susan Freeman
I was intrigued to see that you commented in the book that spending thirty minutes a day on Twitter can help you be better informed than 99% of your competition and I, you know, absolutely agree with that. The trouble is, everybody is on there, you know, we all have the same information so I don’t know what the next thing after Twitter is going to be.
Dror Poleg
My newsletter of course but…
Susan Freeman
Your newsletter.
Dror Poleg
No, but I think even knowing what everyone knows is a good start, I mean, most landlords are so unaware of so many things that are happening and I think Twitter just like real life is a different experience for every person, you follow different people, you notice different things, you get involved in different conversations and also you get your own ideas and you are inspired differently so, you know, I think I’m not saying go on Twitter and it will solve your problems but even doing something like that and kind of being involved in the scene, seeing what people are doing, getting sometimes into amazing conversations with people all over the world and seeing what they are doing but then asking them a question and getting an answer is like a miracle that we should all take advantage of and, you know, we met on the internet and…
Susan Freeman
Exactly, I mean, that’s how I found out what you were writing about so it definitely, definitely works. So, what’s the next challenge for you? I mean, is there another book coming along?
Dror Poleg
So, I am thinking of another book, probably on a slightly broader topic so maybe looking at cities and the future of cities or even the future of urban life. I think, you read the book, there is a lot of that in there already, a lot of sociology and anthropology and history so in a way this book was, I was pretending to write a real estate book but I was actually writing about stuff that I am really interested in so the next book might be even probably doubling down in that direction so, still relevant for real estate people but maybe expanding into a broader audience as well.
Susan Freeman
Okay. Well, Dror thank you, we’ll look forward to that and great to see you in London. Thank you very much.
Dror Poleg
Thank you, Susan, it’s been a pleasure.
Susan Freeman
Huge thanks to Dror Poleg for travelling from New York to share some amazing insights with us on the changes that are reshaping our real estate world as we know it. So that’s it for now, I really hope you enjoyed today’s conversation. Please join us for the next PropertyShe podcast interview coming very shortly.
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