Panelists at the recent ULI Europe Conference in London talked about what the real estate industry is doing to embrace disruption, whether by funding tech startups in-house venture capital funds or by leaning in to the multichannel e-commerce experiences of the future.
Christian Ulbrich, JLL’s global CEO, related the digital journey the agent is undertaking, something he said was essential. “We can count ourselves quite lucky in that tech came quite late to real estate,” he said. “But it is coming now and coming strongly.”
Ulbrich recalled the session that JLL had sponsored at this year’s Davos summit, titled “Reimagining Work in the Age of AI”—“We had to turn global chief executives away because it was so busy,” he said—and pointed to an article in Forbes that predicted that 50 percent of Fortune 500 companies would cease to exist in the next 10 years. “I am pretty paranoid about that, which is why I am driving change at JLL with urgency.”
As part of the digital strategy, JLL has hired noted tech leaders—something Ulbrich said is “vital to taking us on the journey.” Together with other senior members of the team, he added, the new recruits have already been successful in launching several tech-based initiatives across different parts of the global business.
By using the latest in virtual- and augmented-reality technologies, NXT Office allows companies to tour every potential new office space in their market virtually with a single visit to a JLL office. “It completely changes the approach to finding a new office,” said Ulbrich. “It increases productivity and makes the process seamless.”
Ulbrich also pointed to STESSA, an app that JLL has developed aimed at individual landlords. “A lot of people own a couple of flats, for instance, and it can be a lot of work,” he said. “STESSA allows you to asset-manage your personal portfolio. We don’t know if it will make money, but it has already taught us so much about how people interact with real estate.”
Ulrich talked about JLL Spark, which he described as an in-house venture capital fund aimed at investing in tech startups. “We’re less interested in the return than whether the new tech creates value for our clients—that’s the basis for how we shortlist ideas,” he said. “We test them with clients and if they see value in the ideas, then we take stock and roll them out. We’ve invested in 11 startups so far and have Spark people in the U.S., U.K., India, and China.”
Sharing the stage with Ulrich was Natalie Berg, retail analyst and founder of NBK Retail, who has recently published a book titled Amazon: How the World’s Most Relentless Retailer Will Continue to Revolutionize Commerce.
“Retail is going through unprecedented change,” said Berg. “We are spoiled for choice and want to shop on our terms and it is no longer about in store versus online. It is also important that we have seen a proliferation of delivery services—in car, in home, click and collect. That has created complexities for retailers.”
To illustrate the pace of change, Berg invited the audience to consider how different the world of retail is today compared with 10 years ago. “A decade ago, the iPhone was only about two years old,” she said.
“Now, two-thirds of the world is connected via a mobile device. The use of drones and robots used to sound like science fiction. Back then, it made sense to go to a department store and Amazon was only the 55th biggest retailer in the world.”
All of those changes have created major challenges for retailers, said Berg, but she warned that it was easy to overstate the problems. “We are not facing an apocalypse, but there is major structural change and there will be a growing disparity between the winners and the losers,” she said. “It’s a matter of retail Darwinism.”
Berg stated that the rise of Amazon and other online retailers, as well as traditional retailers entering the online space, meant that there is now far more retail real estate than is required. “The harsh reality is that there is an oversupply of retail space,” she said. “Amazon is not the death knell for retail, but we do need fewer stores. The industry needs to follow the customer.”
Another trend worth noting, Berg continued, is that people are spending their money on different things—something that has implications for retail landlords. “It’s not just about differences in how we are spending, but what we are spending our money on,” she said. “We are increasingly spending money on experiences rather than acquiring more stuff—it is a fundamental shift—so it’s no surprise that stores are closing at a rapid rate.”
However, Berg was far from pessimistic about the future of retail. The sector would be different in the future, but it would also be better. “Stores aren’t going anywhere—90 percent of shopping globally is still done in store,” she said. “Weak stores are being weeded out, but that is no bad thing.”
What’s more, Berg noted, at the same time that poor-quality stores are shutting up shop, pure-play e-commerce appears to be dying. “Some online companies are opening stores because they know it has a positive impact on their online businesses,” she said. “They are finding that there is value in physical space. It also helps with returns, which is a ticking timebomb. So, the future of retail is blended—we want the best of both worlds.”