Jack Sibley is to lead the push in driving technological innovation across TH Real Estate’s global platform in the newly created role of innovation & technology strategist.
Sibley will focus on analysing and providing solutions for how technology is changing what end-users want from real estate, proactive engagement with proptech start-ups and disruptors, and efforts to leverage emerging technologies such as Big Data and Artificial Intelligence.
The outcome of these initiatives will be integrated into TH Real Estate’s investment process, driving decisions around asset selection, asset management and portfolio resilience.
The new role is in line with the ‘Tomorrow’s World’ investment philosophy of TH Real Estate, an investment manager with $114 bn (€97 bn) in global AUM which is affiliated to Nuveen, a subsidiary of US asset manager TIAA.
‘We believe that real estate is going through a structural shift and ensuring that the big picture trends we all hear about are reflected in our bottom-up investment behaviour will be crucial to being an innovative and impactful investor in Tomorrow’s World,’ said Sibley.
He will work alongside TH Real Estate’s investment, research, product and operational teams to ensure the approach is embedded and leveraged across the global platform. Sibley joined the company in 2016 as an analyst in the research and development team.
PropertyEU asked him which tech trends are set to have the biggest impact on the real estate industry going forward.
Which new technology is set to be the biggest game changer for real estate in your view?
Sibley: The value of real estate is born from the interaction of people and places, so anything that facilitates that interaction, like transport, is critical. Hence, the popular mantra of real estate investing – ‘location, location, location’ – usually means ‘proximity to a transportation hub’ in practice.
For this reason, the biggest technological game changer for the built environment will be autonomous vehicles (AVs) as it will enable a transportation revolution to occur over the next 5-10-20 years. Although AVs will likely be the determining factor, this transportation revolution will be driven by the simultaneous maturing of three transportation megatrends: AVs, electric vehicles and the sharing economy (ride-hailing). Together, these will combine over the next five years to blur the lines between public and private transportation, and shift towards a narrative of networks of both publicly and privately-sponsored multi-modal mobility platforms.
This shift will have profound impacts for the built environment as location becomes less dependent on major infrastructure projects, and more aligned to road access, the penetration of mobility platforms and how the cost of journeys is influenced by subsidies or taxes. Although the timeline of the technology’s development, deployment and adoption is not certain, it looks likely that by 2030 they will be having a material impact on how people interact with places, especially for those cities that choose to embrace it.
This example also highlights the challenges that now face real estate investors in underwriting, as real estate has one of the longest typical hold periods of any asset class. It used to be that certain core factors - the accessibility of a location, the primary ‘purpose’ of the asset (e.g. to be a place to buy things), etc - could be assumed as constants over the next 8-10 years. As the pace of obsolescence accelerates across the board, these factors have to be re-examined with a first principles approach. The challenge is how to price the impact of technological change that is often high impact, but low predictability of impact.
Where is most of the innovation coming from (which part of the world and which real estate sector is taking the lead)?
Sibley: Real estate innovation is everywhere, but relatively thinly spread, as the industry is still getting up to speed. As a nascent (if fast-growing) area, it is currently too disparate to say that most of the innovation comes from one part of the world and one sector.
However, some broad generalisations can be made. For offices, I would say that New York is currently a major hub of innovation. Why? It is the largest real estate market in the world, it has the most direct experience of interacting with disrupters like WeWork, and it hosts a lot of incumbents that are keen to signal that they are keeping up with the pace of change as offices move towards being more of a B2C business.
In retail, China is leading the way, encouraged by both an accelerated pace of adoption from consumers, whose consumption habits are more elastic than their American or European counterparts, and by being early movers in blending offline with online, which has afforded them advantages in the data arena.
Aside from the other obvious major hubs (e.g. San Fran/LA, London, Berlin, Hong Kong and Singapore), I’ve also recently been impressed with what I’ve recently seen from Australia, Tel Aviv and the Netherlands.
When will we start to see new technologies (such as Big Data and AI) impact the bottom line for real estate companies?
Sibley: Operationally, I believe that we are already seeing it today: in energy efficiency, where Big Data and AI are being used to help optimise building operations and energy usage, leading to lower running costs; and in attracting tenants and consumers through digital experiences. The main issue is that real estate values are so large and lumpy that these gains, while real, sometimes do not make a significant enough (and directly attributable enough) impact at the level of the asset’s overall financial performance.
For technologies that will really drive the financial performance of assets, the big hope is that Big Data and AI can help to better inform investment and asset management decisions by leveraging alternative data sources like open data, geolocation data and more.
TH Real Estate is well-placed to be a leader in this area, and over the next 6-12 months we will be working to integrate the first iterations of Big Data & AI outputs into investment and asset management processes, enabling us to better understand cities, submarkets and individual assets in real-time, and make better investment and asset management decisions accordingly.
