Sustainability, Coronavirus and Real Estate.

Or so it seems, as the world comes to a halt, the streets empty and we all remain locked indoors. In reality, our response to Coronavirus will, indeed has to, place sustainability at the core of a flywheel of change that represents the greatest opportunity the real estate industry has seen in decades. To deal with one we have no choice but to deal with the other.

Without hyperbole we have a moral obligation to not ‘waste a serious crisis’. We now have the chance to do things that were not possible before. We have to seize it.

The global pandemic is acting like a forcing function in real estate, as across wider society. The future is being compressed, time is being fast forwarded, and 5-10 years change will take place in the next 12-18 months. Has a moment ever felt so Darwinian?


“It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.”

 The world has messed up, big time. And this time it’s serious.


What Would have Been

Larry Fink, the CEO of Blackrock, (with over $6 trillion AUM), set the tone for the year in January. His annual letter to shareholders was entitled ’A fundamental reshaping of finance’ and has the sub-heading ‘Climate change is driving a profound reassessment of risk and we anticipate a significant reallocation of capital

He goes on to write about how climate change will impact bonds, whether 30 year mortgages are possible in many areas most at threat from rising sea levels, how insurance may become unobtainable for many, and the impact on inflation and interest rates if the cost of food climbs from drought and flooding. And then he nails his financial thinking to the mast:

‘Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk.


Last year he wrote:

‘a company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders…. Ultimately, purpose is the engine of long-term profitability.’


This received a great deal of attention and much tub thumping, but frankly ‘climate risk is investment risk’ is 100X more powerful. When the man at the helm of a powerhouse like Blackrock says, ’Our investment conviction is that sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors.’, the writing is on the wall.

Demographics is also about to impact on this subject (Demography IS Destiny) – Millennials aren’t so young anymore (up to nearly 40) and they are moving into corporate positions of power. Whilst most ‘Millenials are …’ comments are trite nonsense it is true (according to a large Deloitte study) that as a group the under 40’s do put more weight on ‘improving society’ than ‘generating profit’. Most likely because they’ll have to live with the consequences. Either way, again as pointed out by Larry Fink, the world is currently undergoing:


‘the largest transfer of wealth in history: $24 trillion from baby boomers to millennials. As wealth shifts and investing preferences change, environmental, social, and governance issues will be increasingly material to corporate valuations.’


All of which indisputably means that an industry responsible for one-third of global greenhouse gas emissions, and that consumes 40% of all the world’s energy, has not only no choice but to take this very seriously but is going to be under the most intense scrutiny over the next ten years. There will be some carrots used, but if the industry does not comprehensively up its game, then very many, very large sticks will also be used. Indeed, these are already being used, with New York City mandating that large buildings (above 25,000 sq ft so not even that large) should reduce emissions by 40% by 2030. Not that surprising perhaps as what do we expect when the real estate industry is responsible for 66% of greenhouse gases in the city.

So the scene was very much set for Sustainability to be a key talking point (at least) within real estate. When ‘the money’ is worried about preserving wealth you can be certain the rest of the industry has no choice but to take note. But taking note does not necessarily mean action. The real estate industry, especially during the good times, is highly skilled at taking note rather than action.


What Will Be

The scourge of the global pandemic will, must, destroy the inertia that consistently constrains change within real estate. And it will do this by fundamentally changing the demands of customers. What customers want in the future will not be what they wanted in the past. And we are not actually talking about wants – this is about demands.

Two zeitgeist changing beliefs are becoming the norm. First, that the world away from our immediate homes can be scary, Can be dangerous, Can be unsafe. And secondly, events can be so big that they impact the entire world. We live in such a globalised, interconnected world that we really are ‘in this together’. We’ve seen what an invisible virus has done, to all of us, but also to our planet. A rare upside of the current situation is we are seeing how much pollution is caused by our economies. Many people, perhaps billions, are experiencing air quality that they have never experienced before.

So the peoples of the world are now aware of how much we impact our environment, but at the same time as they are nervous about being out and about in that environment.

Hence the flywheel: our built environment needs to be safe and healthy for people to work, rest and play in, but to make it such we need to embrace a broad, deep and pervasive notion of sustainability.

The imperative, and the opportunity, for #PropTech in this situation is therefore immense. Very short term it no doubt feels to many more like a heart attack but once the immediate dust settles you will see the technology in real estate landscape has been utterly transformed.

We are all aware that throughout the built environment, from design, to finance, construction, operation, on to sale or lease, the use of technology, to remove friction and to enable discovery, is mostly ‘sub optimal’. We do not do much in real estate very efficiently or very effectively. We waste energy, we generate horrendous amounts of carbon, we don’t collect much data, and that we do collect is often not put to much use.

The critical point though is that WE KNOW how to do almost everything better. We could dramatically improve the performance of this industry. We have the tools, the capabilities, and the technologies we need to do so. Not at scale but around the globe there are solutions to most of the ‘known knowns’ of inefficiency and waste.

To date, the issue has been incentives. As a whole the industry has not had the incentives to bother to put to use all the tools in our toolbox. Ten years in to a real estate bull market is no time for innovation. It’s just not needed. It’s not even a criticism; business people have been optimising their businesses, very successfully, for the world as it has been.

Today, all of this is out of the window. Our commercial assets are largely empty. In many instances this might be the case for a while. But worse than that, our customers are not going to return until we can prove to them that they are safe & healthy places to be. They are now acutely aware of the dangers of the environmental conditions around them. Of the importance of good hygiene, and cleanliness. Of the very air they breathe.

Landlords, in historic market downturns, always pull out the same playbook: reduce overheads, cut Capex, minimise expenditure. Hunker down…. survive.


This time is different

The lack of demand is not a cyclical market issue, it is an existential health & safety one. You will not be able to cut your costs to get through this. This time, the only way through the crisis will be by spending money. On upgrades to ventilation systems, on new materials, on new hardware, on new fittings and furnishings, on new cleaning regimes, on new cleaning processes, on communication, on data, on analytics, on interactions with customers, on increased staffing, on new business models and new ideas about what constitutes ‘the office’ and even ‘work’ itself. In a sentence, everything that we know we should have done over the last ten years but have not had to, we need to do now.

That better built environment we so often talked about – well now is the time to build it.

But beyond this, we really need to ensure it happens. To not  waste this serious crisis. In the same way as there are calls to not bail out or prop up incumbent companies in industries fundamentally incompatible with a low-carbon future, we could take this enforced opportunity to mandate the same within real estate. No more investment in anything that does not fit with a low-carbon built environment. Design digitally end to end, construct using MMC, operate buildings with a zero tolerance to waste, plough investment in to replacements for high carbon steel and concrete, connect our assets to the cloud and one another and use the resultant data to create and curate better spaces and places. Demonstrate to our customers that our buildings will ‘look after you’.

Frankly we have no choice in this now. Assets are going to collapse in value, towards complete obsolescence, unless the users of those assets fears are assuaged. The surest route to value destruction will be to assume this is a passing event, and normality will return. That fits in the same bucket as thinking these months will not increase the number of people who will become comfortable with remote working. To compound the problems around our customers being fearful of entering our assets, the pandemic is demonstrating that work and the office are not joined at the hip. We were already heading to a world where we had to persuade people that they needed our product anyway; tomorrow that argument needs to be stronger and richer.

For the #PropTech industry this really is the silver lining to a very dark cloud. Tech companies need to focus on their value propositions, which ideally will be around increasing or enabling greater sustainability, health and wellbeing (directly or indirectly). They need to demonstrate deep understanding of how their hardware, software or services can fit into the operational flow of their customers businesses, and they need to work as partners, not just vendors, whenever possible. Co-creation will be at the heart of the modern real estate company.

What is happening globally today has never been experienced before. We will get through it, probably in a relatively short time. But pandemics will return, and climate change offers up the probability that other ‘stop the world’ events are more likely. Unless we orient ourselves towards a deep focus on creating a sustainable, safe and healthy planet, we will be in real danger. Real Estate has to sit at the heart of this so let’s not fail to grab an extraordinary opportunity.

About Author

Antony Slumbers has been a software development and technology strategist in commercial real estate since 1995. Now, he consults and works with real estate boards on Transformation, Technology and Innovation. A well-known speaker in property, he is a globally recognised expert on PropTech, and #SpaceAsAService. For more go to or talk to him on Twitter @antonyslumbers

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