Analysts can be simultaneously zealous and short sighted about the future, suggests the man steering a global association of property and planning professionals. In Toronto earlier this month for a summit on commercial real estate and its urban context, Sean Tompkins, chief executive officer of the Royal Institution of Chartered Surveyors (RICS), summed up this somewhat contradictory thought pattern.
“We do tend to overestimate the amount of change we’re going to see in the near future and underestimate over the long term,” he said, as he guided the closing discussion and overview of the day’s learning.
Seminar topics for the RICS conference series — which has unfolded in six major North American cities and is set for Sao Paulo, Brazil this week — explore shared concerns for real estate operators and urban administrators, focusing on factors that support or threaten economic growth, investment returns, urban liveability and sustainability. As the Toronto event wrapped up, panellists reflected on emerging technologies, climate risk, infrastructure deficits and affordability for the diverse workforce that cities need.
Superhuman capabilities alter work practices and deliverables
Proptech, commercial real estate’s fintech equivalent, is expected to be one of the more dramatic change agents, although the full reach of Artificial Intelligence, the Internet of Things, data analytics and other digitized approaches to information management is still far from clear. At one end of the task spectrum, industry players look forward to relief from detail-oriented, but relatively rote aspects of their work. At the other, they see interpretive and predictive capabilities on a scale and at a speed that human cognitive skills could never replicate.
“Most of our members are really super interested and most of our members, with a few exceptions, are really super confused about it,” said Michael Brooks, chief executive officer of REALPAC, which represents most of Canada’s major real estate companies and institutional investors.
Still, new entrants to commercial real estate’s multidisciplinary career track are arriving with a more innate sense of the possibilities. “The graduates today are used to having a lot of tools at their disposal,” observed Colin Johnston, president, research, valuation and advisory, with Altus Group.
Some professional upheaval is expected as traditional roles and responsibilities are ceded to algorithms. Brooks speculated about future streamlining of labour-intensive tasks such as development approvals or lease abstracts — “There are some areas that I can’t wait for AI to move into,” he said — while noting there would be fallout for, and potential push-back from, planners and lawyers.
Johnston suggested proptech’s capacity to perform “low-value busy work” will free up human resources for the work they do best — applying their experiential knowledge and judgement in tandem with new ways of collecting, modelling, sharing and monetizing information. “You want to be able to use that data. That’s where experts are absolutely going to be essential,” he said.
Stephen Taylor, vice president, real estate, with the Healthcare of Ontario Pension Plan (HOOPP), foresees enhanced risk management through the melding of data mining, modelling and predictive software. In future, he expects investors will have access to information that will help them to better safeguard their assets and/or make more informed decisions about acquisitions and dispositions.
“You are, in some respects, balancing the virtual world with the real world,” he mused. “That could allow you to assess and work on how resilient your portfolio can be, how your portfolio can hold up under different circumstances. That sort of scenario analysis is very important me.”
However, he suggested there is an even bigger question for the industry to ponder: “What’s the impact of the technology, not on us, but, rather, on our tenants?”
Transit and housing needs escalating
Panellists are also wary as they watch other urban pressures arise in step with proptech. The flip side of economic growth can be escalating costs and increased competition for suddenly scarcer resources — housing, road and transit capacity, schools, green space, recreational services — for city residents. In turn, that flows through to the employers who hope to tap their talent and to the landlords who are trying to attract and retain those employers.
“The word “affordability’ is quite a challenge,” Tompkins affirmed.
“Around the world, almost every major city is grappling with transit and affordable housing,” Brooks said.
When transit users in the Greater Toronto and Hamilton Area (GTHA) voice complaints, they typically mention crowding, inadequate service, rising fares and problematic connections between regional providers — stresses that intensify when affordable and/or appropriate family-sized housing becomes more difficult to secure and pulls residents farther away from their workplaces. Brooks sees potential remedies through boosting the supply of mid-rise and higher-density single-family housing formats like row housing, and forging more and faster train connections to cities and towns that are or could be in Toronto’s commuter shed.
“I’m a GO train commuter,” he reported. “It’s a fantastic way to go to work.”
Looking farther out — in both time and distance — Ayda Chamcham, senior associate with HVS Group, cited the Canadian test project for Virgin’s Hyperloop prototype. Proponents of this transport pod technology envision a 39-minute trip from Toronto to Montreal with a stop in Ottawa 27 minutes into the eastbound route.
Meanwhile, ridership thresholds pose a longstanding dilemma for the more mundane variety of projects. A substantial passenger base is needed to justify transit investment, but many potential users will not take transit until the service level is comparable with other options.
“In Europe, 80 per cent of the population uses transit. In Toronto, it’s 24 per cent; in Montreal, 22 per cent,” Chamcham noted.
A sluggish approval and construction process, as witnessed in many recent high-profile transit lines, also leaves room for development to rise and flourish in other areas, creating new automobile-reliant communities to compete with transit-supportive development.
“The idea of continuous investment into transit rather than defer, defer, and then all of a sudden trying to catch up, is important,” Taylor maintained. “I am slightly wary of projects that take 10 to 13 years to build.”
“To be a world class city, we need world class transit, and we need to build fast, and we need to really stay the course,” Johnston concurred.
Although panellists unanimously praised Toronto Mayor John Tory’s morning address to conference attendees, Brooks urged him and his council peers to consider options like selling air rights over Toronto subway stations.
“Real estate is the tax whipping boy. We’re the ATM for local government,” he asserted. “I don’t think the city is being very creative at all in terms of infrastructure. We’re not doing some of the things we could be doing to make more money.”
Barbara Carss is editor-in-chief of Canadian Property Management.