Letter from America: ‘What living stateside has taught me about real estate’

About six months ago I packed up my life in England and moved to New York City. For four years I had helped grow WiredScore’s European business and the time had come to do the same in North America. Admittedly, I was expecting more of the same between the two markets. What I found were fundamental differences when it comes to building types, building technology, brokerage and the US focus on customer experience. Building type In the US, towering skyscrapers have been staples of metropolitan skylines for more than 50 years. It’s a different story in the UK where, historically, buildings have been smaller. This allows planning regulation to make room for new, larger buildings on historic sites, but in American cities like New York, it is much harder to add the 20% of extra space needed to make new buildings financially viable. This means British developers have the luxury of starting from the ground up when it comes to developing a best-in-class building, complete with the infrastructure to support technologies of today and tomorrow. Their American counterparts have to play the hand they’re dealt. Landlords are forced to try and reverse-engineer sophisticated digital infrastructure into an existing structure in the best way they can, so compromises are often made. Building tech My initial expectation was that the US market would be significantly ahead of the UK in terms of the evolution of in-building technology. What I have discovered is that the answer is far more nuanced. The US market is essentially top-heavy in that there is a handful of companies like Hines, Oxford Properties and Greystar leading the charge in innovation that is ahead of the UK. Sophisticated landlords like these are retrofitting their buildings with fibre backbones with converged IP networks that connect each floor to each other. This connectivity allows for the use of “edge devices” like sensors, IoT and base-building systems. On a portfolio level they are taking a holistic top-down approach to tech built up over the past three years that begins with leadership strategy and ultimately improves the tenant experience and drives cost savings. Conversely, UK landlords, with exceptions, have been focusing on new tech for their new developments, leaving some older buildings behind. However, while the top American owners may be one or two years ahead of their UK counterparts, this is not true of the US market across the board. Many landlords that hold B-class stock are still slow to realise the opportunities that they can create through embracing in-building technology and the risk of obsolescence they face if they do not. Brokerage technology Around America it’s impressive to see the technological support that brokerages provide their teams; JLL has Blackbird & MarketSphere, Newmark Knight Franks has N360, Savills Studley built Knowledge Cubed and CBRE has developed Dimension. But these firms’ ability to implement and get their brokers to adapt to new technology is hampered by a fundamental difference between the US and UK markets. In the US, broker income is almost always 100% commission-based, while that figure is much less across the Atlantic. Although US brokers work under the umbrella of a firm, they are essentially contractor whose pay is based on their own deals, regardless of the firm’s overall performance. With this every-broker-for-themselves mentality it is difficult for firms to create policies that require adoption of new platforms. Whereas UK companies can more easily influence scalable adoption, US firms can only make what amount to strong suggestions. Focus on customer experience The UK market has an advantage in community building as a result of the higher number of high-rises constructed in America, and British landlords taking a more progressive approach. In America, construction is incredibly vertical, isolating workers in their individual buildings rather than any communal space below. The high amount of privatised space adds to a lack of emphasis on creating shared space that fosters community. The UK is by no means perfect, but it is positive to see the focus that companies such as British Land place on creating long-term value through digital placemaking at Broadgate, EC2, and Paddington Central, W2. Even the towers such as Axa’s TwentyTwo, EC2, are designed on the “vertical village” concept. In the past two years, UK landlords have realised they need to start viewing their tenants as valued customers. These landlords are starting to listen to the wants and needs of tenants and providing features such as flexible leases, internet, tech concierge service and plug-and-play offices to improve and streamline their experiences. This shift is happening much more slowly in the US. Boston Properties and Tishman Speyer are starting to trial new products, but the marketplace is less developed and the way that the messaging is being communicated to tenants is still behind. Advice to UK landlords and agents UK landlords and agents who come and visit the US often tell me they are not impressed by the buildings they’ve seen. My advice to them would be to not just use these visits as an opportunity to observe the architecture and fit-out, but to dig into how the owners are thinking about technology more holistically in their strategy for driving innovation in their buildings. The US market can learn from the UK and vice-versa, and I feel lucky to have had the chance to experience both sides. Tom Redmayne is senior director, North America, of WiredScore