The built environment reflects culture, which is constantly evolving. The central question in my mind is, “How is real estate changing in light of significant culture shifts, especially when those shifts are accelerated by new technology?”
First, a bit of history for context. Western thought can be divided into broad categories of understanding and thinking. People related to authority, faith, work, and other institutions in different ways during different time periods. For example, during the medieval period, people generally saw themselves as members of their community rather than as individuals. The built environment reflected this with larger-than-life structures pointing to a higher power and the smallness of the individual.
The Renaissance shifted away from this view toward a humanistic perspective, becoming critical of institutions and in favor of individualism. Architecture, such as the Medici Palace in Florence, reflected this with complicated details enmeshed in still larger-than-life structures that infused the secular and sacred. The built environment became a form of art showing the power of human ability.
Later, Enlightenment thinking further shifted toward the individual. Rational change, progress, and separation of church and state became dominant themes. Based on my understanding of this time period, real estate became more individualized, yet functional and practical. The idea of individual spaces for different kinds of work took hold and the built environment became simplified as common structures were more prolific, reflecting a growing and modernizing economy.
There is a change happening right before us. “Make it new” was the calling card for modernism, the era I believe we are in the process of leaving, which ushered in an optimistic view of human potential clearly visible in buildings like the Guggenheim Museum in New York City. There seemed to be certainty around objective truth and belief in the power of reason. The future offered limitless potential and society was continually improving.
Real estate responded by offering practical solutions, often designed around technology (the means of production). Office towers became inspirational sculptures of art that changed skylines. At the same time, there was a heavy emphasis on productivity and practicality for the built environment. People measured real estate’s success on productivity and transactions. An entire industry emerged around the idea of a lease contract. Everything was measured, defined, and priced.
I believe this era is nearly complete and giving way to postmodernism. While postmodernism is often viewed as taking hold in the 1960s, I see the shift as just beginning, manifested in buildings like Markthal in Rotterdam, Netherlands. There’s been debate that if modernism was optimistic, then postmodernism is pessimistic.
A great deal of cynicism exists toward science and even the notion that society is getting better, with an increasing emphasis on the perceived dark side to many advancements. There seems to be less of a desire for bigger and better, and a greater search for sustainability and balance. A new value of experience over the accumulation of things has become the zeitgeist.
Based on my perspective, real estate is becoming less about productivity or what it offers a city’s skyline and more about how a person feels while in the space. I believe places that inspire creativity and help people flourish will be valued over spaces that can maximize output and efficiency.
So, what does this mean for real estate in a postmodern world? Here are my predictions:
1. Trust as a commodity: Blockchain as a technology (with crypto and NFTs being among its applications) will commoditize trust across the real estate investing, leasing, and broader experience landscape. Blockchain will cut through the trust gap which, in many ways, historically defined the space.
2. Experience versus practicality: The bar for how real estate is judged will increasingly tilt toward how a person feels in a space and away from how practical and efficient it is. Workers now have more options, enabled by technology, to seek out the places where they are most productive. This consideration will be more important than employees per square foot. The metaverse will only enable this by raising the bar for the value in-person will need to add.
3. Blurring of lines: The lines between home, work, and play will continue to blur, affecting the traditionally separate investment allocations made among the office, industrial/logistics, and living/housing sectors. Looking at real estate opportunities from a holistic perspective is imperative.
4. Decarbonized economy: This is likely one of the largest business opportunities we have before us, as we know the built environment is one of the largest contributors and blind spots the market has today. Developing strategies to solve this will be tech-enabled.
5. Public-private partnerships: Much of the historic tension between these two groups in the context of the built environment will fade as attentions turn to solve for growing problems cities are facing. Players that can figure out how to more effectively work with civic leadership will likely win.
David Steinbach – Global Chief Investment Officer at Hines