The Bartlett


Making a new model

Today’s real estate model is increasingly limited in its scope and lopsided. A new Bartlett institute aims to create a concept for the sector that’s fit for the 21st-century city. Words: Hugo Cox

Real Estate

If you ask Andrew Edkins what is wrong with the current real estate paradigm, you will see his eyes lower, his brow furrow and the sort of shrug that says “where do I start?” He is, he admits, something of an iconoclast. It is no wonder, therefore, that his solution to the problem – The Bartlett’s new Real Estate Institute (BREI), which provisionally launched in July – looks radical.  

The vision is to create a cross-disciplinary “sand-pit” made famous by innovation initiatives and the tech industry, upending the traditional silos that separate the real-estate professions –developers, engineers, financiers, architects, designers and so forth.

This result, Edkins hopes, will dislodge the current fixation on the needs of those who supply property and replace it with a model of value based around those who use it or are affected by it. UCL – and The Bartlett in particular – is a natural place to house such an endeavour.

Both The Bartlett and Edkins himself have proved the commercial value of a well-run cross-disciplinary approach with the rapid growth and success of The Bartlett’s School of Construction and Project Management, of which Edkins was Director for four years until 2016. This part of the faculty has become a powerhouse for teaching, research and collaboration with a wide range of external parties since it launched in 2009.

A pressing need

On the face of it, new ideas and knowledge are much needed if the construction industry – and the wider built environment – is to improve the productivity of this sector and influence the wider UK economy. For one thing, Brexit seems to have hobbled the industry. In November 2016, barely five months after British voters had chosen to end the UK’s EU membership, a survey of 

UK building firms found that a weaker pound had driven cost inflation to its highest level since April 2011. Meanwhile, thanks to the UK’s ageing population and the continued squeeze on UK housing supply, the construction industry will need to recruit 400,000 people per year to build the houses the country needs, according to construction consultancy Arcadis.  

However, tighter immigration controls following Brexit will mean a smaller pool of workers to pick from. At the moment, one in eight UK construction workers is a foreign national – in London the figure is nearly one in four. If a hard Brexit extends the points-based immigration system to EU citizens, 215,000 fewer of them will have joined the UK’s construction industry by 2020, says Arcadis.  

Faced by numbers like these, you’d imagine, the industry could do with some blue-sky thinking around the value of conventional wisdom related to the finance, design, construction and use of buildings. “The need for a new approach has never been more pressing. The Institute couldn’t be launching at a better time,” says Edkins.  

Analyse this

One thing that will hinder the real-estate sector’s ability to improve productivity is an increasingly incomplete measurement model – a problem the BREI will be focused on rectifying. Given the growing recognition of the importance of factors like design, environmental impact and employee contentment and productivity on the commercial benefit of a building to owners and users, it is perplexing that there is so little agreement on how effectively to measure the value they each confer.

While, elsewhere, successful innovators have refocused businesses’ processes around building a product perfectly matched to what customers need, real estate’s creaking model owes more to Adam Smith than Apple. “The professions involved in the built environment still focus on the building as an object whose value is conferred in the process of manufacturing – closed, tangible and financial,” says the BREI’s Peter McLennan. “Service elements remain, largely, valueless.”

The result is that evaluating the quality of a building beyond a few simple financial metrics is rare. Measurement models employed by the various disciplines – from financiers and developers to planners, architects, other designers and engineers – typically fail to capture a building’s worth to those who use it or who are affected by it.

The result is that questions of the value uplift of excellent design, the impact of effective place-making and the role buildings have in tackling climate change and economic productivity are not well understood.  While often viewed as a purely social problem, this framing shows clearly that the effective measuring of a building’s value is also a commercial problem.

A few forward-thinking employers – Deloitte in the smart-sensor-stacked Edge building in Amsterdam or the leading tech employers, with their beanbags, beer taps and break-out spaces – have considered the value of the less tangible elements of a building’s design. “But they are the innovators – the exception that proves the rule”, says McLennan.  

Even adding the simple dimension of productivity is rare, meaning that the traditional focus on occupancy levels and yield can quickly create false economies. Fitting double the number of people into an office by knocking down the internal walls isn’t much good if they become half as productive as a result.  

Real estate’s standard model of value stands in stark contrast with much of contemporary industry, which carefully measures concepts of value focused on the contribution of people –both employees and customers – processes and intangible concepts like brand.

The BREI is keen to engage and learn. “In recruiting the services of teaching and research staff, the BREI is looking even further than that,” says Edkins. “It will seek out the insights of data and social scientists, which professionals of the built environment typically exclude. Its remit is ambitiously wide, going beyond ‘commercial’, ‘industrial’ and ‘retail’ buildings to every element of urban infrastructure on which buildings rely and with which they interact.”

“We will be reaching beyond the industry’s traditional silos as we want to tempt professionals from industry, from the third sector and from government – both local and national”

By way of example, McLennan explains that “the emphasis is on thinking ‘healthcare’ rather than ‘hospital’; ‘market’ rather than ‘retail’; and ‘learning environments’ rather than ‘schools, colleges and universities’.”This ambitious remit means a combination  of teaching staff you wouldn’t have seen at The Bartlett before. “In making the BREI work, we will be reaching beyond the industry’s traditional silos as we want to tempt professionals from industry, from the third sector and from government – both local and national,” says Edkins.  

Students, too, can expect a practical education. The BREI’s first Master’s course, to launch in the academic year 2018-19, will explore the issues facing modern healthcare service delivery within a fixed set of healthcare buildings, to a changing healthcare service. “Practical understanding will be at the core of the other courses, too,” says Edkins. “The BREI is going to start with a clear focus on topics and activities designed for practitioners, in the private, public and third sectors.”

Regenerating value

Precisely at the time the BREI is preparing to supply new answers to the question of what is value in real estate and how to measure it, the old answers are looking particularly fragile. Especially questionable is the assumption that the UK’s current model of urban regeneration benefits an area's poorest inhabitants.

This idea, long trumpeted by developers – and more appealing than ever to austerity-era governments on both left and right – sounds compelling. Replace spent housing estates with modern, dense developments in which high-end private and affordable flats are combined, with developers profits from the former helping to subsidise their costs in building the latter.  

Politically, it seems to make sense, too. If you want to fight housing poverty – as then-Prime Minister David Cameron did when pledging last year to level 100 'sink' estates – why not recruit the private sector to the battle? In practice, this is an example of a traditional approach to real-estate financing that no longer works.

A survey by the London Assembly in 2015 considered the effect of 50 estate regeneration projects over the previous decade on the supply of social housing. While the developments resulted in doubling the total number of homes on the estates, the total number of rented social homes fell by 8,000. New knowledge is needed to inform government policy.

It would seem that, without finding a way to monetise the impact on society of not providing social housing, simply dealing with ‘normal’ yield rates for its development will see social housing provision eventually squeezed out.

The Grenfell Tower disaster highlights the failure in understanding the need for resources over time – namely a reluctance to assess user needs and an economic model in which short-term financial costs are frequently mistaken for value – which the BREI is seeking to rectify.

Grenfell is an example, perhaps, of what happens when business as usual is allowed to happen – namely that the public sector has a hard time justifying, resourcing and managing operational aspects of their real-estate portfolio. “At some level, the true value of real estate was bastardised here,” says Edkins. “There was a lack of connection between the use of a risky building material and a poor history of public-sector management, maintenance, and repair.

"The wider issue is how do you design these buildings to ensure that such a regime does not jeopardise people’s lives.”

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