In 2007, two young entrepreneurs named Cheskey and Gebbia withdrew the last few dollars from their accounts. With an immediate need to pay rent to a landlord that was quickly losing his patience, the two young upstarts were struggling badly as their world began to crumble. Vehemently business-minded, the two friends decided that despite their financial troubles they would still attend the Industrial Design Conference (IDC) held in San Francisco the following week. They were both design enthusiasts. They decided to attend in hope that the trip would ease the tension surrounding their situation.
In the days coming up to the event, Cheskey and Gebbia went in search for a get rich quick scheme. Their idea would allow them to pay their rent in the short term so they could buy some time to get their finances in order. This led to an innovative idea which would transform their lives and lead to the foundation of a $10 billion dollar company. The IDC attracted a worldwide audience. The hotels, hostels and all accommodation in the area were filling at record speeds. Many were stranded in San Francisco with no place to stay. It was clear to everyone that demand far outweighed supply.
Meanwhile, Cheskey and Gebbia had a moment of entrepreneurial opportunism that would ensure they never had to worry about paying rent again. They decided to transform their front room into a makeshift BnB filled with air mattresses - enabling them to pay their rent, attend the IDC and turn a profit.
Over time, this concept developed and refined into an innovative business that would flip the budget hotels market on its head and start that I like to call "the Property 3.0” movement. In 2008, the friends founded an online service catering to high profile events for which they knew that accommodation in the area would be in high demand. The company they founded, AirBnB, has helped 13 million people find accommodation throughout the world. 20 years ago, a business concept like this would have been unimaginable. Now, thanks to the internet and the booking systems and location based services it has spawned, we are about to see many more property services move to the online realm.
In 2014, I see London being at the forefront of the "Property 3.0" movement. By 2020, I predict that the Property 3.0 movement will revolutionise the UK property industry. I say this because I am friends with and a mentor to many of these young entrepreneurs. I meet them and hear their ideas and I support them with enthusiasm as they emerge from incubators and cafes with revolutionary ideas that will shake up the property sector.
Although AirBnb is a San Francisco based start-up- the "sharing economy" approach to property that I see in these young entrepreneurs is taking off closer to home. The AirBnB story proves that traditional property can be disrupted by online services. And local European flavours of Airbnb like OneFineStay and HouseTrip further validate this thesis.
As a hub of international property activity, London is the natural home for this emerging movement. The London property market and all the services that surround it are antiquated and are a constant cause of angst for occupiers. And yet the capital continues to attract more and more international capital, putting additional strain to a creaky old ecosystem. I see the "Property 3.0" businesses as an innovative counter-cultural reaction to this public angst. Unlike traditional property businesses, this new breed wants to understand "customer pain points" and build technology products that can help address them.
The UK property industry has rested on its laurels and shrugged its shoulders at the mention of change for too long. It is a system so intertwined with law that it has existed as long as law itself. English land laws can be traced as far back as Roman Times and last experienced a major upheaval during the Industrial Revolution. In fact, the Queen of England is still the world’s largest landowner ruling over 6.6 billion acres of land worldwide. Not to mention English land is still owned by 1% of the population, largely descended from William the Conqueror's army (Source). This is a sector of our society that lays deeply entrenched in history - a history which seems to have stunted its future progress.
In 2014, the incumbents are sitting comfortably on wealth accumulated not through innovation or progression but through following an age old blueprint which does not look kindly upon innovative new models. The Property 1.0 generation accumulated portfolios and wealth through a system of rules set in stone, accepted as an overbearing commandment as “the way things were done”.
The custodians of Property 1.0 still remain unmoved by the sea of change that is steadily approaching their shores. By the time they realise that Property 3.0 offers superior, streamlined services which cater to the consumers’ needs - I fear it may be too late.
We have grown up in a world in which property services were complicated matters that were loaded with emotional baggage. Property transactions required a complex understanding of the legal system and time consuming red tape and paperwork. The incumbents wanted us to believe that most property activity was complex, arduous and expensive. Renting a flat, co-owning a property, procuring cleaning services, managing a household, and finding office space had to be complex processes that warranted hefty fees to brokers that added little value. I'm not sure that's the world I want my children to grow up in.
As a parallel to the sometimes unnecessary complexities in property transactions, let's look at the history of the calculator. Before the invention of this now ubiquitous device, someone who was not a highly trained mathematician could not instantly compute complex equations. Mathematicians were deeply embedded into various industries that required computation, including the world of business. Like the mathematician that has lost relevance in many common sectors, many in the property industries will have to look for new ways to add value as low value activities are automated.
The great equaliser for the Property 3.0 generation is their superior understanding of customer insight, and how to create a technology-powered service that plays to those insights. The incumbents are unlikely to be agile enough to keep up with this rapidly evolving new breed of businesses - businesses built on Eric Ries' principles of "lean start-up". Business bold enough to scale up through experimentation - through repeated customer trials and perpetual product iteration.
Everyone’s time is precious. In the modern world, we all yearn efficiency and speed. Property 3.0 will take the pain out of these transactions and create simplistic user interfaces where the complexity is hidden behind the scenes in reams of software code. My view is that the purveyors of Property 3.0 are about to drag the property services sector into the 21st century. There will be big winners and some big losers as these entrepreneurs emerge from TechCity incubators and accelerators with online alternatives to traditional property services.
So who’s next?
Spacious, a London based start-up is my first pick. Spacious is a visionary business chaired by Rohan Silva (often referred to as the architect of London's Tech City) that adds unparalleled convenience to the process of renting office space. In the world of start-ups and SMEs, this can be a time-consuming, administration-heavy task. Spacious allows for flexibility in commercial property utilisation that high growth businesses desperately need.
Another online property service, Locatable, is looking to solve problems related to household management - their mantra: Managing your home shouldn't feel like a full time job. I can definitely relate here, as the tools (or lack thereof) we currently have for managing our household make the job so mundane that most people put it off altogether. Watch this space for some clever tools for making life easier at home.
Providing simple solutions to complex problems seems to be an underlying theme across all these channels. eMoov, the UK's leading online estate agent, operate under the slogan “For Smarter Sellers Nationwide” is working on a minimalist-design mobile site to help sellers sell their homes.
The industrial revolution saw the last major overhaul in the property sector. This was later penned by Stephen Gardiner as “another of those extraordinary jumps forward in the story of civilization”. Could he have possibly imagined a company such as AirBnB? Probably not.
The internet is the strongest tool for businesses to harness since the invention of electricity. The UK property market is a sector that is screaming out for disruption. The Property 3.0 generation is looming in various cafes and incubators in East London. They are ready to emerge and turn the entire industry on its head.
As Bob Dylan concluded in his 1964 title track, the times, they are a-changin':