Transcript – Season 2 Episode 1: Turning data into insight and insight into action

November 2018

Data insights are having an ever more important role in real estate and infrastructure. Utilising and understanding a wide variety of data sources - such as mobile, credit card and travel data - can directly impact the planning and management of your assets.

In our latest podcast, host Eoin Ó Murchú is joined by Gary Martin, Head of Strategy and Operations, Central London Portfolio for The Crown Estate and Megan Higgins, Director of Customer & Retail Analytics at PwC. Together they discuss the value that data insights can bring to real estate and how analysing data on Bond Street, London helped the New West End Company plan for the future.

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Transcript

Eoin Ó Murchú
Hello I am Eoin Ó Murchú, and welcome to Season 2 of ‘Reimagining capital projects,’ a podcast series that explores the impact of innovation and evolving technologies on the capital project, infrastructure, and wider real estate sectors. Today, I am delighted to be joined by two new guests - Megan Higgins, a director in PwC’s customer insight and retail analytics team, who specialises in machine learning; and Gary Martin, head of strategy at the Crown Estate, Central London office, who managed 10 million square feet of mix-used space in the heart of London’s West End. Welcome to you both.

Megan Higgins
Thanks very much.

Gary Martin
Great to be here.

Eoin Ó Murchú
As you are aware, data shapes most of our day-to-day decisions. Gary, I am keen to understand how this is impacting the real estate sector from your point of view, particularly within the Crown Estates?

Gary Martin
I think one of the interesting things about database decision making, is that in the real estate industry that actually hasn’t always been the case; there are a lot of relationships that come into play, and the actual amount of data that we use has tended to be pretty small. Real estate in general as an industry has benefitted from that asymmetry of information, and that’s really changing a lot and quite quickly right now.

Eoin Ó Murchú
What are some of these key changes you are seeing?

Gary Martin
As an example in the capital markets; we are now going to be able to get a much more granular level of information about what’s happening in ‘live’ time, what’s happening in the market, what’s happening in the occupier side of things, what businesses are doing well, and previously which was just a rent schedule.

Eoin Ó Murchú
Megan you, specialise in the retail sector, are these trends similar in that space?

Megan Higgins
Yes, I think that consumer habits and their preferences have massively changed in the last few years, in the way that people use the world, whether they use digital, whether they use space, people require their world to be more connected like they are, and to have that space be more flexible, so they are less reliant on places; but they expect the experience to be the same everywhere, home and also at work, and then when they are out and about in their leisure life.

So, leisure, and retail, and food and beverage, the way that space is being used has to change to be in line with what customers expect, and that’s just hygiene in a day to day lives, there is not a difference between work and home, it is just experience.

Gary Martin
I think that’s indicative of probably the single biggest overriding trend that’s happening in the real estate sector as a whole, and it’s this shift away from seeing real-estate as a traditional asset class, with stable and growing income streams, and seeing it more as a conduit for delivering an experience and a service for people. It is that focus of people, the employees in a building, the consumers on the street, or any visitors, and focussing on the impact that it has on their behaviour and the business outcomes.

Megan Higgins
Yeah, it is just not an asset it’s an enabler now, isn’t it?

Gary Martin
Absolutely, has been driven by whole wide range of structural factors like technology, the business cycle is a big part of it, the knowledge economy, and the changing nature of work, and then of course health and wellbeing, sustainability and omichannel retailing.

Eoin Ó Murchú
That’s really interesting, because even just thinking back when I started in the workplace a decade ago, work-life balance is becoming more blurred and your experience of what you experience at home and interfacing with technology in the work place, is all merging.
I am just curious, from your point view, even from the real estate sector, Gary, what’s happening in that space, and how are you harnessing that sort of opportunity that’s there?

Gary Martin
I think one of the big things is that it means the real estate value is no longer just about delivering buildings in a specific location, but it is much more about how you operate that space and how you create experience and service, and ease the friction for the people on the ground. The level of service and the different uses that you put into that. Real estate value is increasingly driven by the people and the experience and the behaviour that they have. The co-working and flexible side of things is probably one of the biggest themes in the market right now.

Data is so important in terms of being able to understand what people are doing in their work space.

Eoin Ó Murchú
I am glad you mentioned user experience, because that’s really a turn that has come to the fore in the last three or four years in my view.

Megan, in the retail sector, how are you managing that expectation that these users or people are having when they go into their local supermarket or the local shopping centre?

Megan Higgins
I think the real estate certainly has a lot to learn from retail and how they have used data. Retail has had so much data at their fingertips, but equally consumers have so much more data at their fingertips today. So, they are far more connected. They are hyper-connected than we’ve ever been. It is key for retailers to be able to deliver that customer expectation and make the shopping experience an inspirational journey that they will repeat. Which means focussing less on the transaction and focussing more on the end-to-end experience from the time that they walk through the door. Everything about that space, they need to be able to go to the toilets or services, facilities, be connected on Wi-Fi; accept different types of payments.

It has completely changed the environment of retail and the way that retailers use data is that they start to understand those consumer habits and behaviours, therefore their preferences which helps them drive what type of store they have, where, what type of format, the facilities, and then you go into the shopping centres and also areas like Central London, and you really start to see the relationship between consumer behaviour and the environment.

Eoin Ó Murchú
I guess what they are really trying to do is drive footfall in a way, because what stops me from buying something online as opposed to going to the shop, and it’s that user experience you get there, isn’t it?

Megan Higgins
Yeah, and I think the more connected we become technically, the more human that we have to make the experience and to, kind of, balance it out. Because, at the end of the day, whilst everyone is on their phones; 23 hours a day, at the end of the day it’s all about that consumer touch point, the human element, and that’s where the real estate base really plays an important part in retail still today.

Eoin Ó Murchú
I guess that’s really interesting, so just drawing that outside even more, if you look back 15 or 20 years ago, I guess that information really wasn’t there from a data perspective, but now we have so many data points from credit cards, mobile phones, even travel habits, and its all there. How is that being used in retail and maybe even in the real estate sectors to inform decision making?

Megan Higgins
You are absolutely right, there is so much more data. I think I heard a statistic the other day that you work around with a minimum of 3000 data points any one point in time. The challenge is how you use that information and drive the insights from that, and understanding what the relationship of the cause and effect is. I think that that’s probably the biggest challenge, in any industry, is to really glean the insights from that and then make the tangible change.

Where I think the challenge is for real estate typically has been a relatively stable environment, where it is very difficult to change, but I think the challenge is that as the consumer expectations change and retail environment changes, can the real estate and the physical infrastructure be flexible to change at the same time, and the data helps understand and forecast what that might look like in the future.

Gary Martin
You mentioned they are learning from other sectors, and retail being a great example of that. I think in the work place we look to the hospitality sector a lot, hotels and leisure, and they are doing some great things in that industry, about looking at what people really want the experience on the ground to be, and how they can change the layout of the floor plan or the layout of rooms and furniture, and the impact of that we will ultimately have on people.

That’s something that’s really at the forefront of our mind in the workspace. We now have a much greater level of information, data, and insight that’s come with your occupancy sensors. Now you go into a lot of workspaces, and they will have sensors under every desk and every meeting room, and that’s not about monitoring people, that’s about monitoring usage, so that you get the most out of every square foot of that really valuable space.

Eoin Ó Murchú
I think it’s really interesting example you’ve drawn, the comparison there with the hospitality sector, because that drives that experience, and it makes it not just the place for work, but a place to almost hangout, have a coffee, and sort of network as well. It is a place to socialise, and it becomes a wider use case for the asset.

I am just keen to know Megan, from the time you are with PwC, are there are any examples for what we can draw out, whether this has been actually applied in practice. We’ve helped people along the line to deliver this kind of environment?

Megan Higgins
Yeah, absolutely, I think the best example is a company that we work with called New West End Company, who is the business improvement district, and they are responsible for representing the interest of the owners and occupiers in the West End covering Bond, Oxford, Regent Street, which is obviously the Crown Estate’s land, and then 74 streets surrounding. We did a study last year for new West End Company as a pilot to roll out a wider program, and we did it on Bond Street. We analysed spend data, mobile network data, global travel data, and the TFL travel data. The insights that we derived from that were around, who is using the area, how do they use the area, what time of the day, how long do they spend in the area, what nationality are they, age, affluence, it is all on an anonymised basis.

The point of this is for place making an experience, not to directly the target customers or market to them, but from that we are able to take tangible insights, such as we saw the number, equal seconds spent on the street came from the Japanese customers on the international side, was mostly domestic market, but the Japanese had the second highest spend at the international customers.

So, what they told the retailers on Bond Street is that they could increase their customer experience by having a Japanese speaker in store. Equally through the mobile network data, we saw that there is a large group of customers that are on the street post 7 O’clock. Now the trading hours are from 10 to 7 on Bond Street. Actually, if we lobby with Westminster council to increase those trading hours, how much more could the revenue increase if the retailers were able to stay open past 7 O’clock? Then from that we can start to infer the types of customers that are visiting the area, and therefore what services and facilities would improve the loyalty and the experience in the area.

What we are doing this year with New West End Company in the Crown Estate is part of that as well, is working with all of the members of New West End Company across those 74 streets to pull all of that information together and profile who shops in the West End and how they use it.
One of the key things that we will be doing is what is called network analysis. What that will allow us to do from the actual physical location of the stores, is understand the strength of the relationships between the various brands. From a real estate perspective, we can use that data to start to model and forecast the impact of a particular brand not being there.

So, we identify anchor stores, and therefore you can start to use that data to say, ‘well, if this key store didn’t exist, what would that do to the rest of the area?’

Eoin Ó Murchú
That’s hugely powerful, and Gary, from your perspective, is there any ways that this can be applied to really your sector in particular?

Gary Martin
Well, I think, one of the interesting things with the study, with New West End Company last year is it disseminated and dispelled some myths that were just generally held for a long period of time, such as the demographic nature of the shopper on Bond Street, and it being actually a majority of domestic consumers.

If you had asked anyone in the industry, we wouldn’t have had any data to back it up, but our gut would have just been, it was predominantly overseas visitors. That was a really important compelling piece of data that just allowed us to look at the activity that we do, we are to take on a day-to-day basis a little bit differently.

Then similarly applying those same concepts to the workplace, understanding how people move, what people are actually spending their time doing, because we know from a whole series of studies that what people say they do and what people actually do is very different.

We are looking at where are the hotspots in an office, and how do you make sure that the desks, or the meeting rooms, or the breakout areas are laid out in a way that maximises interaction, networking, collaboration, and then also gives people the opportunity to work quietly if that’s what they want to do. These are some of the things that we’ve never been able to do without data that we have now.

Megan Higgins
I think the important thing to note is retailers do use data really well, and some less so, but the application of data and modelling can be applied to any industry. You just need to know how to use it, and as an example the network analysis I spoke about in the real estate context for Regent Street as an example. You can apply the same thing to where people are physically located in an office, versus how often they email different departments.

So, that email connection is your network, would you be better off moving the people that constantly email each other, next to each other. So it’s reconfiguring the work place completely based on the actually activity within the work place.

Eoin Ó Murchú
As Gary notes percentage efficiencies across the board to drive value, and I have never heard a better example of data driven insights from what you’ve just described. It is really fascinating and how all those connected notes, and how to hold the moving parts can get really true value. Gary, I am keen to know, how has this challenge been undertaking with real estate sector, is it a bit task, is it something that can be done?

Gary Martin
We are absolutely up for the task, but the challenge for most traditional real estate owners and developers is that none of this comes naturally, it’s an entirely different skill set, and often the activities are somewhat contrary to the traditional practice of maximising efficiency, intensification and capturing value, as much value as you can on day #1. To make decisions about investment development, or indeed what Megan was talking about, which is all about asset management in public realm investment, that looks really different than what we’ve done in the past, and that gut reaction we had, it requires a really solid evidence base and data, which we just don’t have enough history yet, but the great thing about the study was that it started providing some of that insight that allows us to make our decisions a little bit different about, what retailers we will put in different places, or how we may layout the public space.

Eoin Ó Murchú
And I guess, as Megan said, it is not about just getting the data, it is about making sense of that data, is that fair Megan?

Megan Higgins
Yeah absolutely, and I think that that’s a challenge for every industry, is finding the talent that can do that, but also the cultural change within an organisation to trust that data. My advice is to start small rather than trying to boil the ocean, because it is difficult, but very soon much, like digital has become hygiene in our everyday lives. Millennials have grown up not knowing anything other than a digital world. Data driven insights will at some point become hygiene, so people either will need to start adopting it or fall behind.

Eoin Ó Murchú
I guess that’s really a good opportunity for me to ask, what does the future hold in your view for the real estate and maybe the wider retail sector around data and how we will want to use this going forward?

Gary Martin
I think Megan makes a great point that it’s not about data itself, it’s about the insight that it provides and the ability to improve the user experience or the operations on the ground for people, and I think that’s the big thing that the industry needs as it get its head around, as data in itself is not valuable.

I think one of the biggest challenges for the industry right now is around construction and the nature of the built environment. Buildings and planning have 10 or 15 year life cycles if not 50 to 100 years. In a world where the user experience and customer expectations and capabilities are changing on a day-to-day basis if not weekly, how do you respond to that in an asset class that has 10, 15, or 50 year life cycles. The answer and the solution has to be that you build in the technological capabilities, behind the scenes, behind those great architectural beautiful buildings; you build in the capabilities for them to operate more like software.

Eoin Ó Murchú
And driving those insights in a day-to-day basis until you can identify the next trend and adaptability to actually suit the need in the future basically.

Gary Martin
Yeah, using those buildings to create an amazing rich data set that has all sorts of information that we currently can’t even actually get our head around, and then as Megan says, employing and gaining the skills within our industry to make sense of that, and to figure out what does that actually mean for how we design buildings, how we asset manage them, and how we invest in them.

Eoin Ó Murchú
I think that’s a really exciting place to leave it for today’s discussion.

That was really enjoyable and really insightful in terms of how data is driving insights going forward within both real estate, retail, and actually the wider industry as a whole. I find it really fascinating, and I hope everyone at home enjoyed listening to it too.

We will be back again soon for more discussion about innovation and technology, and in the meantime, should you wish to learn more about data, disruption, or any other of the topics we’ve covered today, please visit our website at pwc.co.uk/reimagine.

Please subscribe to the series to get all our latest episodes, and don’t forget to rate and review.

All our past content is available online, so please check out if you haven’t done so already. So, until next time, thank you all for listening.

Contact us

Alpesh Shah

Capital Projects & Infrastructure Technology Lead, PwC United Kingdom

Tel: +44 (0)20 7212 4932

Eoin Ó Murchú

Capital Project Services: Technology Select & Optimise, PwC United Kingdom

Tel: +44 (0)7718 979 676

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