What do we mean by #RethinkRealEstate?
If you are wondering what your life is about and want to get rather philosophical about it all, there is nothing quite like acquiring a new job title –particularly when you have to make it up yourself. This was my task when I joined the Bartlett Real Estate Institute and it helped me to define our bigger purpose too.
Fashioning my title as ‘Professor of Real Estate’ made me look more closely at the term ‘Real Estate’ itself. I’ve used it widely for a few decades now, sometimes brooking criticism from English colleagues that it is “too American”. But I like it because it is a globally-recognised term for what we in the UK more often call ‘Property’ – an ambiguous term which can also refer to a whole host of possessions like stocks, shares, bonds, gold and chattels. Real Estate is something much more specific and special.
Dictionary definitions vary but agree on the distinction between Real Estate and other possessions. Merriam Webster puts it very simply: “Property in buildings and land”. Collins expands a little: “Real Estate is property in the form of land and buildings rather than personal possessions”.
The ‘real’ thing about real estate is that, unlike other types of property, it is immovable. (The German term, ‘Immobilie’, would therefore perhaps have been a more appropriate job title but in this post Brexit country, such a Europhile title might be a step too far…)
The immovability of real estate is what gives the asset particular and peculiar characteristics. Having spent the last 32 years immersed in the sector and studying it from many different angles within a complex, global industry, I think these special characteristics are often poorly, inadequately or improperly understood, even by insiders. People often mistake land price inflation for a rise in the value of their home, for example. (A rise in land price can often hide obsolescence and depreciation in the buildings that stand on it).
The complexity of Real Estate characteristics is illustrated when you start to look at more detailed definitions of the term. After the commonly agreed definition of ‘land and buildings’ there is some disagreement as to what it does and doesn’t include. Definitions vary according to the rights conferred on real estate owners in different jurisdictions. For instance, Investopedia describes real estate as “Property made up of land and the buildings on it, as well as the natural resources of the land, including uncultivated flora and fauna, farmed crops and livestock, water and mineral deposits” but other definitions specifically include different types of infrastructure or exclude cultivated crops and may also list air, mineral and other rights as separate to land rights. These differences are themselves revealing when we try to think about what Real Estate actually is.
There are long and complex disagreements on the internet (take a look at Wikipedia for example) between would-be editors of real-estate subjects relating to the definition of various Real Estate rights and responsibilities. Some of these are based on different cultural beliefs and legal practices in different jurisdictions as well as different perspectives between what is commonly understood and practiced versus the historic origins of said rights, terms and practices.
I find these differences instructive in themselves. They raise fundamental questions about the nature of land; can anyone truly ‘own’ land or only some of the rights to certain aspects of it? Who really controls land and what is the role of sovereign states? The questions are deep and endless – and, like many human constructs in economics and law, probably unanswerable.
Real Estate is not subject to any natural law save that we are all automatically born onto it and we are territorial apes. So every human being on the planet has a direct or indirect interest in real estate; it is an important subject area.
If we have an imperfect or incomplete understanding of what Real Estate actually is, we can’t properly assess and deal with the risks and issues associated with it. The nature of real estate ownership, rights, responsibilities and tenure have far-reaching implications, not only for investors and landowners but for occupants of buildings and wider communities and nations. So how is the Real Estate ‘industry’, in its broadest sense, doing in terms of its global understanding, holistic approach and joined-up problem solving in this area?
Not too well, I suggest. We are all too self-interested and narrowly invested.
Being immobile, Real Estate will naturally be defined by its geography, just as buildings are defined by their use and experts and operatives in the industry by their specialism. Real Estate practice is therefore, necessarily, both local and sectorial as well as specialised. But as a consequence, the industry tends to operate in separate, specialist silos which are unhelpful when problems need to be addressed in a more global and holistic way. Climate change would be a good example of this but so too are the social, demographic, geo political, digital and economic changes and challenges which beset the globe. Activity in the world of real estate is rather like a giant jigsaw puzzle to which many people hold an individual piece of the answer but very few people see how it all fits together.
So for me, an exploration of definitions, looking at what real estate is, has also helped to define my job and the role of our institute. We have created a place where the pieces of the puzzle can be assembled and made sense of. It seems clear to me that we need to think deeply and perhaps differently about the fundamentals of Real Estate and more clearly define the rights and responsibilities associated with it if we are to face those challenges and changes of the 21stcentury.
We are all about land and buildings – and everyone is welcome.
