Mike Sales, Nuveen RE CEO
Nuveen RE
In this second episode of the #CEOTalks series, having sat down with JLL’s Guy Grainger last time, I spoke about PropTech with Mike Sales, CEO of Nuveen Real Estate. Nuveen RE was born out of the 2019 rebrand of TH Real Estate and, as Nuveen’s real estate specialist, it represents one of the largest real estate investment managers in the world, with $125 billion of assets under management.
Angelica Donati: Mike, lovely to meet you and thank you for agreeing to take part in the series. Nuveen RE is taking PropTech very seriously, so I’m curious to know – what made you decide to focus on PropTech?
Mike Sales: Real estate investors have traditionally focused on cyclical change as the key external driver of returns; but today, we recognize there are structural disruptors – namely demographics, sustainability, and technology – that are just as important to focus on. This approach is baked into our philosophy as Investors in Tomorrow’s World.
We have recognized technology as a megatrend that we need to adapt investment strategies to take advantage of for a long time – it has always been one of the factors that we use when deciding what cities to invest in for our flagship funds for example. However, over the last three years, we have seen technology’s impact on real estate take off exponentially. In light of this, we appointed a dedicated innovation and technology strategist at the start of last year – Jack Sibley. Jack joined the business three years ago, working between our Research and Product Development teams. It was good timing, as he soon became the informal point person for innovation and PropTech across the business, and as PropTech hit an inflection point he moved into a dedicated role.
Overall, our commitment to this area is driven by our belief that real estate is in the first innings of a decade long period of technological transformation and disruption, and we are well placed to be a net winner from this. It is not going to be easy though – we need to stay agile, find the right combination of being proactive and reactive, and choose which areas we want to concentrate on through the noise. Helping us to do that is Jack’s mandate in his role.
Donati: What has been done to date and what are your plans for the future in terms of PropTech?
Sales: One of the first things we have had to do is build out our innovation network to give us a much greater presence in PropTech ecosystems across the world. We have made a lot of progress here, helped by our recent rebrand from TH Real Estate to Nuveen, although it will require ongoing work to maintain this level of visibility into start-up ecosystems as they continue to grow fast. To help with that effort, we have partnered with Concrete VC in Europe as part of their Braintrust group, and are considering a venture capital strategy in the U.S.
So far, we have been focusing on three main areas of PropTech:
Data– We have been focused on making the most of our own proprietary data, as well as complementing that with more open datasets and ‘alternative’ data like mobile data and transaction data. These give us a new, independent perspective and we are already starting to see clear examples where this is helping us make better investment and asset management decisions. Over the last year, we have hired people with different backgrounds to build a data team and help us become leaders in this space.
Asset-level technologies- We are thinking more strategically about the technology stack within our assets. The aim here is typically either to enhance the end user’s experience of the space or the efficiency of the building’s operation. This also dovetails a lot with the work we’ve been doing for many years on sustainability and energy efficiency. In practice, this means working on common standards across our platform, creating processes for trialing and rolling out new technologies and generally coordinating our activity in this area better. We’ve also worked with best-in-class partners on specific projects such as CA Immo with The Cube (in Berlin), or our partnership with Edge Technologies across Europe.
New real estate concepts– This is one of the most interesting categories, being driven by business model innovation rather than technologies themselves. We have seen the successful emergence of tech-enabled operators offering a different consumer proposition, across offices (co-working), housing (co-living) and retail (D2C brands). These groups are challenging what people traditionally think of as ‘office’ or ‘retail’, often blending concepts together, and this is subtly starting to change the nature of real estate investment. We are excited to embrace the opportunities for value-creation that this disruption creates, and we already have some great examples of this on our platform, like WeWork Devonshire Square. We plan to continue to be a leading partner for these new uses of real estate going forward.
Donati: How do you think PropTech will change your business, and what do you think will instead not change any time soon?
Sales: As a broad guide, it is always interesting to look at how other industries have experienced periods of technological disruption. Technology has generally tended to increase the advantages of scale, democratize access, increase the importance of data and magnify the value of agility. All of these are relevant for real estate and we are focused on making sure we are positioning ourselves favorably in light of these trends.
There are, however, certain structural differences between real estate and other industries which will influence how technology affects the sector. We operate in a highly heterogeneous, private market asset class, and fundamentally we create value from bricks and mortar, which itself is not as easy to change as a piece of code. On balance, we believe that technology will be more of an enabler than a disruptor to real estate for landlords and investors.
From an investment performance perspective, we are seeing technology drive ever faster cycles of consumer preferences, which means an accelerating pace of obsolescence for all real estate assets. This reinforces the importance of our Tomorrow’s World approach, which provides a strong focus on ensuring our investments are well aligned with the structural trends of real estate demand.
Donati: What are you most excited about and betting big on (and how are you doing so) and what, on the other hand, does not excite you that others are very keen on?
Sales: Data is one of the big areas of focus for us, where we are investing in our capabilities by making dedicated data hires and working to a global data strategy. Although we are only seeing the tip of the iceberg, real estate investing has begun its journey towards a more ‘quant’ age, as greater transparency and data availability will increasingly enable us to get a fuller picture of what is happening on the ground and take the right actions to drive value. We think we can build a proprietary advantage in this space and will continue to invest in our data by hiring more data specialists, creating strategic partnerships with external innovators at the cutting edge, and working to raise the overall data competency of our broader investment teams and our agency partners.
There aren’t many areas that we are particularly pessimistic about, but there are areas that we have decided to be more focused on tracking right now, rather than being the ‘pioneers’ in, because we think it will still be a while before they hit critical mass. An example would be blockchain and, to an extent, a technology like Virtual Reality. We think the best is yet to come from those technologies but that they will start hitting inflection points in the next 3-5 years.
Donati: Thank you, Mike, you have definitely given me food for thought! Before we go, do you have any other observations on PropTech you would like to share with our readers?
Sales: A big part of being successful in adapting to technology is not letting the existing scale of our platform lead us towards hubris. We are self-aware of some of our limitations in approaching tech. Our senior leadership, for example, is made up primarily of people who have had decades of real estate experience, rather than much exposure to technological innovation and disruption. To mitigate this, we are embracing reverse mentorship as much as we can in this area and giving more influence to the younger generation within the business.
A lot of it comes down to people. There is a digital skills deficit across the whole of the real estate, and we are not exempt from that – even if we are probably better than most – so that is an area we need to keep improving in. We also know that in order to remain best-in-class investors we need to attract different types of people to work here than we would have previously considered. That probably means more people with ‘hard’ data skills, but also more people with ‘soft’ hospitality and service skills who can help us optimize end-user experience. This is ultimately also part of wider efforts to increase our diversity as an industry of course.
Overall, it is a very interesting time to work in real estate and we are excited to take advantage of the opportunities that technological innovation will continue to create in the future.
The conversation has been edited and condensed for clarity.
Mike Sales leads the Nuveen Real Estate and Real Assets investment business units. Mike’s career began in 1989 as a development surveyor at Morgan Grenfell Laurie, before being appointed to head of the U.K. Investment Agency in 1993. His tenure at Nuveen Real Estate dates back to 1994 when he joined the Henderson property business as an investment manager. Mike has led the Nuveen Real Estate platform since 2015, after the merger of Henderson Global Investor’s and TIAA’s real estate platforms in 2014.