Yesterday evening I moderated a panel on innovation in real estate at the Rotman School. The panelists included Subhi Alsayed (Innovation Manager at Tridel); Michael Lio (President of buildABILITY Corporation); Alison Minato (VP of Sustainability at The Minto Group); and Tad Putyra (President and COO, Low Rise Development at Great Gulf).

Though the general consensus was that the real estate industry is terrible at innovation, it was comforting to hear that a number of both low-rise and high-rise developers are working on and/or towards building “net zero” homes. A net zero home is a home with no net energy consumption. What this means is that the home produces as much as energy as it consumes.

The general strategy with these homes is to design the building so that it’s as energy efficient as possible (as in R-40 walls and triple-pane glazing) and then use renewable energy sources (such as solar) to fulfill any remaining energy needs. Of course, the next step would be homes that actually produce more energy than they consume so that they become net contributors to a city’s energy grid. But let’s not put the cart before the horse.

There are a number of challenges to achieving this goal—one of which is on the consumer side. Many of the panelists mentioned that consumers simply don’t care enough about building performance and energy efficiency. Instead of worrying about air tightness, they’re worried about cosmetic things, like granite countertops and hardwood floors. That’s not to say that these pieces aren’t important, but they’re only one aspect of a home.

So what’s the solution? Do developers and home builders need to get better at consumer education? Or should utility companies be the ones shouldering this responsibility? After all, improving energy performance means lower utility costs.

One thought that came to mind (and I’m testing this for the first time with the Architect This City community), is that maybe homes need to become more of a product. Today, developers often market projects and communities ahead of themselves. But maybe that’s not the best way to drive innovation within the real estate industry.

For example, think about how car brands segment the market. When you buy a Mercedes, you expect a certain level of performance and quality. You probably don’t know about every little technological innovation in the car, but you assume that they’re pretty damn good.

With a new home on the other hand, you’re buying (insert generic name) on the Park or the Residences of (something regal sounding). The developer’s brand is secondary. And maybe that’s the wrong approach. Maybe it’s making consumers believe that the only thing that matters is whether you’re getting stainless steel appliances and granite countertops.

Maybe consumers need to know whether or not they’re buying from the Mercedes developer or from the Ford Pinto developer. After all, consumers make decisions based on heuristics. They need to be able to say to themselves:

"This home is $50,000 more, but it’s from the Mercedes developer so I can justify it. I’ll have less problems in the future, I’m sure."

Instead, consumers are saying to themselves:

"This home is $50,000 more. Why is that? They both have stainless steel appliances and granite countertops. I’ll just go for the cheaper one."

I refuse to believe that the real estate industry can’t be as innovative as other industries. There’s always a way. We just need to figure it out.

What are your thoughts?

A few years ago during a class at the Rotman School when we were all introducing ourselves, I had a professor ask why all architects seem to want to become developers. He asked it because there were 3 architects (or at least architect-trained) in the class who were either currently working in development or planning to move into development following their MBA.

Indeed, it is pretty common for architects to make this jump. So much so that I’m often asked (as recently as last night) about how I made the transition from architecture to development. Given the frequency of this question, I figured it would be worthwhile to turn my response into a blog post—particularly since I did make the decision to write more about what it means to be a developer.

The first thing I should say is that I’ve never really worked as an architect. I interned at an architecture firm one summer, but that’s about it. I’m not licensed as an architect and I have no plans of ever becoming licensed. Therefore, I’m technically not allowed to call myself one, which is why I often say “architect-trained.”

However, this doesn’t mean that I didn’t face a certain degree of stigmatization while I was completing my Master of Architecture and looking for my first real estate job. The real estate community often perceives architects as being impractical, fanciful and generally poor with money and business.

Part of this, I think, has to the with the fact that design schools often don’t like to talk about making money. It’s taboo. Design is supposed to be something purer and grander than money. Maybe that’s why it’s not uncommon for even the most famous of architects—such as Louis Kahn—to die deeply in debt.

But I think this perspective is bullshit. Which is why I spent every single one of my electives during my Master of Architecture over at the business school taking finance, economics and real estate classes. I was determined to be just as good as the MBAs at “the numbers.” And even became a teaching assistant for a real estate economics class.

So my first piece of advice to architects looking to make the transition to development is that you need to overcome the perception that you don’t understand money and business. You need to demonstrate that you can crunch numbers and that you know how to make money for investors.

This could mean getting an MBA or Master of Real Estate Development, taking extracurricular classes, starting a blog, or just convincing somebody in real estate to give you a chance so that you have it on your resume. Whatever it is, you need to reposition your personal brand so that it no longer says architect.

This is important because, from my experience, if a real estate company is used to hiring people with business degrees, then it’s going to be tough to get them to pay attention to you and your architecture degree. They just don’t understand the value that you might be able to bring to the organization (and you do bring value).

My second piece of advice is to find developers who have an architecture background and specifically reach out to them. There are lots of us. They’ll be sympathetic to your background and will probably give you more time of day. But you’ll need to come prepared with the right tool chest. Demonstrate to them that you have the skills necessary to be a developer (see above).

As I’ve said before, developers are, in many ways, a jack of all trades. So the more you can master all of those trades, the more likely you’ll get some hiring manager to take a risk on you. But when you do finally make that transition, I believe that you’ll be better for it.

Not only because architects understand the building process, but because architects are trained to have an inherent sense of responsibility for the built environment. We get upset when building are ugly and public spaces suck. But we also know what will make them better.

The way I see it, by becoming a developer you’re really just learning how to execute on your ideas. It’s one thing to know what makes a building beautiful, but it’s another thing to go out and raise the capital and build the damn thing.

So I don’t regret any of my architecture degrees. I got so much out of them. And I firmly believe that design is only going to become more important. Designers, after all, are the new rock stars. We just need a few more business and entrepreneurship classes in architecture schools.

The Globe and Mail published an article yesterday morning called, “Why a lower loonie is (mostly) good for Canada." It talks about the recent decline of the Canadian dollar from parity last May to roughly USD $0.92 today. But that the drop is essentially because of a rising US dollar. 

Irrespective of what’s causing the devaluation though, the article takes the tone that it’s generally good for the country:

“On net, this could be seen as a good thing because it’s making Canadian goods and services more competitive,” said Michael Devereux, a professor at the University of British Columbia’s Vancouver School of Economics.

But this viewpoint always gets me concerned. 

Canadian goods and services shouldn’t be competitive because they’re cheaper; they should be competitive because they’re the best damn good and services in the world. And so my fear with statements, like the one above, is that it almost makes us believe that a weak dollar is a prerequisite for competitiveness. It’s not.

In fact, research done by Professor Walid Hejazi at the Rotman School has shown that a weak Canadian dollar actually lowers productivity levels and creates a disincentive for innovation. Why bother to innovate when you can always get your goods and services to market at a lower cost than your competitors?

Thankfully, the outgoing Senior Deputy Governor of the Bank of Canada (and upcoming Dean of the Rotman School), Tiff Macklem, has acknowledged this perspective. In a talk at Queen’s University last January, he said:

"What should Canadian businesses do? First, don’t count on a weaker Canadian dollar. Hoping for a weaker Canadian dollar is not a business plan. A sustainable export strategy cannot rely on expectations of a more favourable exchange rate, since Canada is likely to remain an attractive investment destination."

That sounds like good advice to me.