Aaron McGhee experience in the commercial property industry spans two decades, with eight years at Knight Frank Australia. As the Chief Operating Officer and Chief Financial Officer at the firm which employs around 1,200 people across 27 offices, McGhee is well-placed to see how this global pandemic will leave its mark on the Australian property market.
He recently sat down with FuturePlace to discuss the relationship between real estate and technology, and where he sees the marriage heading in the future.
FuturePlace: Tell us about your role at Knight Frank and your priorities in the current environment?
Aaron McGhee: I’m both the COO and the CFO; the roles are combined because in a business our size they’re just so highly interrelated. I see our industry as essentially a people industry. Although there’s a product, it’s really about clients and aligning people to client outcomes. At Knight Frank, we focus on achieving exceptional results through proactive service and innovative solutions.
Before COVID the role was really to point out how to accelerate the revenue growth of the business. The change with COVID means that our world becomes a little more driven towards finance. I’d say that’s one of the bigger changes in our industry at the moment; you need to become very internally focused on expenses.
FP: Do you think the focus on expenses is happening industry-wide?
AM: Not just at Knight Frank, but I’d say also with a larger proportion of our competitors, the transactional side of the business virtually fell off the perch in mid to late March. What that means as a result is that you’re carrying a large amount of overheads on 50% of revenue, potentially. It comes down to a cash management job.
FP: What role do you see technology and innovation playing in Knight Frank’s future post-COVID?
AM: If you compare the reaction to COVID with that of the GFC, the responses have been very different. Typically, what a lot of businesses did in GFC times was dedicate a lot of the first wave of expense control to their business services groups – like finance, IT, marketing and HR. But at Knight Frank what we did was make a decision to hold onto and use this period as a way to accelerate what we’re doing as a company. For years, we’ve been driving innovative tech solutions built specifically for desired client results. Our plan was to execute our longer term strategy, because with less noise and less activity, it allows you to focus on what you want to become.
FP: Interesting way to look at it. What about remote work?
AM: Knight Frank was already talking about work from home before March. Probably 12 to 18 months ago, we set a plan to work from anywhere. So all COVID did was accelerate the take-up of it.
Interestingly, we had set up a partnership with a group called All Access Plus. The industry has long been grappling with how to deliver great experiences with flexible working spaces. When COVID hit, we put All Access Plus into our own business, because ultimately it became a great way of tracking COVID. You can control socially distant bookings and even track who is on and off the floor, all day, every day.
That sort of nimble approach of having something already in your back pocket – then flipping it to be relevant, to be COVID relevant – that’s something that was able to be resolved within just three or four days of discussion, then rolled out and implemented. Whereas, if we had to go and create it and work out how to integrate, then you’re talking about months for a turnaround.
FP: How would you say Knight Frank’s approach to PropTech differs from those of your competitors, and why have you chosen your particular model?
AM: If you compare us to our publicly listed competitors that are very top line revenue focused, we’re a private business that’s more focused on profitability and less about shareholder returns. We’re not in a race for size, so we can focus on quality. What that means is we could use technology as the accelerant to improve our position in the market. We’re concentrating on better equipped agents out in the field, more timely information, better insights, and not just local insights. This leads to better, quicker results for our clients. We’re trying to enable the global discussion and relevance to the Australian market to be delivered out in the field by individuals.
FP: That makes sense. What does your investment in tech look like?
AM: We’ve undergone a total acceleration of our investment in IT. We don’t necessarily want to own and try and control the technology, but rather be nimble and partner with best of breed. It’s more about leveraging the best outcomes for our clients than ownership for us.
What tends to happen with technology is that, if you build it and you create it, you become personally invested in it. The market can move very quickly, and you might be still sitting on something that you’re very proud of, but is no longer market relevant. Our model allows us to continually supersede ourselves.
FP: What impact is COVID having on the appetite for PropTech from investors and tenants?
AM: Change is certain, but as I look at it, it’s going to affect every industry differently. I believe if your business is sales-oriented and client-facing, being in the city and close to your client will still be necessary. But if you’re doing, say, a data entry job and you’ve got to commute, then it’s just not safe to get on public transport. Those employers shouldn’t be asking people to do that job if they could just as successfully do it at home. In our own workplace re-occupancy, we adopted a “people before place” mindset as we believe that by putting a human lens on everything we do, we’ll get the best for and out of people. So, the washout I think you’ll see will be a change in the way that space is used and the density in which it’s used for. At least for the short term.
FP: How have you seen that play out in reality?
AM: There’s an example of a group we partnered with early on called Equiem. They have created a way to service community engagement within a building platform. It’s like delivering concierge services to occupants within premium buildings. We worked with Equiem to pivot that product to what they’ve now called Remote, which is basically an employee engagement platform.
Remote has yoga classes, fitness classes – any notification around change. There are also quirky things on there too, like videos of the CEO cooking at home, and general content to make people feel they’re still part of the company, because a remote workforce is very hard to bring together in terms of a culture. For the short term, working from home has a novelty to it. But for the longer term, people want to feel a part of something. That’s really hard to achieve when everyone is working remotely.
FP: Due to COVID, the property industry is going through a period of change, not just a hiccup. What are your priorities going forward?
AM: When you’ve got downtime, that’s the time for self-improvement. But as a company, we haven’t just put that on the individual, it’s a two-way street. No one knows when the tap is really going to be turned back on in terms of demand. So, what we’ve been doing in the meantime is working on making sure that all our people are very present. We’ve also launched an internal learning platform with hundreds of courses that provides our employees with the autonomy and flexibility to drive their own development. This way, they can escalate their expertise at will.
Ultimately, what hurts our industry is stagnation. It’s that period of stagnation that really hurts everyone, because we’re all bound to it regardless of our personal performance. We’re saying we’re going to be a group of people that will absolutely try to do more with less, be more proactive, be more agile, be more innovative, be more collaborative with our people, clients and partners.
FP: That’s a much less stressful way to motivate individuals to improve – at their own pace vs one dictated to them. How do you see this changing Knight Frank?
AM: We don’t want to be known for everything, but what we do want to be known for is our people and our performance. And that in itself will breed a totally different type of agent who will come to our business as a result. If they turn up and they know that they’re going to be better enabled, that the dialogue is different, that the clients see us differently then that’s the priority.
At the end of the day, what COVID has done is proven that technology underpins everything that you do from now on. This has always been a relationship game – and it still will be – but you can’t avoid technology at this point. It is going to be the lifeblood of every successful business coming out of this.