The Industrial Revolution remembers

Stephen Roulac (Roulac Global, Tiburon, California, USA)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 10 June 2019

Issue publication date: 10 June 2019



The purpose of this paper is to explore the significant structural forms and influencing factors that shape the adoption of technology advances and innovations in society, generally and the property sector specifically.


The paper uses action learning and interviews, literature review, thought experiment and comparative/conceptual/qualitative analysis.


For two centuries, the property sector was essentially “exempt from” and essentially a passive by standing in the industrialization and innovations that transformed the economy. In recent decades, the circumstances changed dramatically; the property sector is rapidly making up for the lost time.

Practical implications

The property market participants who long relied upon, while many property market participants prospered in relying upon long established practices – in some ways more reminiscent of a medieval guild than a contemporary long-standing practice with little attention to, or need to, be concerned about change forces – those circumstances have profoundly changed. Understanding the forces leading to that change and the implications of that change is essential for effective property involvements in the twenty-first century.

Social implications

Whereas the property sector largely was dominated by a product-focused supplier mentality, the major change forces are shifting more and more access, power to consumers. The result is that society shall have more robust and more user-oriented offerings of property goods and services.


This research distilling the results of the featured keynote address to the London 2000 Cutting Edge Conference provides, and is, the first thoughtful assessment, combining both rigor and relevance to address these profoundly important developments that are shaping and informing the property sector in the twenty-first century.



Roulac, S. (2019), "The Industrial Revolution remembers", Journal of Property Investment & Finance, Vol. 37 No. 4, pp. 380-397.



Emerald Publishing Limited

Copyright © 2019, Stephen Roulac


Once unrelated and independent, today real estate and technology are interconnected and interdependent. Technology companies and other enterprises associated with technology are major sources of office space demand. In major markets – specifically London, New York, San Francisco – technology-linked tenants account for a major share of new office leases and a substantial share of the occupied office inventory.

CRE Tech estimates that some 4,000 startup new companies are engaged in PROPTECH, including property-themed versions of PLANTECH and FINTECH. Technology advances that transform the creation, delivery, management, financing, transactions, services and more of property involvements – both supplementing the analogue-based business styles of established enterprises and also representing new tech-based substitute/competitive/disruptive alternatives to real estate companies’ business as usual style – proliferate. Significant technology startups – linked directly to the property sector and concurrently facilitating the experience of spaces and therefore impacting property – are prominent on the lists of so-called Unicorn companies with billion dollar or more valuations. Amongst prominent high-profile PROPTECH companies are We Company (formerly WeWork), AirBnB, Zillow.

The growing role of PROPTECH and the influence of technology advances and applications in the property sector are especially visible, noteworthy and impactful because the property sector has long lagged other sectors of the economy in embracing innovation, generally, and technology advances, specifically. As prevalent as are technology advances in the property sector today, these technology advances are really a quite new phenomenon, for while industry transformative innovative practices were initiated in other sectors of the economy at the outset of the Industrial Revaluation, the property sector was more a bystander than an engaged innovator.

The disconnect between advances in the economy, broadly, and the lack of such parallel advances in property, specifically, was the theme of my keynote address to the Cutting Edge Conference of the Royal Institution of Chartered Surveyors in London at the tum of the millennium. That presentation was adapted to the opening book of Domain 13, Producers of Property Goods and Services titled The Industry the Industrial Revolution Forgot in my forthcoming The Property Knowledge System, published this year. The paper that follows is reprinted as an extract from this book.

Industrial Revolution forgot real estate

Fortune (1947) magazine profiled major industries to assess the challenges and opportunities following the conclusion of the Second World War. About the housing sector, Fortune (1947) observed that it was the industry that the Industrial Revolution forgot, with building practices being as primitive as those in the time of Louis XIV. Real estate and its related industries have long lagged contemporary business. The subject matter and its practitioners have been parodied in multiple media ranging from Sinclair Lewis’s classic Babbit to the popular Hawaii Five-O television series, in which it seemed the bad guy was always a real estate developer.

The Industrial Revolution transformed virtually every sector of the economy, save one. One major sector of the economy that the Industrial Revolution seems to have forgotten and long ignored was real estate. Notably, one of the few articles to appear in the Harvard Business Review concerning the property sector deplored the dubious image of those involved in real estate (Burns, 1967). Until relatively recently, real estate was described accurately as something a person sort off ailed into. But in the last short number of years, the Industrial Revolution has remembered. The sectors of the economy involving providing property goods and services are being transformed dramatically, with new technologies, new business models, new services, new companies providing old services in new ways, and scores of thousands of brilliantly talented and creative people being attracted to the property sector of the economy.

Advances in the property and real estate sectors have lagged well behind advances in society overall. The Industrial Revolution that occurred in the 1700s and 1800s preceded the similar Industrial Revolution within the property sector by approximately 200 years. Society has been operating in a post-Industrial Revolution mode for approximately the last two centuries. During much of this time, however, the property and real estate sectors have been largely in a pre-Industrial Revolution mode. While virtually every sector of the economy and society changed profoundly, as a consequence of the Industrial Revolution, the Industrial Revolution “forgot” to introduce similar changes in the property and real estate sector. The theme that the property and real estate sectors of society have been forgotten by the Industrial Revolution is illustrated in a pictorial timeline, shown in Figure 1.

Industrial Revolutions obsolete prior technologies, procedures, skill sets and market positions. Industrial Revolutions trigger a value migration of physical, financial and human capital, from the prior established order to the new way of doing things. Industrial Revolutions introduce new standards of managerial, professional and technical skills that are often not possessed by those who worked in the prior business phase.

The more advanced the industry, the less applicable general skills and common sense are to working in many of the most important industry-specific positions. The conclusion that the Industrial Revolution forgot property and real estate is inarguably substantiated by consideration of the knowledge, training and skills required to function competently within the business. The vast majority of people pursuing property and real estate involvements lack the explicit professional education and training that their counterparts in other businesses possess. Although there certainly are exceptions, most professionals working in medicine, the law and finance, having made a conscious choice to pursue that career path, follow a course of study as an undergraduate that leads to a graduate professional school, study for licensing and/or professional certification examinations, initial apprenticeship experiences, and formal continuing education and training. The majority of people working in brokerage and agency functions, appraising and valuing, financing and development, property management and related fields lack equivalent preparation, education and training.

There are few advanced industries that an individual could assume a position of leadership, responsibility and trust, as do people in real estate, without significant, concentrated, and extended training and preparation. It is unthinkable that an individual who did not have extensive training and preparation in computers or chemistry would assume an important role in an enterprise devoted to that business. Yet these outcomes are not uncommon in real estate. So long as the property and real estate sectors are dominated by people whose requisite knowledge and skill set are at the lower as contrasted to the more advanced spectrum of training and proficiency, the activities that comprise property and real estate shall collectively been “forgotten” by the Industrial Revolution. Indeed, to some degree the professional caliber of people working within the real estate sector has been derivatively upgraded as a consequence of individuals who have been displaced and/or disillusioned by more conventional industrial activities moving into the property and real estate sectors.

Multiple revolutions

The Industrial Revolution was one of multiple revolutions that occurred in the sixteenth, seventeenth and eighteenth centuries. While the term Industrial Revolution is most often associated with the technology of manufacturing, specifically the transformation of the means by which goods were made, concurrent to the Industrial Revolution were other revolutions that not only made the Industrial Revolution possible, but also aided and abetted the Industrial Revolution. These other revolutions included:

  1. governance and society;

  2. enterprise organization;

  3. markets and merchandising; and

  4. capital 5-knowledge.

These five revolutions in society overall are derivatively mirrored in the property and real estate realms. Each of these particular revolutions and the parallel equivalent revolution – and in multiple instances lack thereof – prevalent in the property and real estate sector are discussed below.

Governance and society

The revolution in the industrial processes of the making of goods was both made possible by conditions more conducive to creativity, than had previously prevailed, and also became a reflection of the outcomes made possible by the application of revolutionary concepts of governance and society. The revolutionary concepts of governance and society challenged and transformed the prevalent thinking that had dominated the previous history of society; were built upon the revolutionary propositions of individual rather than state superiority; open rather than closed access to opportunity; rewards based on merit rather than circumstances of birth; and change being embraced rather than suppressed.

Among the revolutionary changes in governance and society were the following:

  • the ballot box replaced military might and/or heredity as a source of power;

  • ideas rather than force became the primary means of access to leadership;

  • a market system replaced state control as the fundamental premise of political economy;

  • freedom and individual initiative were championed over state dominance and repression as a basic premise of individual expression;

  • access to opportunity became broadly available, rather than being primarily dominated by class and heredity;

  • change which had earlier been mostly discouraged, if not overtly suppressed, became accepted and encouraged; and

  • the premise of rewards was merit based on circumstances the individual could influence rather than those he or she could not.

These forces of revolution in governance and society are summarized in Table I.

Just as public sector governance of society exerts profound influences upon people’s life experiences, opportunities and quality of life, so also does the private sector governance within institutions, sectors of the economy, and private organizations find the realm of life experiences, opportunities and quality of life in the context of that particular realm of involvement and activity. Governance in property and real estate involvements is in the process of dramatic change from a pre-Industrial Revolution phenomenon to a post-Industrial phenomenon. These profound changes in governance of property and real estate involvements include:

  • the control of opportunity and political influence that was once associated with power is replaced by expertise in capital contribution as a social power;

  • while political influence and creativity have long been and continue to be a means of access to leadership for property involvements, in the post-Industrial Revolution era, strategy and capital emerge as important leadership themes;

  • the relationship of property and real estate involvements to political economy, following in the pre-Industrial Revolution from the premise of exploitation of the environment and capital sources, in the post-Industrial Revolution honors with respect to the environment and capital sources;

  • individuals who, in the pre-Industrial Revolution, were expected to accept what property interests provided now have the opportunity to exercise initiative to specify their desires;

  • access to opportunity that was once limited and restricted is now broadly available;

  • change, once resisted, is now accepted and encouraged; and

  • the premise of rewards relying on political influence and exploitation of the environment and capital resources has been replaced in the post-Industrial Revolution era by an ethics-based individual initiative and competitive return to resource inputs.

The profound change that has transpired in the governance of property and real estate involvements between the pre-Industrial Revolution eras and the post-Industrial Revolution eras is summarized in Table II.

Industrial-making revolution

The so-called classic Industrial Revolution was possible only because of the revolution of governance and society discussed in the prior section. As noted above, the Industrial Revolution in the narrow version can be considered an industrial-making revolution. The broader version of the Industrial Revolution can be considered to be an umbrella concept that incorporates the enterprise organization revolution, the knowledge revolution, the markets and merchandising revolution, and the finance revolution. The industrial-making revolution profoundly transformed the means by which society made things, the mechanisms and artifacts it employed in making them, and the environments in which society made and then used what it made.

Some of the significant changes resulting from the industrial-making revolution include:

  • transportation that once was primarily dependent upon human and animal energy was supplemented by inventions that extended/accelerated the scope, distance and speed of transport;

  • a manufacturing process dominated by a single person working alone was replaced by an assembly line, featuring automation and involving many working on specialized tasks;

  • machines have replaced man as the primary manufacturing energy source, and oil, gas and electricity replaced daylight, fire and wind as the primary sources of light, heat and power, respectively; and

  • old manufacturing premise of the craft approach to one-off making was replaced by automation and systematized processes.

These changes are summarized in Table III.

In addition to the extraordinary impacts of the governance and society revolution, the industrial-making revolution described here both aided and abetted and was made possible by concurrent and derivative revolutions in enterprise organization, markets and merchandising, finance and knowledge.

While the property and real estate sectors mirror some parts of the industrial-making revolution, in other ways, the contemporary construction and building process reflects a mix of the pre-and post-Industrial Revolution circumstances. The industrial processes employed in the making of goods, as well as the attributes and functions of the goods that are predominantly made, have changed most profoundly. The activities employed and the means by which those activities are employed in constructing buildings, on the other hand, have experienced a much lower order of magnitude of change than has occurred in other segments of society.

The very conceptual constructs of structures, what Le Corbusier described as machines for living, reflect scale, form, function, relationships that are not all that dissimilar from what prevailed hundreds of years ago. Expressing this point another way, while the products that dominate contemporary society would likely baffle and bewilder a person who centuries ago took a time travel experience to today, such a person would be much less disoriented in the buildings that comprise the society’s built environment. Certainly, the craftsman of several hundred years ago would be very much out of place in contemporary manufacturing, as his skill set and knowledge base were, in the vast majority of industries, only peripherally relevant and useful. The construction worker of hundreds of years ago, however, could meaningfully find his way around a construction site and make quite useful contributions.

The consideration of certain attributes of the industrial-making revolution as applied to property and real estate, summarized in Table IV, might suggest the conclusion that the property and real estate disciplines have changed much more profoundly than they in fact have:

  • In the realm of transportation, the road/rail systems between regions and elevators within buildings have characterized the built environment, more or less for the past century. Notably, the advances within society concerning transportation systems have been much less readily evidenced in the property and real estate sectors.

  • The primary skills and manufacturing energy source employed in the building process is largely dependent upon man, although machines are becoming much more significant.

  • Within buildings, oil, gas and electricity, respectively, have replaced daylight, fire and wind as sources of energy, light and power.

  • The manufacturing process used for onsite building has moved from project-based, involving multiple contractors, toward specialization and automation via an assembly line.

  • Craft, with some modified adapted assembly line and off-site fabrication, still characterizes the manufacturing premise of the building.

While significant progress has been made in the application of technology in certain components of the building process, such as the timber industry, the process of how a building is constructed still reflects a more primitive rather than advanced manufacturing proposition.

Enterprise organization

The new structure of organization of enterprise is one of the most profound transformations over the last couple of centuries. As a consequence of the revolution of enterprise organization, the economy increased in scale, opportunities that had been limited became pervasive, access to resources that had been restricted became open and a new class of professional managers emerged. Indeed, prior to the enterprise organization revolution, the structure of job descriptions in society involved a bifurcation of a large group of workers and a small group of owner-managers. As a consequence of the enterprise organization revolution, a new managerial class of workers emerged, dedicated to the profession of managing people, physical, financial, knowledge, information and process resources.

The enterprise organization revolution brought about extraordinary changes in property institutions, ownership of private property and ownership-management structure. The dramatic transformation of enterprise organization that has occurred within the last two centuries is depicted in Table V. Highlights of the changes in the enterprise organization revolution include:

  • property moved from being state-dominated to private-dominated;

  • ownership of private property became dispersed through many owners, after being earlier concentrated with a few owners;

  • the earlier integrated owner-manager form was replaced, and ownership and management were separated by the emergence of professional managers, allowing passive investors;

  • the organization of work has evolved from one worker primarily doing all the tasks with limited organizational and technology support to a system of specialization delegation with productivity leveraged by processes and technology in the property; and

  • single workers continue to dominate the performing of tasks in property and real estate, as systemetization, specialization, processes and technology leverage are much less pervasively applied than in other sectors of society.

As a consequence of the enterprise organization revolution, power has shifted from the state to large corporations.

Until very recently, the enterprise organization that applied in the property and real estate sectors has reflected both a blend of the pre-industrial and post-industrial organization enterprise structures of society overall. In some parts of the world, property institutions have reflected private ownership, but in other parts of the world, they have been largely state-controlled. Ownership of private property has been largely concentrated in institutions and a few individuals. With minor exceptions, the ownership/management structure has reflected the earlier pre-Industrial Revolution form of direct ownership requiring investors to take on a management role, as an active managerial class has been relatively limited (“Management Challenges …”; Roulac, 1984).

Within the last decade of the twentieth century, there has been a revolution in enterprise organization, as it relates to the property and real estate involvements. As depicted in Table VI, comparing the property enterprise organization prior to the late twentieth century to what appears today, there are profound differences, including:

  • whereas property ownership was until recently controlled by the state in many parts of the world, privatization moves have transferred property interests from state-controlled to individuals;

  • the ownership of private property, once concentrated within institutions and a few individuals, is now more and more dispersed through many owners; and

  • whereas property ownership historically was limited to those who had substantial capital and the capacity to arrange for their own management, the recent advent of securitization has offered the separation of the management and ownership responsibility, allowing passive investors to enjoy the benefits of professional management of their property involvements.

Today, property and real estate more and more reflect the enterprise organization attributes of the corporate sector that were prevalent in the early 1900s. As discussed above, transition is underway at an accelerating pace. Nonetheless, because the Industrial Revolution has so long forgotten property and real estate, the remembering process is neither smooth nor expeditious.

Markets and merchandising revolution

With an ever-decreasing proportion of the society’s workforce employed in manufacturing plants, the consequences of the Industrial Revolution are much more evidenced in the diversity and features of products, and especially how those products are sold and distributed. This very visible transformation of the society’s experience of and access to products is a consequence of the markets and merchandising revolution, whose profound changes are summarized in Table VII. Among the highlights of the revolution in markets and merchandising in society are:

  • scope has been changed from local to global;

  • markets that were once very inefficient are now mostly efficient;

  • a sales process that involved the owner selling the goods at the point of manufacture has been replaced by a specialized sales force, covering national and even global territories;

  • people who once had to pay all cash for products now acquire them through installment payment arrangements, spreading the payments over time;

  • payment in cash has been replaced by credit card and equivalent arrangements;

  • a seller/vendor relationship, which was characterized by a caveat emptor, buyer beware orientation, has been supplanted by strong consumer protection laws with substantial recourse in the event of sellers’ wrongful conduct; and

  • brand name, which once had only limited application, is now a pervasive phenomenon of companies and distinct product identities.

The markets and merchandising revolution in society continues to transform the content, context and experience of daily life.

Within the property and real estate sector, a significant markets and merchandising revolution has occurred within the last few decades. As summarized in Table VIII, among the profound changes in the property and real estate marketplace have been the following:

  • the market scope has gone beyond local and national and become global;

  • while, historically, very inefficient markets are becoming more efficient, markets are still characterized by varying degrees of inefficiency;

  • a sales process for property interests involving local brokers lacking systems, technology, training and specialization has been supplanted by emerging global firms, whose commitment to invest to create superior merchandising capabilities is still not certain;

  • the standard mortgage is being supplemented by specialized financing arrangements that offer more flexibility and access;

  • the payment mechanism for property is supplementing cash for property goods and services with certain arrangements whereby the landlord gains an equity participation in the tenant’s business outcomes;

  • The caveat emptor system of buyer beware that has long characterized real estate transactions is being replaced by strong laws that protect against wrongful lending, construction quality, and misrepresentation/non-performance of sellers and service providers; and

  • branding is emerging as a specific priority of companies and properties.

Property markets and merchandising are being revolutionized at an astonishing rate and by a startling magnitude.

Capital markets revolution

The society’s capacity to grow and prosper is a function of its ability to gain access to organized capital to fund investments in plant, equipment, organizations, training and the infrastructure resources requisite to economic development. The transformation of the capital markets has been profound as any of the revolutions concerning making, technology, knowledge, ownership and markets. In sum, capital markets have gone from the few to the many. Whereas capital formation was virtually non-existent, other than through the power of royalty or military conquest, capital formation is now central to society. These profound capital market changes, summarized in Table IX, include:

  • capital access, previously available only on the criteria of privilege and power, now increasingly emphasizes creative ideas;

  • liquidity, once highly limited, has now become substantial through 24-h global trading;

  • low trading costs have replaced very expensive and cumbersome transaction economics as proliferation of institutions to facilitate trading via phone on a 24/7 basis have emerged;

  • research information, once very limited in terms of availability, is now broadly available via multiple sources; and

  • capital formation, virtually non-existent in the pre-Industrial Revolution era, has been transformed to pervasive access via venture capital and securities markets for initial public offering.

More and more, capital market capabilities delineate a country’s global competitive position and a company’s capacity to grow and meet its opportunities in the marketplace.

The capital market context of the property and real estate involvements, until quite recently, more reflected the pre-Industrial Revolution than post-Industrial Revolution characteristics of the corporate sector. These antiquated capital market attributes included:

  • a capital access system that was largely restrictive but now is more broadly available, and although improving, liquidity of property interests is still relatively limited and restricted;

  • transaction economics continue to be very expensive, both absolutely and relative to other financial interests;

  • although transaction mechanisms are becoming more efficient, they still are cumbersome absolutely and especially relative to other financial interests;

  • research information availability, once very limited and predominantly customized, is expanding but still meaningfully lags securities in terms of economics, accessibility and coverage; and

  • capital formation institutions that were rather limited, with real estate a residual user of capital, have been replaced by direct access to capital markets by securitization.

These significant changes in how the Industrial Revolution is remembering the capital markets concerning property and real estate are summarized in Table X.

A crucial theme behind the Industrial Revolution remembering the long-neglected property sector is the delayed embracing by the capital markets of securitization of financing and investing in property. Imagine if you wanted to invest in WalMart but could do so only if you had enough money to buy an entire WalMart store and were prepared to run it yourself, serving as a manager, hiring a staff, dealing with the inventory, doing the local promotions and the like. Without securitization, specifically the ability to buy and sell shares of companies with the financial investment separated from the management involvement responsibility, you could invest in major businesses only if you had the financial resources and management capability to own and run them. Until very recently, this impossible situation is described in property investing.

Knowledge revolution

The status of knowledge, learning, education and school was dramatically transformed by, and concurrent to, the Industrial Revolution. These profound changes were reflected in general education, education for professions, training and continuing education, evidence of competency, knowledge transmission and innovation. The dramatic divergence for these six factors in the pre-Industrial Revolution era in comparison to what emerged in the periods following the Industrial Revolution are summarized in Table XI, as follows:

  • general education that was once limited became pervasive;

  • professional schools replaced guilds in the master-apprentice system to educate people for the professions;

  • formal training programs, often explicitly sponsored by companies emphasizing continuing education, replaced on-the-job training;

  • competency was evidenced by formal certification and licensing programs rather than the individual’s self-assertion;

  • knowledge transmission via multiple media mechanisms superceded the verbal storytelling of earlier times; and

  • innovation that had been individualized and haphazard became structured, formalized, systematized.

The outcome of the significant increase in the society’s commitment of resources to knowledge learning, education and schooling was to create a much more capable workforce as well as a much more powerful knowledge-creating capability for society overall.

A similar assessment of the property and real estate sector prior to the late twentieth century in comparison to a more recent approach for the same factors, appears in Table XII. In many ways, the property and real estate sector, until very recently, reflected more commonalties to the pre-Industrial Revolution era concerning knowledge, learning, education and school than the post-Industrial Revolution approach. These differences are highlighted by the following factors:

  • the general education concerning the discipline is largely trade-oriented, emphasizing licensing preparation;

  • education for professionals tends to reflect a guild orientation with relatively limited professional school emphasis;

  • training and continuing education have been largely an on-the-job affair, with few formal training programs and mostly dependent on individual initiative;

  • evidence of competency is predominantly by self-assertion, as licensing and certifications are perceived as having marginal/variable credibility; and

  • knowledge transmission is by newsletters and books of variable quality and reliability.

The picture today reflects significant change from what it was until relatively recently. The role of knowledge, learning, education, and schools for property and real estate is evidenced by the following:

  • general education still has closer similarities to trade-oriented courses than is reflected though general education society in society overall;

  • education for the professional is evolving toward professional schools, although remnants of the guild orientation are still prevalent;

  • training and continuing education are becoming a priority for explicit company commitment;

  • new certification programs are emerging to evidence competency;

  • knowledge transmission is mirroring the broad commercial sector, with extensive media and professional associations; and

  • innovation is becoming similar to the corporate sector as organized, systematic and structured investments and research and development are increasingly common.

Reviewing the factors in the broad corporate realm concerning knowledge learning education schools in comparison to property and real estate, the key challenges to accelerate the future are in the education realm.

Largely forgotten processes

The cumulative consequences of the Industrial Revolution, having forgotten property and real estate, are made powerfully impactful through interactions with the property and real estate process. The means by which properties are created and interests in properties are transacted diverge dramatically from those that apply in other segments of society. If the production and transaction processes of other sectors of the economy could be described as advanced, then the property and real estate sector is primitive. This primitiveness creates obstacles and barriers, but also opportunities and potential.

The murky, ponderous, cumbersome, complex, time-consuming and expensive attributes of direct real estate transactions stand in sharp contrast to the transparent, dynamic, efficient, streamlined, expedited and economical attributes of transactions of financial interests in some other assets, such as the shares in business enterprises. In many ways, the rigid, unique, long lead-time, fixed attributes of property seem out of sync to the fluid, ubiquitous, instantaneous attributes that characterize so much of contemporary society and commerce. As long and difficult a process as it is to commit to a direct real estate transaction at the front end, is it also a time-consuming and complex process to disengage from a direct real estate investment. These sharply divergent attributes between property ownership and financial interests are summarized in Figure 2.

The procurement system employed to implement the construction of real estate projects diverges materially from that utilized in virtually every other major sector of the economy. The prevailing method by which a real estate project is created involves a design/bid/build process, which involves five distinct functions and entities providing goods and services to create the project. Whereas in the majority of industries the functions of design, engineering, parts production, assembly and sales are integrated into a single enterprise, in real estate these functions are most often provided by five different companies. Because no company, other than the developer that contracts and pays for the five companies’ contributions to the final building project, has an economic stake in the overall success of the project, and each party to the venture is motivated to maximize their profits and minimize their risks for their component of the project, often through arrangements and conduct that are detrimental to the project’s overall profitability and risk.

The majority of real estate venture involve five separate categories of companies providing goods and services to the overall project:

  1. design services are provided by a licensed architect;

  2. engineering are provided by certified engineer;

  3. component parts are provided by building materials suppliers;

  4. assembly is managed by the general contractor; and

  5. sales are the province of a property marketing organization.

The communication and interaction between these five parties is most often sequential, if not overtly adversarial. Engineers may be frustrated that architects are insufficiently sensitive to the structural implications of their designs. Contractors encounter plans and specifications they perceive to be insufficiently articulated, uneconomic, if not overtly unbuildable. Supplies of building materials to real estate development projects are most often in a reactive mode, bidding to provide what is specified rather than having the opportunity to suggest what might best serve the project’s profile and the user’s objectives. The sales agent must deal with the project as presented, since that function rarely has the opportunity to have meaningful input to the project to make it best serve prospective purchasers’ needs and desires.

Because the financial outcomes realized by the architects and engineers are neither directly related to the market’s acceptance of their designs, the successful execution of their designs by a contractor charged with assembling building materials components to create the structure, nor in the interaction of the design professionals with the building process, once their design is delivered. The institutional relationships of the contracting process do not motivate design professionals to maximize the successful construction of their building. Lacking in economic motivation, either in the form of upside profit participation or downside loss exposure for their miscalculations, design professionals are inevitably less conscientious in implementing their work than they might be were such motivations to exist and concurrently quick to disclaim any responsibility for problems that ultimately ensue (Whitlock, 1992). Notably, the professional associations that serve architects and engineers have aggressively and effectively campaigned to create contracts that serve to protect their members’ interests in ways that compromise the ultimate economic integrity of the building process.

The contemporary design/bid/build procurement system for construction projects stands in stark contrast to the means by which other capital-intensive projects are designed, engineered, manufactured and sold. Whereas an automobile, a capital-intensive product whose complexity and functional utility challenges at least mirror a building. What if five separate, independent companies were involved in designing the car, doing the engineering, providing the parts, assembling the car and then selling it? While the sales process for a new car is through an auto dealership, which is most often a separate entity from the manufacturer, that dealership does operate with some continuity and ongoing association with the manufacturer, effectively serving as its agent. For the real estate development venture, in contrast, the five members of the development team that join together for a particular project may or may not have worked together before or expect to work together in the future.

Implications of remembering

What are the implications for the property discipline of the Industrial Revolution remembering and thereby introducing to the property and real estate sectors forces similar to those that transformed society? Several particular outcomes emerge from a comparison of the conditions in the property and real estate sector that prevail now, during the post-Industrial Revolution time, to those conditions that prevailed in a pre-Industrial Revolution time. This comparison leads to several conclusions with profound implications for the thoughts leaders of the property discipline:

  1. If the Industrial Revolution truly is to remember the property discipline, a much higher priority must be assigned to innovation and learning.

  2. The curriculums of higher education programs throughout the world should include considerations of place and property through inclusion of survey courses, Western civilization, global culture and history; seminars organized around property and place themes; and inclusion of explicit consideration of issues concerning place and property a multitude of social science, physical science and behavioral science overviews as well as specific seminars and courses that address certain property and place themes in the context of that discipline.

  3. Inclusion in business professional school curriculums of place, property and real estate perspectives in basic courses as well as specialized electives, which address not only the principles of place, property, real estate and facilities but also the institutions, markets, players and processes that guide their application.

  4. Reexamination, rejuvenation and broad penetration of a new place/property paradigm of professional study on a global basis, through creation of professional school programs that go beyond the parochial, narrow licensing/transaction/traditional thinking of American real estate schools; the strictures of the finance paradigm perspective that has emerged to dominate American faculty positions; state agency approaches that insufficiently consider corporate strategy and capital markets considerations; or isolated approaches of professional architecture, planning and engineering programs that insufficiently acknowledge/address their intersection with and relationship to other disciplines and the multiple perspectives, concerns, criteria of implementation.

  5. Strong need for formal continuing education programs involving skills, content, perspective and the capacity to deal with unstructured situations, self-initiation, corporate support and multimedia delivery mechanisms.

  6. Dedicated commitment to innovation via structured, purposeful and funded explicit research and development process.

  7. Systematization, automation and integration of processes that heretofore have been discrete, disaggregated and distanced from end outcomes.

  8. Acceleration of securitization of the ownership and financing of property interests to achieve superior management of the resources of the built environment, investment opportunities and transactions facilitation.

  9. Continued evolution and expansion of databases and information concerning places, properties, real estate and facilities.

  10. Explicit attention by those with leadership responsibilities for enterprises to strategies for their enterprise’s places, properties, real estate and facilities, recognizing the contributions that can be made by those crucial resources to the objective of creating compelling places to live, work, shop, invest and learn.

Discretely, cumulatively and collectively, these directions have profound implications on the role of those whose primary work is the creation, dissemination, application and teaching of knowledge concerning places, properties, real estate facilities.


Industrial revolution timeline: forgetting and remembering property and real estate

Figure 1

Industrial revolution timeline: forgetting and remembering property and real estate

Divergent attributes of transactions processes: property vs financial interest

Figure 2

Divergent attributes of transactions processes: property vs financial interest

Governance in society

Factor Pre-Industrial Revolution Post-Industrial Revolution
Source of power Military might and/or heredity Ballot box
Access to leadership Force Ideas
Premise of political economy State-controlled Market system
Premise of individual expression State dominance and repression Freedom and individual initiative
Access to opportunity Dominated by class and heredity Broadly available
Change Mostly discounted and/or suppressed Accepted and encouraged
Premise of rewards Social class, circumstances of birth, state’s decision Individual initiative: work ethic, accomplishment and contribution

Governance in property and real estate involvements

Factor Pre-Industrial Revolution Post-Industrial Revolution
Source of power Control of opportunity and political influence Expertise and capital contribution
Access to leadership Political influence and creativity Strategy, capital, political influence and creativity
Premise of political economy Exploitation of environment and capital sources Honor/respect environment and capital sources
Premise of individualexpression Acceptance of what powerful property interests provide Initiative to specify what desire
Access to opportunity Limited and restricted Broadly available
Change Resisted Accepted and encouraged
Premise of rewards Political influence, exploitation of natural and capital resources Individual initiative: work ethic, accomplishment and contribution

Industrial/making revolution in society

Factor Pre-Industrial Revolution Post-Industrial Revolution
Transportation Foot, horses, sailing ships, horse-drawn carriages Bicycles, cars, trains, airplanes
Primary manufacturing energy source Man Machines
Manufacturing process One person makes product from start to finish Specialization and automation via the assembly line
Source of heat, light and power Daylight, fire, candle, wind Oil, gas and electricity
Manufacturing premise Craft and one-off making Automation and systematized

Industrial/making revolution in property and real estate

Factor Pre-late twentieth century Post-late twentieth century
Transportation Road/rail systems between regions; elevators within buildings Road/rail systems between regions; elevators within buildings
Primary manufacturing energy sources Man Man and machines
Manufacturing process One person makes product from start to finish Specialization and automation via the assembly line
Source of heat, light, and power Daylight, fire, candle, wind Oil, gas and electricity
Manufacturing premise Craft and one-off making with some in-field assembly line and off-site prefabrication Blend of craft, in-field adapted assembly line and off-site prefabrication

Enterprise organization revolution in society

Factor Pre-Industrial Revolution Post-Industrial Revolution
Property institution State-dominated Private-dominated
Ownership of private property Concentrated in few owners Dispersed through many owners
Ownership-management structure Integrated owner-manager form Separation of ownership and management via professional managers and passive investors
Organization of work Mostly one worker did all tasks, with limited organization and technology support Specialization and delegation; productivity leveraged by processes and technology

Enterprise organization revolution in property and real estate

Factor Pre-late twentieth Century Post-late twentieth century
Property institution State-controlled property ownership in many parts of world: China, Soviet Union, Latin America, Africa Privatization move transfers property from state to individuals
Ownership of private property Concentrated in institutions and few individuals Dispersed through many owners
Ownership-management structure Direct ownership requires management Separation via securitization
Organization of work Mostly one worker did all tasks, with limited organization and technology support Mostly one worker did all tasks, with limited organization and technology support

Markets and merchandising revolution in society

Factor Pre-Industrial Revolution Post-Industrial Revolution
Scope Local Global
Efficiency Very inefficient Mostly inefficient
Sales process Owner sold goods at place of manufacture or traveled to bazaars near buyers’ homes Specialist sales force, covering national/global territories
Role of brand identity Limited to individual reputation Company/banner brand and distinct product identity
Payment terms Predominantly all cash or equivalent Installment payment arrangements, allowing to pay overtime, more equating to useful term of the good acquired
Payment mechanism Cash Credit card and equivalent arrangements
Confidence/reliability Caveat emptor buyer beware Strong consumer protection laws, providing confidence to consumers and the reliability of seller’s representations and recourse in the event such representations are misleading or fraudulent

Markets and merchandising revolution in property and real estate

Factor Pre-late twentieth Century Post-late twentieth century
Scope Local/national Global
Efficiency Very inefficient Becoming more efficient, and still characterized by inefficiency
Sales process Local brokers lacking systems, technology, training and specialization Emerging global firms with uncertain investment commitment
Role of brand identity Limited to personal/company reputation Emergence of brand identity of properties and companies
Payment terms Standard mortgages Specialized mortgages with more flexibility and access
Payment mechanism Cash Cash plus equity participation in tenant business outcomes
Confidence/reliability Caveat emptor buyer beware Strong consumer protection laws, providing confidence to consumers and the reliability of seller’s representations and recourse in the event such representations are misleading or fraudulent

Capital markets revolution in society

Factor Pre-Industrial Revolution Post-Industrial Revolution
Capital access Limited to privilege and power Available to creative ideas
Liquidity Limited; transactions difficult and require time Substantial: 24-h global trading
Transaction economics Non-existent Institutions facilitate trading via phone on a 24/7 basis
Research information availability Very limited; required private initiative, substantial expense Extensive, widely available!...accessible via multiple research resources on Internet
Capital formation institutions Almost non-existent: primarily royalty Pervasive access via venture capital and securities market for initial public offerings

Capital markets revolution in property and real estate

Factor Pre-late twentieth century Post-late twentieth century
Capital access Largely restricted, save for largescale speculative development More broadly available
Liquidity Limited; transactions difficult and require substantial time Improving, transactions becoming more streamlined; securities can be traded on a 24/7 basis
Transaction economics Very expensive Still expensive
Transaction mechanisms Cumbersome More efficient transaction processes emerging, especially in form of electronic automated markets
Research information availability Very limited; required private initiative, substantial expense Expanding research resources, more broadly accessible via internet, especially for securities; cost still substantial
Capital formation institutions Limited: real estate a residual user of capital Direct access to capital markets via specialized arrangements plus securitization

Knowledge revolution in society

Factor Pre-Industrial Revolution Post-Industrial Revolution
General education Very limited formal schooling programs Extensive higher education through many colleges and universities
Education for professionals Guilds and master-apprentice system Professional schools: business, law, medicine
Training and continuing education On the job Proliferation of self-study programs; corporate training programs; and required continuing education study hours
Evidence of competency Self-assertion Government-administered licensing and formal certification programs
Knowledge transmission Primarily verbal storytelling Extensive via professional associations and multiple media of books, radio, film
Innovation Individual initiative; inventiveness haphazard Corporate focus via organized, systematic research and development; specific investments in innovation

Knowledge revolution in property and real estate

Factor Pre-late twentieth century Post-late twentieth century
General education Trade-oriented courses emphasizing licensing Trade-oriented courses emphasizing licensing
Education for professionals Guild-oriented programs of professional associations plus limited professional schools, i.e. architecture, engineering, etc. Evolving toward professional schools
Training and continuing education Previously on the job; few formal training programs; primarily dependent on individual initiative Emergence of explicit company commitment to training
Evidence of competency Self-assertion; licensing and certification of marginal/variable credibility Emergence of new certification programs
Knowledge transmission Newsletter and books of variable quality and reliability Extensive via professional associations and multiple media of books, radio, film
Innovation Individual initiative; inventiveness haphazard Corporate focus via organized, systematic research and development; specific investments in innovation


Burns, L.S. (1967), “Is babbit dead?”, Harvard Business Review, September–October.

Fortune (1947), “The industry capitalism forgot”, September.

Roulac, S.E. (1984), “Management challenges in an era of institutional transformation”, Real Estate Issues, Vol. 9, Spring/Summer, pp. 37-43.

Whitlock, T.L. (1992), “An argument for design/build”, Real Estate Finance, Fall, p. 87.

Further reading

Roulac, S.E. (1994), “Foundation of the knowledge structure: review of real estate principles texts”, Journal of Real Estate Literature, January, pp. 37-65.

Roulac, S.E. (1996), “The state of the discipline: malaise or renaissance”, The Journal of Real Estate Research (Special Issue Commemorating the Tenth Anniversary of The American Real Estate Society), Vol. 12 No. 2, pp. 111-121.

Thoreau, L.C. (1999), Building Wealth – The New Rules for Individuals, Companies and Nations in a Knowledge-Based Economy, Harper Collins, New York, NY.

Corresponding author

Stephen Roulac can be contacted at: