O U R How Digital Technology is Disrupting Global Real Estate - IPUT
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
SHAPING
OUR
CITI E S
How Digital Technology is
Disrupting Global Real Estate
G LO BA L R E S E A RC H R E PO RT
SHAPING
OUR
CITI E S
Authors:
How Digital Technology is
Léan Doody
Disrupting Global Real Estate Zung Nguyen Vu
Pooky Mitchell
Real estate has always shaped cities, and Alannah McCartney
technology has always shaped real estate.
From the elevators and telephones that made Editors:
the skyscraper usable, to the car’s impact on Nicola Hudson
the suburbs in the 20th century, technology
Brice Richard
has an intimate relationship with space –
Stephen Hill
and with value.
Léan Doody
The skyscraper solved a real estate problem by allowing
for large amounts of rentable space on comparatively small Contributing
plots of land in places where land is expensive: city centres. companies:
The advent of the motorcar allowed vast areas of land
to be opened up for residential use, rapidly increasing Accenture
the value of – and demand for – suburban and rural land. Allianz Real Estate
Boston Properties
Will digital technology have a similarly transformative effect
on cities and real estate? At a city scale, the answer is yes CBRE Global
– one only has to look at how online shopping continues Investment Partners
to reshape asset classes like logistics, as well as the high Charter Hall
street. But what about digital technology in the building; Eir
will it be as transformational as the elevator?
Goodbody
This report looks at how the commercial real estate industry GRESB
is changing and explores how new business models will Heden
enable digital technology within buildings to create value. Investa
IPUT
ISPT
Knotel
KPMG
Legal & General
LinkedIn
UBS
University College
London
Urban Land Institute
WeWork
COMMISSIONED BY IPUT PLC
Published November 2019 ISBN: 978-1-5272-5269-1 Copyright © 2019 IPUT PLC
CONTENTS Foreword Page 02 Executive Summary Page 04 Section 1 Drivers of Change The climate crisis Page 07 New competition Page 10 Opportunity: what does this mean for landlords and developers? Page 15 Section 2 Towards Better Workplaces User centred places and buildings Page 17 Sustainable and resilient assets Page 23 Section 3 Barriers to Uptake Value proposition Page 27 Legacy systems and proprietary solutions Page 30 Technology leadership Page 31 Risk Page 31 Section 4 What Does This Mean for Real Estate? New business models aligned with user experience Page 33 New approaches to technology Page 34 New leadership roles Page 39
2
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING FOREWORD
OUR
Shaping Our City
CITIES
IPUT takes pride in being an Irish real estate company
with a 50-year track record. As the largest owner of offices
in Dublin, we recognise our responsibilities and take our
presence in the city seriously.
Niall Gaffney
Chief Executive, IPUT
By investing in sustainable In formalising our development
buildings and public realm, we strategy, we visited some of
place an emphasis on people. the world’s leading office and
mixed-use schemes – such as
We are investing in buildings Broadgate and King’s Cross
that enhance the occupier in London and Hudson Yards
experience, enabling us to set in New York, amongst others.
new environmental standards for We have seen the increased
offices in Ireland and marking us prevalence of digital technology
out as a landlord of choice. in these cutting-edge schemes
and recognised the growth in
Our business model has evolved,
demand from both investors and
and we are now developing a
occupiers for more sustainable,
number of major projects in For the past five years, we have
efficient and environmentally
Dublin city. This has prompted us strived to align our own portfolio
friendly properties.
to explore what are the drivers with best-in-class standards,
of change in real estate and how Against the backdrop of a recognising our corporate
they are shaping the projects we growing climate crisis, investors responsibility to our investors,
are planning for our city. now want more detailed asset occupiers and wider society. We
level data to evaluate the have made significant progress
Over the course of the past
sustainable performance of their achieving gold & platinum LEED
decade, we have seen technology
investments ensuring that the and Wired Score certifications
disrupt business models globally
companies they invest in are across our major holdings. Our
with significant implications for
socially responsible stewards own office became the first office
the world of work. The real estate
of their capital. In addition, in Dublin to be awarded WELL
sector has been slow to embrace
occupiers are seeking quality Certified Gold.
this digital revolution, however
office spaces and a greater
this is now rapidly changing.
investment in the public realm
to attract and retain talent but
with more flexibility within the
office environment.
3
Foreword
Computer generated image of IPUT’s Wilton Park development in Dublin 2
“
As we commence the We would like to acknowledge the We have strived
development of almost 65,000 contribution of Léan Doody and
sq m of mixed-use space in her team at ARUP in producing to align our
Dublin city centre, we recognise this report. We are also grateful portfolio with
that now is an opportune time to the various contributors from
for us to explore the key digital across the global real estate
best-in-class
drivers of change in the real world who were so generous standards,
estate industry. We partnered in sharing their experiences recognising
with ARUP to evaluate the with us. This report sheds some
readiness of the industry to adopt interesting light on the challenges our corporate
these changes and to learn how and opportunities facing the responsibility
we could apply global best- real estate sector and how the
practice to our projects for the property owners should begin to to our investors,
benefit of our future occupiers reassess their business models occupiers and
and support long-term returns and leadership over the next
for our shareholders. decade. Our ambition is to ensure
wider society
we align our future plans with the
learnings from this report.
4
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING EXECUTIVE SUMMARY
OUR
Disrupting Real Estate
CITIES
Commercial real estate The climate crisis is provoking Commercial property developers
has been slow to adopt investors to look for more themselves are starting to wake up
sustainable assets and more asset to the new opportunities unlocked
new technologies. The level data will be needed to help by digital technologies, to manage
traditional business model them evaluate the sustainable complex portfolios, make better
of letting properties on a performance of their investments. informed development decisions,
10-20 year basis has not decrease project management
Meanwhile occupants are looking costs, and even extract more value
demanded it. But things for higher quality services and from the operations of complex
are changing. more flexible real estate to attract properties.
and retain talent – and they are
increasingly seeing flexible office
providers as part of the solution.
“
the real estate industry has been
sluggish about adopting digital
technology – one study puts it
behind other industries by as
much as five years
Pictured centre of image
1 Grand Canal Square, Dublin 2
5
Executive Summary
These changing business • Better occupancy data allows So what are the implications
models, new technologies and for more understanding of new for real estate?
pressures from occupants and space configurations and the
• Organisations should take
investors mean that there are productivity and satisfaction
a more strategic view of user
opportunities to use digital outcomes they enable.
experience and the changing
technology to deliver better
• More informed portfolio role of asset managers to
workplaces, for instance:
management and reporting be curators of services for
• Experience design and relies on asset level data about tenants, managing ecosystem
placemaking allow for better the condition of buildings, of partners. They will need to
understanding of the needs visualised by dashboards. decide whether to outsource
of people from their spaces or hire Service Designers and
• Despite these opportunities
and how technology can help perhaps consider employing
the real estate industry has
deliver great experiences. a Chief Experience Officer.
been sluggish about adopting
For example, Knotel relies on digital technology – one • New lightweight approaches
its tenant engagement app study puts it behind other to retrofitting and construction
to help their customers get industries by as much as mean buildings can be smart
what they need, and help them five years. There are multiple enabled without carrying out
better understand how they reasons for this: the difficulty costly systems integration.
can design better spaces of upgrading legacy systems,
and experiences for their • New types of leadership roles
the conservative nature of
customers. will be needed to identify
the industry, and the lack of
technology opportunities and
alignment with real estate
lead implementation. Some
business models.
organisations are hiring Chief
Technology Officers as well
as data scientists into their
real estate functions. Ensuring
privacy and security of data
will be a key responsibility.
6
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING
OUR
SECTION 1
CITIES
Drivers of Change
K E Y TA K E A W AY S
• The climate crisis has forced all sectors and • Beyond the climate crisis, tenants and occupants
industries to step up to take action. In order to are demanding more flexible working spaces.
safeguard investors’ portfolios and buildings The traditional ‘9 to 5’ workspace has changed
against the threats of climate change and future dramatically. Tenants want spaces that can
reporting requirements, more operational data encourage, inspire and attract a creative and
is needed to assess these risks. Buildings must productive workforce, with services and digital
be equipped to collect operational data. solutions that support that. User experience
design is a key tool to create services.
Reception at Riverside 2, Dublin 2
7
Section 1 – Drivers of Change
What links Greta Thunberg and former WeWork CEO Adam Neumann?
Both are figureheads for two forces reshaping commercial property:
the climate crisis and the flexible space industry. This chapter sets the scene
by introducing these key forces – the climate crisis and the changing nature of
work – which are threatening to disrupt the familiar real estate business model.
The climate crisis Reporting requirements – on these answers in our
moving towards more monitoring and management
In May 2019, The Guardian disclosure of investments – for example
newspaper updated its style around climate-related capex
guide to recommend the term As Mark Carney, Governor of amounts and insurance risks.”
‘climate crisis’ in place of ‘climate the Bank of England warns, our
global financial system is backing Investors will need more asset-
change’. Protest groups, such as
carbon-producing projects that level data to better inform their
Extinction Rebellion and School
will raise our planet’s temperature assessment of these risks.
Strike for Climate, are having
an impact on public opinion, as by more than 4° C1 by the year
evidenced by an Opinion poll, 2084,2 double the limit outlined in Risk analysis and mitigation
conducted in May 2019 during the Paris Agreement. Regulation
Extinction Rebellion protests, is set to increase. Over time, Despite the growing number
finding that 63% of the United the European Union (EU), city of regulatory frameworks that
Kingdom (UK) public agreed with governments and real estate require companies to report
the statement “we are facing a companies have taken several on and disclose information on
climate emergency”. Fast fashion influential actions to address their sustainability performance,
icon Forever 21’s bankruptcy, these demands: there is still an overall lack of
bans of single-use plastic straws, common reporting structures
• On an international level, and frameworks.
flight shaming, Burger King’s
in May 2018, the European
launching plant-based burgers –
Commission adopted Understanding climate risks,
all sectors are beginning to step
a legislative package how to mitigate these risks and
up to the challenge at hand. 2019
on sustainable finance the implications on real estate are
may prove to be a watershed year
aimed at asset managers proving to be a major challenge
where the recognition of climate
and investors, including for investors and portfolio
threat and the push towards
disclosure requirements for managers.
climate adaptation become
environmental sustainability
mainstream.
and low-carbon benchmarks.3
“
Real estate is not immune to • In New York City, the City
either the ecological threat Council has mandated its Sustainability is
or the societal pressure to
make changes, and real estate
14,500 least efficient buildings both a risk and an
to accelerate efficiency
investors are now starting to upgrades in order to radically opportunity today.
wake up to the risks of global
warming and climate change.
reduce their greenhouse The risk is mainly
gas emissions.
For example, Allianz Real Estate around regulation
• In addition, the Governor of
has committed to making all of
the Bank of England, Mark
and obsolescence.
its investments climate-neutral
by the year 2050. As Olivia Muir, Carney, has stated that banks Opportunities
Director for Asset Management should be forced to disclose include higher rents
UK Ltd, within Multi-Managers their climate-linked risks within
Real Estate at UBS says, the next two years, and he has and retention on the
“Sustainability is both a risk and also said that more information occupation side and
about these risks would
an opportunity today. The risk
prompt investors to penalise
lower costs for the
is mainly around regulation and
obsolescence. Opportunities and reward firms accordingly. owner, for example
include higher rents and retention • As Olivia Muir says, “We are financing
on the occupation side and lower asking our fund managers
costs for the owner, for example increasingly detailed questions Olivia Muir
financing.” on sustainability issues and Director for Asset
place a growing emphasis Management UK,
UBS
1
https://www.theguardian.com/business/2019/oct/15/bank-of-england-boss-warns-global-finance-it-is-funding-climate-crisis
2
Xiaoxin Wang, Dabang Jiang, and Xianmei Lang, “Climate Change of 4°C Global Warming above Pre-industrial Levels,” Advances in
Atmospheric Sciences 35, no. 7 (July 2018): 757–770, https://doi.org/10.1007/s00376-018-7160-4.
3
https://ec.europa.eu/info/business-economy-euro/banking-and-finance/green-finance_en
8
SHAPING
OUR
CITIES
Pictured above
Earlsfort Garden, Earlsfort Terrace, Dublin 2
Rapid urbanisation means that premiums are typically evaluated More data is needed
many of the assets which are on historical analysis and do
held by real estate investors are not take future climate risks into Through the collection of data,
in cities, which are particularly account. Assessing and pricing it is possible to observe, monitor
vulnerable to the immediate climate risks is a developing topic and understand the impacts of
effects of climate change. As within the insurance industry, climate change on real estate,
our weather conditions become although the impact of these while also being able to predict
more extreme, so too do the risks on the value of real estate future changes and optimise
associated insurance costs. is difficult to measure.5 buildings appropriately. The
In the United States (US), the key reporting benchmarks,
economic costs of 2018’s 394 Corporate reporting is essential outlined below, are moving in
natural catastrophic events for understanding climate risk this direction.
amounted to US$225bn, with awareness. As the landscape
for reporting climate-related • Currently, GRESB (Global
insurance covering US$90bn
of the overall total, creating the risks in real estate continues Real Estate Sustainability
fourth-costliest year on record to grow, investors are beginning Benchmark) is a key
of insured losses. In some parts to integrate environmental, benchmark used to collect
of the US, insurers are refusing social and corporate governance comparable and reliable data
to insure certain properties as a (ESG) data into their investment on the ESG performance of
result of the increase in extreme decisions and corporate real assets. Launched in 2009
weather events. The insurance strategies. Real estate developers by a group of large pension
protection gap (i.e. the portion play an important role in assisting funds, GRESB covers US$4.5tn
of economic losses not covered) investors who take climate risks in real estate and infrastructure
was 60% in 2018, the highest into consideration. Methods value and is used by more
level since 2005.4 of data collection are likely to than 100 institutional
become more sophisticated investors to monitor their
It is widely understood by in the future so that the value investments, engage with
investors that insurance is not an impact of climate risks can be their partners and, ultimately,
appropriate method of evaluating understood and factored in make decisions which will
climate risks, as insurance accordingly.6 lead to a more sustainable
4
https://www.insurancejournal.com/news/international/2019/01/22/515420.htm
5
https://1eg3hu1iihkr2ga6vceuz7hb-wpengine.netdna-ssl.com/wp-content/uploads/sites/127/2019/02/ULI_Heitlman_Climate_Risk_
Report_February_2019.pdf
6
https://1eg3hu1iihkr2ga6vceuz7hb-wpengine.netdna-ssl.com/wp-content/uploads/sites/127/2019/02/ULI_Heitlman_Climate_Risk_
Report_February_2019.pdf9
Section 1 – Drivers of Change
real estate industry. It relies Agreement. To date, 672 after an increased number of
on participating real estate companies are taking science- investors began to ask about
managers to self-report data based climate action. its sustainability goals and
focusing on ESG performance, initiatives. These targets have
• One example is Landsec, which affected its work across three
energy, water, waste and
manages more than 2.2 million main areas: buying buildings,
greenhouse gas emissions.
square metres of property, developing buildings and
From 2020, reporting of asset- and which has committed
level data will be mandatory. managing buildings. Since
to reducing greenhouse gas implementing these targets,
• In addition to GRESB, there are emissions by 40% per square Landsec has been able to
several other benchmarking metre by 2030. The Science enhance its reputation and
tools being used by real estate Based Targets Initiative has relationship with investors, as
developers. The Science helped Landsec to set these it can be considered a better
Based Targets Initiative targets and come up with long-term investment and
specifies how much and how different methodologies for is future-proofed for further
quickly a company needs to achieving them. Landsec investor requirements.7
reduce its greenhouse gas set itself the challenge of
emissions to stay in line with becoming the sustainability
leader in the real estate sector
the goals set out by the Paris
In addition to creating tools and platforms with which real estate developers can collect
these data, there is also a push to share this information in order to drive disclosure,
insight and action towards a sustainable future.
The following initiatives encourage and support disclosing information related to sustainability reporting;
• The Carbon • The Task Force on • BREEAM is a world- • LEED is the most
Disclosure Project Climate-related leading sustainability widely used green
(CDP) is a not-for- Financial Disclosures assessment building rating
profit organisation (TFCD) develops method used for system in the world.
which measures voluntary, consistent masterplanning LEED provides
companies’ climate-related projects, buildings a framework to
environmental financial risk and infrastructure. create healthy,
impact.8 disclosures for use The BREEAM highly efficient
by companies in In-Use scheme and cost-saving
providing information is used to assess green buildings.
to investors, lenders, the environmental LEED certification
insurers and other impacts and is a globally
stakeholders. As sustainability recognized symbol
of February 2019, issues relating to of sustainability
more than 580 existing buildings. achievement.
companies (which It recognises the
are responsible for need to evaluate the
US$100tn in assets) actual operational
have expressed their performance of
support for TFCD buildings rather than
recommendations. that of the building as
designed.9
As real estate developers are expected to keep up with these different benchmarking frameworks, these
different reporting needs are producing a need to collect more operational data on the impact of critical
sustainability issues – such as climate change, human rights, governance and social well-being in property
and estates – which, at the moment, are difficult to gather and quantify.
7
https://sciencebasedtargets.org/case-studies-2/case-study-land-securities/#targetText=The%20targets,from%20the%20same%20
base%2Dyear
8
https://www.cdp.net/en/companies
9
https://www.assurityconsulting.co.uk/knowledge/guides/what-is-the-relevance-of-breeam-in-use-to-fm10
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING
OUR
CITIES
Tenant demand New competition
A growing number of companies Beyond sustainability, tenants
are committing to reducing and occupants are demanding
their carbon footprints. Since a more responsive and flexible
commercial buildings account workplace experience. This has
for 39% of global carbon been driven and enabled by new
emissions,10 their efforts often competition from space-as-a-
involve their buildings. For service providers, which have
example, since 2009, Microsoft given tenants more choice in
has committed to reducing the services and office experiences.
company’s carbon footprint and As a result, landlords and
is striving towards cutting carbon developers are starting to listen
emissions by 75% by 2030. One more attentively to the tenant
of the ways Microsoft hope to voice. This is forcing building
achieve this is through building owners and developers to
sustainable campuses and data provide a more outcomes-based
centres. It hopes to remove fossil offer. Tenants do not just want
fuels completely from these new an office – they want a space
buildings and run the campus on which encourages, inspires
100% carbon-free electricity.11 and attracts a creative and
productive workforce.
LinkedIn has also committed
to 100% renewable energy
and a 75% reduction in carbon What a good workplace
emissions in its operations. means today
As of 2018, 80% of its buildings
are powered from renewable As many industries are
sources. Within its buildings, beginning to move away from
it aims to reduce waste during the traditional ‘9–5’ concept
demolition, construction and of working environments,
operation. To date, 60% of we are faced with the question
LinkedIn’s offices have green of why firms still require office
building certificates.12 space at all.
“
The flight-shaming movement, Firms still see quality office
which aims to discourage people spaces as a critical asset for Nothing supplants
from choosing to fly because enabling productivity, culture, one-to-one,
of the environmental impact, recruitment and retention.
has added a new dimension Attracting and retaining top face-to-face
to reducing corporate carbon talent is critical to the success relationships.
of modern companies. Office
footprints. Solutions for reducing
spaces are thus expected to Although our
the environmental impact of
business flights revolve around actively help enable a productive people can work
and engaged workforce. As
taking direct routes, flying
organisations are faced with
anywhere, we
economy or purchasing carbon
offsets to reduce their carbon accelerating and expanding want them to
footprint. However, there is an change, and as automation want to come to
opportunity for technology to advances, organisations
aid in improving the connectivity and workplaces are placing the office. We try
and collaboration of people from a premium on collaboration to design highly
and creativity.
anywhere and at any time, with appealing spaces
the aim of decoupling business
growth from environmental that will help drive
impacts.13 productivity and
engagement
Jim Morgensen,
VP Workplace, LinkedIn.14
10
https://americas.uli.org/wp-content/uploads/sites/2/ULI-Documents/Greenprint_PerformanceReport_VOL-10.pdf The Greenprint
Performance Report
11
https://blogs.microsoft.com/on-the-issues/2019/04/15/were-increasing-our-carbon-fee-as-we-double-down-on-sustainability/
12
https://socialimpact.linkedin.com/environmental-sustainability
13
https://www.raconteur.net/business-innovation/reducing-corporate-carbon-footprint
14
Arup interview11
Section 1 – Drivers of Change
Pictured above
IPUT’s offices overlooking St. Stephen’s Green, Dublin 2
To begin with, innovation in the placement of several entities are working remotely all the time.
knowledge work comes through in one place, can become a It can be even harder to train and
face-to-face connections and competitive advantage for mentor junior staff when there is
chance encounters. “Ideas firms. However, as with cities, no face-to-face connection.
spread more easily in denser there must be a balance. Good
places”, Edward Glaeser workplaces allow people to It has become commonplace for
summarises in The Triumph of meet others and find a space developments, large companies
the City.15 While Glaeser speaks of belonging without feeling and co-working spaces to look
of density as the competitive overwhelmed by the volume to start-ups for cues of good
advantage of cities compared of others. workplace design. Ten years ago,
with suburban or rural areas, the an open office with colourful
same argument could be made Second, having a shared physical beanbags, ping pong tables, and
for bumping into colleagues space is important for work beer on tap embodied the ideal
within a dense office or bumping culture. While remote working space as imagined by start-up
into potential clients in a dense offers flexibility, it can be more founders – twenty-something
business district. Colocation, difficult to build a strong culture graduates straight from American
and shared ethos when teams fraternity halls.
15
Edward Glaeser, The Triumph of the City, 1st ed (New York: Penguin Books, 2012)12
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING
OUR
CITIES
Pictured above
Tropical Fruit Warehouse, Sir John Rogerson’s Quay, Dublin 2
As start-up culture matured, so Despite this, some companies
did its taste in workspace design: feel that they must convince
virtually all of these elements people to come to the office. It
are now being phased out or is no longer acceptable for the
abandoned. Open-plan offices, office to be just an open floor
for instance, have received with rows of tables; it needs to
the most intense backlash: be an enabler of collaboration,
workers complain that they are of individual styles of working,
distracting, with official studies a node in a global network. It
finding that employees in open- should offer employees a chance
plan offices spend 73% less time to feel part of something bigger.
in face-to-face interactions.16 The Multiple user needs must be
conversation has shifted towards considered: opportunities for
defining what ‘good culture’ really wellness during the workday,
is and how proper management moments for social belonging,
techniques can get us there. and flexibility for teams to
reconfigure spaces to suit
Third, we cannot assume that all different work activities, for
workers want to work remotely. example. Failing to deliver on
Especially in big cities with high these expected needs will lead
rent, many employees do not to friction, dissatisfaction and,
have appropriate space at home ultimately, a decline in work
in which to work. While having productivity and satisfaction.
the choice to work at home can
be a luxury, having nowhere to There are several cultural
escape to can turn into a burden. shifts happening at a global
For all these reasons, the role scale, which are converging
of commercial real estate has to shape new expectations
not diminished. Rather, it now for the workplace. The digital
plays an even bigger role in transformation is changing how
delivering on the strategic goals teams and people want to work,
of organisations. allowing for personalisation,
automation and insight.
16
https://www.bbc.com/worklife/article/20180718-open-offices-make-people-talk-less-and-email-more13
Section 1 – Drivers of Change
Pictured above
Reception at 10 Molesworth Street, Dublin 2
“
People are becoming increasingly Real estate developers and There are several
open about personal challenges landlords are expected to adjust
in the workplace and expect their current offerings and cultural shifts
support from employers for their services to keep up with the new happening at a
wellbeing and mental health. expectations and technologies
The office is no longer simply a that are out there. There are
global scale, which
place to work; it is also a place for abundant opportunities for are converging
socialising, relaxing and engaging smart technology and landlord to shape new
with the surrounding community. services to support these shifts.
And the global climate crisis has Space needs to be used in a more expectations for
made people more aware of the strategic way in order to deliver the workplace
environmental impact of their on the needs and expectations of
actions in the workplace. occupants, and data can be used
to achieve this goal.14
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING
OUR
CITIES
“
More landlords
are adding
short-term
and flexible
co-working
spaces to their
portfolios in
response to
demand from
existing and
prospective
tenants for
more flexibility
Pictured above
WeWork office space
Industry disruption failed initial public offering (IPO) Many small-to-medium-sized
in 2019 (largely related to the businesses and start-ups, which
Space-as-a-service providers speed of its expansion and prioritise agility, do not want to
and new platforms are meeting valuation model, rather than to spend resources on designing
many modern tenant needs co-working itself), the underlying a workspace, updating furniture,
and advancing them. Landlords model of ‘space as a service’ has managing facilities or even
are beginning to respond with become mainstream and is here managing different contractors.
their own space-as-a-service to stay. This will involve a different They want the flexibility to quickly
offerings, but many have also approach to risk, design and expand or contract their footprint
outsourced these flex space management. More importantly, without committing to fixed,
offerings to third parties to it also involves a fundamentally long-term, upfront leases. They
manage. different relationship with tenants also want access to other spaces
– changing from hands off to when they do expand or contract.
Flexible leases and much more hands on. They are increasingly interested
co-working spaces in seeking out landlords (such
as Knotel) that can provide all
More value-added services
More landlords are adding short- these services in one package,
term and flexible co-working Employee engagement and and are willing to pay extra for
spaces to their portfolios in talent attraction are also key the convenience. This offers an
response to demand from concerns for tenants. As a result, opportunity to landlords if they
existing and prospective tenants tenants are placing a premium on can design and deliver the right
for more flexibility. However, given workplaces that offer community services to wrap around their
that this is still a relatively new and learning opportunities. existing real estate.
service for many, companies Meanwhile, excellent indoor
require more granular data environmental quality and
in order to create financial building infrastructure (lifts,
projections and inform the future access, connectivity, etc.) are
leasing strategy. Despite the becoming basic requirements.
risks presented by WeWork’s15
Section 1 – Drivers of Change
Better data occupants is an important data and behavioural user data,
task. Enabling access to data the challenges of integrating
Tenants today want to ensure that allows people to see trends smart building systems into
they are making the most of the in how spaces, services and legacy infrastructure, and the
costly space and services they facilities are being used and to mindset shift required when
are paying for. Accessing data not explore opportunities for sharing it comes to considering user
only ensures that occupants are information. experience and service design.
getting value for money, but can
also reveal interesting insights Landlords and building owners
about business behaviours and Opportunity: what does are in the unique position of
inefficiencies. Businesses want this mean for landlords being able to offer integrated
data in order to understand their and developers? design around experiences
own needs for space and to make – from the physical building
better use of their space. This report focuses on the structure through to curated
opportunities for commercial end user experiences for people
Without access to data or the property landlords and in their buildings across space,
processes to manage and take developers to use innovative technology and service. But this
advantage of it, it is difficult to new digital services, digital requires a fundamentally different
make effective change in real technology and data enablement approach to risk and a different
estate and keep up with the to enhance their business. It relationship with tenants, from
demands and expectations of also highlights the different the upfront sell to the ongoing
occupants. Creating networks current risks and challenges that partnership.
and feeds of communication landlords face – for instance, the
between landlords and building need for improved asset-level
“
Businesses want data in order
to understand their own needs
for space and to make better
use of their space
Pictured below
10 Molesworth Street, Dublin 216
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING
OUR
SECTION 2
CITIES
Towards Better
Workplaces
K E Y TA K E A W AY S
• The changing demands of investors and occupants has brought a great
opportunity for real estate stakeholders to rethink creative and innovative
solutions in order to improve efficiency gains and additional revenue streams.
A number of leading organisations are using digital and user experience to
create buildings that are more sustainable, resilient and occupier focussed.17
Section 2 – Towards Better Workplaces
The evolving demands of investors and occupants put new pressures on real
estate owners, developers and landlords to begin thinking about how to adapt
to these needs. These forces bring about a great opportunity for real estate
stakeholders to rethink creative and innovative solutions in order to improve
efficiency gains and additional revenue streams. This chapter looks at some ways
that landlords and occupants are starting to use digital technology to enable new
ways of working and sustainability, aligned with their current business drivers.
User centred places addressed (through technological unlock their hotel room doors
and buildings and non-technological means) – and that provides operational
significantly reduces the risks data to Disney World on people
“There is a definite movement of technology investments. flows around the park.
in real estate towards becoming This process, referred to as
more like the hospitality sector. ‘experience design’, can support So, in a real estate context,
There is a huge amount of a building throughout its design, the user experience of the
competition to attract the best development and operation. commercial office should
employees, and companies are contribute to enhanced
turning towards their buildings According to a recent CBRE productivity, and to talent
to offer them that unique selling survey18, one-third of tenant retention and attraction by
proposition.” Achal Gandhi, Head companies have plans to hire creating better experiences for
of Global Portfolio Management a User Experience (UX) Lead, people in those buildings. Some
at CBRE Global Investors.17 and two-thirds would be willing companies, such as Charter
to pay a premium for a building Hall in Melbourne, are hiring
Today, a landlord needs to not in which the landlord had Chief Experience Officers to
only satisfy the needs of the provided an enhanced UX offer. ensure that building design and
tenant’s Chief Executive Officer This is up from 18% in 2018.19 operational decisions (including
and Vice President of Real Estate User experience design seeks to building technology decisions)
in a company, but also needs design spaces and services by are driven by user experience.
to design services for a wide understanding user needs and
range of users – a role that many data in order to create a better This approach only makes
landlords are not equipped to human experience and contribute sense for the landlord where
take on. But what do users expect to wider strategic goals. The it is aligned with a business
from a good workplace, and how pioneers of user experience model that rewards the landlord
can developers and landlords use design and placemaking in the for tenant retention. This is
digital technologies and services built environment context have why co-working and flexible
to meet these expectations? been visitor attractions – from space providers have seen such
museums to theme parks – growth – as tenants can take
Some landlords and tenants are because their whole raison short leases and pay for services
turning to user experience design d’être is to sell an experience of as they need them, the flexible
and placemaking to understand a place. For example, in 2013,20 space operators are incentivised
what occupants need, and are Disney launched its MagicBand, to take the time to design good
designing services to meet their a wearable device that allows experiences for tenants. Knotel
needs. Understanding the current guests to gain entry to Disney is a good example where its
and future needs of a building’s World, access attractions, make business model is aligned with
users and how they can be purchases at restaurants, and the needs of its tenants.
“
There is a definite movement in real estate
towards becoming more like the hospitality
sector. There is a huge amount of competition
to attract the best employees, and companies
are turning towards their buildings to offer
them that unique selling proposition
Pictured Opposite
47-49 St. Stephen’s Green, Achal Gandhi,
Dublin 2 Head of Global Portfolio Management at CBRE Global Investors
17
Interview with Arup.
18
CBRE 2019 EMEA Occupier survey.
19
CBRE 2019 EMEA Occupier survey.
20
https://www.fastcompany.com/3044283/the-messy-business-of-reinventing-happiness18
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING
OUR
CITIES
Digital supporting landlord employees which would not A core part of the Knotel
flexible space: Knotel have such a strategist in-house); experience is its tenant
these workplace strategists help engagement app. Customers
Knotel caters for mid-sized companies to lay out space in use it to report problems, book
companies that want to see order to maximise employee rooms, and interact both with the
their own names above the productivity. Knotel then space and directly with Knotel. It
door; it rents out entire floors operates the space according includes user-facing information
to companies, rather than to its service agreement, thus (e.g. Wi-Fi codes, post, recycling),
subdividing the space. It saving customers the trouble and it makes it easy to on-board
specialises in providing space of managing multiple contracts new staff. It is also a useful source
in city centres – areas that and service providers. Customer of data for asset managers and
are in high demand and are satisfaction is key to lease designers, and it guides them on
usually quite expensive. Knotel renewals: “Our business model what they need to pay attention
customers want office space is aligned with the lifecycle of our to when planning space.
where their talent wants to be, customers’ businesses – we want
and therefore their space needs them to stay with us as they grow Other examples of workplace
to be more productive in order and change, either in their current design and technology have
to offset rents. location or somewhere else in our been primarily driven by
portfolio. We want our customers occupants in order to improve
Knotel helps customers to make their own utilisation and staff
to be satisfied, so that we can
their space more productive. productivity. Examples on the
serve them over the full life of
Their workplace strategists next page from Adobe and
their business,” says Chris Namih,
work with customers (often Google illustrate this point.
Head of European Expansion at
companies with 200–400
Knotel.21
“
Our business model is aligned with the life cycle of our
customers’ businesses – we want them to stay with
us as they grow and change, either in their current
location or somewhere else in our portfolio
Chris Namih, Head of European Expansion, Knotel
Pictured below
Knotel Paris
21
Arup interview.19
Section 2 – Towards Better Workplaces
“
In the past
we relied on
people telling
us what they
think they do,
now we can
get hard data
that tells us
how people
are really
using the
space
Jim Morgensen,
VP Workplace,
LinkedIn
Google Campus Warsaw
Activity-based working assisted Going further, LinkedIn is will be “remote” — made up of
by occupancy sensors: Adobe deploying sensors and using new hires that can live and work
anonymised Wi-Fi triangulation anywhere.
Office workers are reacting to understand occupancy and
against homogeneous open patterns of use, so that it can People increasingly want the
workspaces, which they design its workplaces better. option to work remotely or from
consider to be distracting and “In the past we relied on people the office, while still feeling
to prevent collaboration. From telling us what they think they part of a bigger team. This will
an organisational point of view, do, now we can get hard data increasingly be a concern as
as rents become increasingly that tells us how people are organisations seek to reduce
expensive in sought-after city really using the space,” says their carbon footprint by reducing
centre locations, office managers Jim Morgensen, VP Workplace the amount of business travel
want to optimise spaces and for LinkedIn. their employees must do. Remote
increase utilisation. Activity- working can also reduce costs,
based working allows teams as companies require a smaller
and individuals to choose where Remote work, assisted by real estate footprint the more
to work, flexibly, depending on wireless audio/video: Google employees work remotely.
the task at hand. However, it is vitally important
According to a recent study,
to maintain strong personal
Sensing data can support 70% of permanent employees
relationships and culture for
activity-based working by work remotely, away from their
remote workers.
informing people of which office main office, at least once a
areas are free to be used, thus week.22 Meanwhile even while To make remote collaboration
enabling agile collaboration. in the office, more and more seamless, all of Google’s offices
Adobe’s new London space work involves collaboration are equipped with its custom
has sensors under each desk with colleagues who are wireless hardware which enables
and different types of social working remotely, either from people to log in to a conference
spaces, enabling people to know other offices or elsewhere. directly from a Google calendar
what space is free. Companies Some organisations are even invite and hangouts. The
such as Workplace Fabric have establishing themselves as speakermic, custom designed
created signage screens for distributed companies. Stripe, and built by Google, intelligently
users to obtain live information a $35bn online payments reduces echoes and actively
about available spaces; this company, is built as a distributed manages background noise to
information is displayed on a company with “hubs” in San deliver rich, immersive, crystal
managed signage screen in the Francisco, Seattle, Dublin, and clear 360° sound. In huddle
office. Through a clear, colour- Singapore. Earlier this year, Stripe rooms, ‘Meet’ hardware can
coded format, users can use this announced that its fifth hub automatically zoom and crop
data to instantly locate suitable based on the number of people
workspaces on the floor. in the room.
22
https://www.cnbc.com/2018/05/30/70-percent-of-people-globally-work-remotely-at-least-once-a-week-iwg-study.html20
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING
OUR
CITIES
Going beyond this, Jim master plans. Free from the project spans 1.7 million square
Morgensen of LinkedIn would constraints of legacy systems, metres of high-end mixed-use
like more automation of these new smart districts, such as commercial and residential
kinds of tasks – perhaps using Toronto Waterfront or Hudson space. At the project’s outset, the
AI and sensors to support a Yards, have the power to imagine developers had grand ambitions
seamless user experience of what an ideal vision could be of using smart technology
collaborating with people across from scratch, and push for more primarily to create energy
many locations. “We would like radical use cases. However, these efficiencies and sustainability. It
the system to take care of picking districts also offer some lessons was envisaged that Hudson Yards
the right room, recognising and for where smart technology would have an on-site microgrid
connecting people automatically, needs to include careful and gas-fired microturbines to
providing the right air quality, consideration of community, generate both hot and cold water,
lighting, air flow for the number privacy and social context. as well as sufficient electricity to
of people in the room – making keep the lights on during a power
an enjoyable and seamless outage. A system of sensors and
Hudson Yards: visitor
experience for our people.” apps – developed in partnership
experience use cases are quick
with New York University’s Center
So much of this productivity wins, but need to be considered
for Urban Science and Progress
and experience-enhancing thoroughly
– will provide an unprecedented
technology is deployed by flow of data for the Center for
New York City’s US$20bn
occupants. But what is the role of Urban Science and Progress’s
Hudson Yards development
the landlord in enabling this in the researchers and Related’s
on Manhattan’s West Side is
building, and in the wider arena analysts to pore over.
the largest private real estate
of placemaking across a city
development in the history of
precinct? We see some of these
the US. Co-developed by Related
ideas pushed to much more
and Oxford Properties Group, the
extreme versions in new district21
Section 2 – Towards Better Workplaces
These visions have been Rather, Related and Oxford Electronic Frontier Foundation,
successfully implemented Properties Group turned its an international digital privacy
to varying degrees. The attention to smaller experiential advocacy group that campaigned
hybrid service model for a initiatives, partnering with the against LinkNYC, said that infinite
large microgrid, developed in New York-based company data retention periods are a “red
conjunction with Con Edison, is Intersection (which counts flag” for data privacy and the
seen as an innovative model that Sidewalk Labs as an investor) to rights of individuals who do not
could open up new options for integrate several straightforward opt in to the technologies – for
large developments to combine smart features once a building example, being filmed. “This kind
locally produced energy with has tenant employees in situ. For of technology, absent community
support from the grid. However, example, an app will let tenants control, can be pernicious,”
the initial promises of urban track packages, pay rent, or make Buttar said. “It might be a private
data-driven management have concierge requests. Currently, neighbourhood, but it’s still no
(so far) proved more aspirational biometric fingerprint sensors more respectful of the individuals
than practical and have been allow office workers at 55 Hudson that are in it.”
put on hold. According to Jay Yards to speedily move through
Cross, President of Related, the lobby’s security system.
Lessons from Hudson Yards
Hudson Yards, “We concluded Touchscreen kiosks provide
that big data is probably the last visitors with everything from Chasing after a grand ambition
thing we’ll get to. It’ll be years basic wayfinding to tickets for of complete data collection
from now before we’re in that 30 Hudson Yards’ observation and storage might be a costly
world.” Technology has changed deck. These use cases provide distraction for developers, given
rapidly in the decade since the property developer with the high costs, privacy concerns
planning began, Cross notes, and immediate quick wins and tenant and unclear use cases. Rather,
running data feedback loops or satisfaction. developers should focus on
grappling with privacy concerns getting the user experience right
is not something the real estate However, the kiosks’ application
– identifying several high-value
company is equipped to tackle. in Hudson Yards still leaves
use cases where they can pilot
something to be desired.
smart technology and develop
They resemble LinkNYC’s free
the right data management
Wi-Fi kiosks, bearing the shape
protocols. These use cases need
of supersized phone screens
to be considered early on in order
and doing little to activate
to have maximum impact. This
the space or truly encourage
will create ‘quick wins’ for tenant
community engagement with
satisfaction and will also result
the development. They were
in upskilling the organisation,
largely conceptualised in a
generating valuable lessons
utilitarian manner and, like
about technology development
LinkNYC, have raised a whole
and data management.
slew of data privacy concerns.
Shahid Buttar, a director at the
“
This kind of technology,
absent community control,
can be pernicious... It might be
a private neighbourhood, but
it’s still no more respectful of
the individuals that are in it
Shahid Buttar,
Director Electronic Frontier Foundation
Pictured left
Vessel by
Thomas Heatherwick
at Hudson Yards22
IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate
SHAPING
OUR
CITIES
“
The role of the
asset manager
will change
to be more
data driven
and they
will become
curators of
key services
Grigor Hadjiev,
Head of Special
Projects, West Europe
Allianz Real Estate
Understanding the dynamic citizens’ desire for convenience
relationship between people, in new models of retail, with
place and technology supporting infrastructure
(logistics), as well as in new
In cities, technology platforms models for town centres?
such as Airbnb, Uber and JustEat
are changing land use and Another example is the growing
mobility systems and making trend for more prepared food
new services possible, even while delivery to homes and offices.
they reshape labour markets Some restaurant chains are now
and industries. City governments making decisions about where to
are using digital technology locate based on how easy it is for
and data to address congestion, delivery vehicles to reach them.
upgrade lighting, save energy and Pedestrianised town centres are
empower communities. Citizens no longer attractive. Like retail,
rely on their smartphones to restaurants will need to raise their
navigate, pay for transport, game to offer better experiences
access entertainment, shop and and better surroundings –
generally reduce friction in their otherwise they are potentially
urban lives. competing with people’s homes.
Chain restaurants will probably
At a city level, however, the use be most affected in terms of a
of technology has had very requirement for different spatial
real impacts on how space is layouts. The logical extension
organised, configured and used. of this for chain restaurants in
For example, the impacts of particular is that they are opening
online shopping include changes ‘dark kitchens’: standalone
in the use of high streets, kitchens in locations with lower
increased need for logistics rental costs and good access for
parks, and increased traffic delivery vehicles.
from deliveries. In the UK, the
retail stalwart Marks & Spencer As online and physical spaces
has closed 100 shops across converge, the impacts on
the country in response to its cities will continue. On a more
decreasing need for physical granular level, there will be more
space – 33% of its clothing is now technology in the public realm
sold online. As Marks & Spencer as more IoT and smart city
is typically an anchor tenant on solutions are rolled out in our
local high streets, this is leading cities. Our city plans will need to
to further challenges for town accommodate these spatially,
centres. How can planners and but also at a technology systems,
urban designers accommodate data and policy level.23
Section 2 – Towards Better Workplaces
Sustainable and This prompts new questions As is the case with experience
about what services tenants design, the pioneers in using data
resilient assets
need and how landlords can to understand customers and
“The role of the asset manager ensure that those services are their needs are the co-working
will change to be more data provided in their buildings so and flexible space operators. For
driven and they will become that they retain existing tenants instance, WeWork has created
curators of key services.”23 Grigor and attract new ones. This will a tool called Polaris to help the
Hadjiev, Head of Special Projects, require strategic partnerships organisation become better at
West Europe, Allianz Real Estate. with companies and co-working listening by constantly tracking,
operators who can operate cataloguing, and sorting nuggets
When the average lease the buildings. But, in order to of user insights sourced from
was 10–20 years long, asset understand what services are hundreds of continuous user
management was fairly passive. needed, landlords will also need research interviews globally.
Now that tenants are asking for to have a firm knowledge of how
more – shorter leases, as well the building is operated so that Optimising energy and
as more flexibility, services, they can identify the valuable environmental performance has
technology and sustainability – it services for their tenants. This been a bigger driver for landlords.
is more challenging to maximise will require the right data and the Improving the sustainability
assets to provide a good return right insights in order to steer and energy performance of
on investment. stakeholders and implement new their buildings and providing
business models. better customer service around
facilities, has pushed some
landlords to deploy platforms to
better understand how buildings
are performing and take action to
fix issues.
Pictured below
1 Grand Canal Square, Dublin 2
Pictured above
Caption to go here
23
Arup interview.You can also read
