Disruptive technology—and the need to embrace it—will continue to influence office and retail tenants, as well as developers, panelists said at the ULI U.K. Annual Conference, held in early June in London.
The retail sector, and shopping centers specifically, are facing multiple challenges—challenges not limited to the rise of e-commerce, said Henrie Kötter, chief investment officer at German shopping center owner and developer ECE. “If retailers only had one challenges, they would probably have worked it out by now,” he said. “But they have 15 problems—online, the fact that many expanded too rapidly, and so on.”
Many funds are looking to at least reduce their exposure to the sector. While acknowledging the difficulties, Kötter said the shopping center is here to stay. “Obviously some retailers are having a hard time,” he said. “But I do see a future for retail, although not every retailer or every asset.”
This is not the time for investors or developers to pursue aggressive development strategies. Kötter said. Rather, it is a time to take a long, hard look at the market and how it is evolving. “So, what we’re talking about are defensive investments,” he said. “It’s actually very normal thing in business: you need to invest to secure your future.”
Shopping centers need to evolve along three lines, Kötter said. The first he described as a “digital mall” concept through which shoppers can search inventory online, secure an item and pay, then pick it up in the store. Second, ECE is increasingly targeting the services it provides to get the greatest bang for its buck. Finally, ECE is working to improve the entertainment and food and beverage offerings in its malls, he said.
For the office occupier market, a key trend driving change is the battle for talent, which is manifesting itself in different ways, said Despina Katsikakis, international partner and head of occupier business performance at Cushman & Wakefield.
First, corporations are increasingly lean and agile, looking to tap talent when they need it rather than employing a bloated workforce, she said. However, all corporations compete on technology based innovation which has broken down the traditional sectoral barriers and today all businesses are tech businesses, she said.
Also, though many companies now employ four generations of workers, all generations want the same things from their employer, she said, including flexibility, an understanding of a company’s purpose, the ability to learn and grow as an individual, and a sense that the employer cares about their well-being. All of this stems from the fact that “barriers between working, living, and learning are increasingly blurring,” she said.
As a result, all companies need to provide workspaces that support flexible work habits and employee well-being. Key factors in terms of the latter include access to nature and collaborative space, which Katsikakis said could reduce absenteeism by as much as 37 percent.
“Unfortunately, most real estate executives are rewarded for reducing costs. But if you factor in absenteeism, [spending a bit more on an office environment] can provide business benefits,” she said. “A third of absenteeism is down to poor air quality, and soon our phones will tell us about air quality. People will demand better.”
Taking up the office occupier theme, Antony Slumbers, chief executive officer of Estates Today and a self-declared innovation evangelist, focused on the ways in which automation—driven by artificial intelligence—will change the nature of employment and, therefore, office requirements. Quoting a McKinsey and Company report, he said 49 percent of current work activities could be automated using only existing technology. Anything “structured, repeatable, or predictable” will be automated, he said.
However, Slumbers said he does not view this as a threat, but instead as an opportunity. The work of the future will be anything that involves design, imagination, inspiration, creation, empathy, intuition, innovation, collaboration, or social intelligence, he said. Nobody misses washing clothes since the invention of the washing machine, he noted. “It’s old work; we don’t do it anymore,” he said.
All of this has huge implications for workplace design, he said. “How are people using the space? What are they doing in it? Does the space allow them to do it?” he asked. “Fundamentally, no company has ever said they need an office. What they need is a productive workforce.”
Addressing the idea that more tech firms may follow Google and take development into their own hands if they cannot get what they want from the property industry, he asked, “Will real estate learn tech before tech learns real estate? Large tech firms are already thinking about how they can rebuild cities as landlord and developer.
“What is needed is a new breed of business translators who understand enough about what tech does and what property does,” he said. “It’s one of the great new skills. You’re going to get people coming in and creating new products.”