The UK Chapter kicked off 2018 with Predictions & Resolutions hosted by M&G Real Estate. A thought provoking panel highlighted the importance of open dialogue and a need for deep understanding between the supply and demand sides of the industry to get to the heart of what the customer wants.
The corporate real estate world is on the edge of a transformative era, facing demands from millennials, the rise of artificial intelligence in the workplace, the impact of Brexit and the imminent lease accounting law changes set to impact occupier portfolio strategies.
With these challenges in mind, it’s time for suppliers of real estate to recognise the importance of understanding their customer and look at what exactly people need, offering more flexibility in what they provide - it’s the people not the companies driving the change.
Here’s what our panel of experts and Chapter members attending the event predicted are the key factors impacting the industry in 2018:
Predicted to make up 35% of the global workforce by 2020, Millennials are a driving force for change in real estate portfolios. The challenge is to create environments that will attract and retain this generation. Will this see the adoption of common standards and a standardisation of environments required by occupiers? Or is this a call for developers to realise they need to understand the customer and offer more flexibility in what they provide? The standardised base product isn’t want people want any more.
We’re predicted to see up to 20% of the market provide flexible workspace in 2018. This will see an increase in lease flexibility and ways of procuring space, meaning developers and landlords are going to have to act quickly to provide the right product – understanding what the customer wants and providing them with a simple menu of options for occupiers to be flexible.
When asked, 78% of the audience thought flexible working will become part of a balanced solution for corporates over the next five years, with 30% of space being leased this way. Only 18% thought flexible working will be the main way in which space is occupied.
With the Brexit deal negations well underway we’ll no doubt see regulation tighten to limit cross-selling of services. But will Brexit see a mass migration of financial services jobs out of the UK? 84% predict there will be minimal (less than 10,000 jobs) moves as a result of Brexit but it’s going to be essential that banks don’t lose access to the European market.
No doubt uncertainty around Brexit will continue, but let’s not forget we’ve had ten years of uncertainty since the last financial crisis and now we’re ready for the outcome. Regardless of any challenge from Brexit and migration out of the UK, London is a fantastic place to live and work, and the office market will continue to outperform – there just needs to be the right product out there for the right people.
Advances in technology
As an industry we’re underestimating the impact of the rapidly-growing Artificial Intelligence offering, but we also have the most to gain and need to identify its opportunities and recognise tech as an enabler rather than a threat. Agents in particular can survive this disruption by understanding it and using it to determine what the client really wants and values – the role of the advisor will be to navigate change and processes and provide valuable on-demand advice.
Lease law changes
Currently not all occupiers appreciate the impact of the new lease accounting rules on their business. It’s the role of advisors to provide information to clients and understand their needs, offering shorter leases and putting the responsibility on the agents to articulate and translate needs. Once again, an active dialogue is needed between developer and client to ensure people get a lease that works for them. When asked, 49% of the audience felt that rent level will become a function of lease length and 45% see occupiers wanting shorter leases.
Let’s stop looking at and doing what we did yesterday. To stay relevant by looking ahead, understanding who and what the customer needs and embrace the many opportunities before us.
With special thanks to our panel @matthewstone M&G, @stuartbeety, @stevenskinner HB Reavis and @tobyogden Cushman & Wakefield
Follow our programme of events that will be held across the year covering off some of these key challengers of the industry.