Disruption in Real Estate. Jon Neale, Head of UK Research

Transcription

1 Disruption in Real Estate Jon Neale, Head of UK Research AP

2 Why is conventional business under threat? The internet allows companies to gain scale and market share very quickly This is increasing the competitive pressures in many sectors.. and reducing the advantages of incumbents Technology is producing new, more efficient business models and will automate many tasks Big data will change the way business, government and cities function.. and autonomous vehicles will change the way we move around 4

3 The digital ecosystem Exponential advances in computational power Exponentially faster processing speeds and new forms of computer architecture are powering technologies previously written off as impossible Internet of things Billions of smartphones, wearables and Internet of Things sensors that are transforming business models and ways of working Ubiquitous connectivity Faster and near ubiquitous connectivity is connecting more devices and people to the Internet The data revolution Data production is expanding at an exponential pace, giving businesses new insights into their customers and their operations AL18 The organisation re-organised Vertical stacks The industries of the future A leaner future Small core teams scaled-up when needed Contingent workforce Flexible project-by-project resource Digital demographics Migrants, natives, dependents The rise of the machines Autonomous workers

4 Slide 6 AL18 Not sure I get the leaner future icon? Avery, Lois, 05/09/2016

5 Vertical stacks Higher up the stack A plethora of other companies leverage the layers beneath them Bottom of stack A small number of firms provide the critical layers such as operating systems and enabling infrastructure. E.g. Apple or Amazon Reorganisation into stacks will shake up what many industries look like today. At the base of the stack, a small number of firms will capture the majority of profits in their sector. Higher up the stack, a mix of asset-light companies leveraging other companies platforms to build and market new products What does this all mean? Greater drive towards flexibility (shorter lease lengths) Polarisation between core, in-demand locations and others Corresponding divergence between core investment assets (long income, low yields) and the rest New investment models which involve closer management of tenants and more business engagement Greater use of data to understand buildings, neighbourhoods and markets Reduced quantum of conventional investible assets alternatives become more important A new science of real estate 8

6 Retail The first property sector to be disrupted Cynicism over early-2000s wave of online retailers replaced by certainties Polarisation between convenience and destination Emphasis on customer experience and F&B Rise of click and collect, omni-channel shopping Greater use of customer data Reduction in national portfolios High-profile retail failures 9 Retail Sales Europe 2008 vs 2014 Structural change driven by e-commerce and multi-speed economic recovery Index 2008 = 100 Excluding daily goods spend, real retail sales in high street, shopping centres and retail warehouse locations have fallen over 25%. Online Retail Sales ' Spain Portugal Netherlands Denmark Italy Romania Ireland Hungary EU28 Czech Republic Germany Finland Austria Belgium France United Kingdom Sweden Norway Switzerland Poland Turkey Russia Source: Oxford Economics, Ecommerce Europe, Centre for Retail Research,

7 Online Retailers Taking Physical Space Technology and physical stores to drive sales and raise brand awareness Source: JLL, Changing Role Physical Space Role of the physical store is changing UK Retail Channels for Different Stages of Purchase 2016 Role of the physical retail space is changing. Source: Pragma Multichannel Survey, June

8 Dining Food service industry is going through a period of rapid change Time is becoming a more precious commodity than money. Places need to be destinations in their own right and offer an experience beyond pure retailing to Eating out today is Enabling diners to Pop-up restaurants, Food halls have proven more compete than just a for way our precious share time. the location, the whether simple or to act as a successful to refuel; at its best, it is now an experience to be savoured The and enjoyed. world is a stage food and the theatre is just as important as the experience Digitalised itself. dining ultra-high end, they all have in common is the element of Exclusively exclusivity. random anchor for shopping centres or to breathe new life into Local derelict and but architecturally artisan exciting food space. Consumers expectation is now to eat what they want, when they want, regardless of Dining the time of day or traditional Diversity meal times. 16 Disruptive technologies Upstream supply chain SUPPLY Suppliers Manufacturers Warehouses Retail stores End customers CHAIN Downstream supply chain E-commerce and the digitisation of retail Big data The Internet of Things Uberisation and the sharing economy 3D printing Automation and robotics Augmented reality Autonomous vehicles Drones

9 Strong investor demand and performance Warehouses remain critical parts of supply chains. Record investor demand for logistics, Strong historic investment performance (IPD). Relatively good performance outlook (JLL forecasts). European logistics & industrial investment Pan-Europe total returns, % p.a. to end-2014 Forecasts of gross total returns, % p.a bn % yr 5 yr 10 yr Logistics Industrial Retail Offices % Source: JLL Source: IPD Source: JLL Technology implications Less demand for warehouses to function as storage facilities - better supply chain visibility Taller buildings - more automation More buildings used for rapid throughput Secure broadband wireless internet access Better asset utilisation due to sharing Within the life of a distribution building - imagine a scenario where driverless goods vehicles deliver into and from warehouses full of robots

10 City Logistics Challenges for city logistics Growing demand Competition for land from higher value uses Congestion High costs Regulations New approaches are required Last-mile fulfilment Multi-modal logistics platforms for more sustainable solutions Consolidation centres for construction and retail Multi-storey (ramped) warehouses to make best use of limited land Offices - what have we already seen? More flexible and mobile working Greater employee densities Emphasis on informal breakout space and café facilities Wireless has liberated office design Division between collaboration and concentration space Provision of food, beverages, other amenities (internal and external) Workspace and location as recruitment and retention tools. And brand support devices Cycling no longer a niche commuter mode

11 Demand Drivers for demand Urbanisation & efficiency Demographics Clustering Infrastructure Knitted Together by Data.. Specification The changing face of the workplace

12 What are occupiers trying to do now. and what does it mean for requirements User Experience : offices, locations and cities as tools for recruitment, retention and productivity Engineering Collisions : collaboration and innovation, different uses Welness : green spaces, clean air, sports facilities, relaxation rooms Data and technology a new science of real estate Contingent workforce temporary workers, temporary teams Giants and SMEs platform providers and the rest Where will our workers live? Bournville Health and Well-Being: The next big thing We are more focussed on family needs and duties, rather than designing space that keeps singletons in one place. We would rather provide wellbeing in terms of work/life balance, so we don t need funky places or an on-site hairdresser. Tech It does but more of a would like rather than must have.. we were voted best employers in the world in terms of health and wellbeing, that is an integral part of the business. - Tech We have a very strong focus on staff so health and wellbeing is very important. We would like to see access to those sorts of amenities. Life Sciences Work-life balance is becoming more key. Insurance The whole health agenda is massive. We are looking at an on-site doctor. This really is the next big thing in terms of recruitment and retention of staff. In Frankfurt there is a restaurant and kindergarten we are looking at an environment where you can live and work. Law Health and wellbeing is definitely coming up the agenda. About to kick start a project on how our approach to this will involve the whole business. It will be a requirement going forward. Law 22

13 AL20 Contingent workforce Core workforce Employees Contingency workforce Specialists and freelancers AL21 Smaller core teams will work with flexible project workers, contracting-in specific skills or extra resources for projects Franz Brueck AL9 AL23 A leaner future Employees A company s core workforce Contingent workers Freelance and specialist providers sourced via talent platforms With the growth of outsourcing and automation, companies will become leaner and more dispersed, summoning the expertise of outsiders when required regardless of where these workers might be based Autonomous workers Algorithms and robots automate and augment tasks

14 Slide 23 AL20 Avery, Lois, 05/09/2016 AL21 Same as perious, take some content from slide 17 in original deck and add here Avery, Lois, 05/09/2016 Slide 24 AL9 Avery, Lois, 05/09/2016 AL23 See slide 19 original deck for some points to add, use icons if poss Avery, Lois, 05/09/2016

15 AL15 AL16 Workplace as a service Five star-service The workplaces of tomorrow will focus on user experience to attract and retain talent A hub and spoke model A network of liquid spaces will develop around core space, serving corporates, startups, microbusinesses and freelancers Getty Central London Serviced Office take-up Million sq ft 1.4 SO as % of total 12% % % 6% 4% 2% City East London WE % of total Source: JLL 0%

16 Slide 25 AL15 AL16 We can get this 'workplace as a service' point on to one slide. Needs an image that better says 'service'. Something like: And it needs to have some copy, see below comment for 2 x points to slide on, one after another. And can they be bulleted using an icon? Avery, Lois, 05/09/2016 1) Five star-service: the workplaces of tomorrow will focus on user experience to attract and retain talent 2) A hub and spoke model: a network of liquid space will develop around core space, serving corprates, startups, microbusinesses and freelancers Avery, Lois, 05/09/2016

17 The number of coworking spaces worldwide grew to 7,800 in 2015 compared to 3,400 in 2013 The number of members using coworking space is predicted to reach 1 million by 2018 Key expectations from coworking members: Sharing Knowledge (68%), Brainstorming or sharing new ideas (60%), Sharing opportunities for new jobs or projects (55%) Source: DeskMag,The Global Coworking Survey 2015 Coworking for corporates Corporate clients are embracing coworking to drive innovation and growth and meet CRE strategic plans (reducing footprint + increasing employees satisfaction and growth) Internal Collaboration Internal coworking for employees only Coworking Membership External coworking membership for employees only External Coworking Space Collaboration space for employees shared with external organisations/ individuals in an external coworking environment Internal Coworking Space Internal coworking space open to organisations/ individuals Source: JLL 27 Copyright JLL Corporate Solutions Keep Your Friends Close and Your Enemies Closer. The great corporate fear Disruption. The solutions: - Greater collaboration with SMEs requires new approaches to office design (and cultural change) - Bring start-ups into the organisation through incubators - Bring them into the building or nearby and encourage collisions - Can be achieved within towers vertical cities

18 Challenge of Campus Developments Innovation districts constitute the ultimate mash up of entrepreneurs and educational institutions, start-ups and schools, mixed-use development and medical investments all connected by transit, powered by clean energy, wired for digital technology, and fueled by caffeine. Katz, B. and Wagner, J. (2014) 29 Some Examples The Edge, Amsterdam

19 Some Examples Soundcloud HQ, Berlin 31 Some Examples HafenCity, Hamburg 32

20 Innovation Districts. Innovation districts constitute the ultimate mash up of entrepreneurs and educational institutions, start-ups and schools, mixed-use development and medical investments all connected by transit, powered by clean energy, wired for digital technology, and fueled by caffeine. Katz, B. and Wagner, J. (2014) 33 And financial services, too 95% of C-suite banking professionals believe specific aspects of their business are at risk to fintech disruption.. (PWC, 2016) In our view, blockchain technology may result in a radically different competitive future in the [financial services] industry, where current profit pools are disrupted and redistributed toward the owners of new, highly efficient blockchain platforms. (PWC, 2016)

21 Other trends The bottom line still matters Portfolio Optimisation - Back and mid offices moving to regional locations Impact of rising rents and business rates on Total Occupancy Cost Lease Accounting changes Nearshoring.. 35 What does this mean for Offices? Innovative developers Data-rich Flexibility Urbanisation Hyper-connected Authentic, vibrant, amenity-rich Amenities Continued Polarisation Promotes health & well-being 36

22 Geo-political, Regulatory and Economic Pressures Risks to the global economy are on the rise Global Equity market correction Depressed oil prices, weak demand commodities Divergent monetary policy Currency manipulations and fluctuations Large-scale involuntary migration Escalated geopolitical tensions China Slowing economy and stock market volatility Policy easing to reverse economic slowdown Government push to shift economy from exports and investment to consumer spending Continued migration from rural to urban U.S. Fed s decision to raise interest rates, spurring dollar s rise against other currencies. Dodd Frank and Basel III financial regulation Affordable Care Act rising health insurance costs Immigration access to talent 2016 Presidential election uncertainty Europe Brexit s potential for decade of uncertainty Euro area slow growth European monetary policy easing to fight deflation Competitiveness reforms in France and other countries, especially around labor market rigidity Bank regulation India Now fastest growing large economy Government has enacted reforms to ease business operations Structural reforms still pending including land acquisition, GST, labor, power sector Foreign direct investment, productivity and growth left in doubt Japan Abenomics - adoption of negative rates Tax policy Source: JLL, Oxford Economics Jon Neale Head of UK Research +44 (0) jon.neale@eu.jll.com Thank you COPYRIGHT JONES LANG LASALLE IP, INC. 2015