Balancing a range of competing – and sometimes conflicting – priorities when assembling and managing real estate portfolios isn’t a new challenge for corporate occupiers.
But the range of technology tools available to them is expanding rapidly, and the objectives are becoming ever more fluid and dynamic.
So what are the key factors driving corporates’ real estate decisions? How does technology fit into all this? And is there anything distinctive about the way technology firms view the future?
CBRE’s EMEA Occupier Survey for 2019 asked more than 180 corporates for their views on these questions (and others) in order to get a comprehensive and up-to-date picture of companies’ thinking on real estate.
More than one-third of them view labour and skills shortages as a key strategic challenge, which is double the proportion reported last year. And employee engagement, talent attraction and development are among the three most important drivers of corporate real estate strategy, even ahead of cost reduction.
In this context, the challenge faced by occupiers is how to procure, design and curate real estate across different locations, functions and formats in a way that genuinely optimises human capital, and to find ways to evaluate whether their chosen approaches are working.
This is resulting in the evolution of more people-centric CRE strategies. Three of the top five aims of CRE strategy are alignment with corporate goals, talent attraction and development, and employee engagement. And the first two are more important for technology companies specifically.
How are companies going about this? The survey identifies four levers through which companies are using real estate to influence and enhance their appeal to skilled labour. These are:
- Procurement and fit-out
- Flexible space
- User experience
- Technology
On procurement and fit-out, the internal characteristics of a building such as floorplate design, provision of technology and, especially, favourable lease options are becoming increasingly important.
Cat A and shell and core are still the most popular arrangements for taking a large lease in a new building, but occupiers are increasingly prepared to consider other possibilities: nearly half would be prepared to pay a rental premium of more than 10% for tech-enabled space and an even higher proportion for fully furnished and highly serviced space.
Demands are changing, and tech enablement and space-as-a-service are becoming more highly sought after.
The flexible space agenda is continuing to evolve, with plans to make significant use of flexible space over the next three years 20 percentage points higher than current usage.
Corporates are also becoming more discerning about the type of space they want and their reasons for wanting it: among technology companies, 67% envisage significant use of serviced offices over the next three years, compared with 45% looking for hybrid space.
One-third of them are doing so explicitly for the purposes of attracting and retaining talent.
While relatively few companies have formal user experience (UX) programmes, landlord provision of UX features does favourably influence occupiers’ building selection decisions and their rent behaviour.
At the same time, two-thirds of respondents highlight tech enablement tools as a component of UX programmes so, in a sense, UX forms one element of occupiers’ wider approach to tech investment strategy.
The findings in these areas link with wider views on the impact of technology disruption on corporate operations.
Well over half of companies expect technology innovation will have a substantial impact on their operations over the next three years, with most highlighting artificial intelligence and machine learning as the most likely source.
So technology strategy continues to be a major area of focus: nearly three-quarters of companies intend to raise their level of investment in real estate technology in the next few years although, interestingly, the proportion is slightly lower for tech companies alone.
The favoured technologies and motives for deploying them reflect a marked shift towards people-related objectives: technology is increasingly viewed as the means of achieving people-centric ends.
The focus of planned investment is moving away from energy management controls and sensors for occupancy management towards more people-centric applications such as occupant navigation apps and connected external internet of things.
User experience and productivity are explicitly becoming the rationale for pursuing tech investment.
