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Gerald D Hines Founder and chairman of Hines 1925 Born in Gary, Indiana 1948 Receives BSc in mechanical engineering from Purdue University 1948-57 Works as a partner in engineering firm in Houston, Texas 1952 Starts building projects “as a sideline” 1957 Founds Hines as a one-man business 1971 Builds the 50-storey One Shell Plaza 1976 First project outside US 1979-86 Opens regional offices across US 1983 Receives Honorary Doctorate of Engineering 1987 Has completed 373 projects and has 921 US staff 1991-98 Opens office in Berlin, followed by Mexico City, Moscow, Paris, Frankfurt, Prague, London, Barcelona, Beijing, Warsaw and Sao Paulo 2001 Environmental Protection Agency’s Energy Star partner of the year. Hines’ properties consume 23.5% less energy per sq ft than national average 2002-03 Named Energy Star partner of the year for second and third year running 2004 Declares intention to expand international portfolio in more than 100 markets 2005 Has worked on 237m sq ft of property in 113 cities across four continents. Intends to open second office in China (Shanghai) and an office in India (probably Bangalore) |
Gerald Hines walks into his company’s London office holding an overnight bag. Despite being 80 this year, the eponymous founder of Hines, one of the world’s biggest developers, has the lifestyle of the young jetsetter. In the previous two weeks, he has flown between India, the south of France, the US and the Caribbean.
It is a telling reflection of Hines’ approach to his business. Despite having a map of the City of London behind his desk, he isn’t tied down to any particular area.
The future of large developments
And, according to Hines, there is little future for large office developments in the UK or his home turf of the US. “People wanting to build big offices in the West should all be very careful, because they could end up being very poor,” he says with a smile.
His comment is not merely mischievous. At its root is an awareness of the emerging phenomenon of companies sending large parts of their businesses offshore.
In the US, shortly before taking a well-earned weekend of R&R in the Caribbean, Hines was attending a roundtable of 40 investors and 45 of his own staff from around the world. “There was a lot of speculation about how much the transfer of business functions to overseas tech centres will affect office populations,” he says. “The Third World was very much the focus – and it is becoming increasingly important.”
He adds: “The client is thinking globally. We have to think globally because it is a global market. If the jobs are going to India, the developers should be looking at India.”
For Hines, the logic behind this shift is obvious. “I’ve spent a lot of time in India over the past year,” he says. “There are lot of highly skilled people there. And the cost savings are more than enough to justify the move.”
He explains: “The competition has started because of the internet. If you can work on a project for 10 hours here, and then have your people work on it for the next 10 hours there, you can do things in half the time. Because of that, you are going to lose a lot of white-collar jobs to the Third World.”
As an example, he cites GE, which is moving one-third of its entire research division to India. And while this is making huge savings for businesses, large developers focused solely on specific areas in West are going to suffer. One outcome of offshoring, says Hines, is that the shape of buildings, and the requirements that occupiers have, will change in cities such as London. “The depth of offices will become much shallower,” he says. “We won’t see many deep floorplates any more.”
Higher quality
And as well as buildings being smaller, the quality will have to be much higher. “The average employee will be higher salaried, and more demanding,” Hines believes.
Because of that, environmental conditions will become much more important. “As well as improving the quality of the air and mechanisms – such as temperature controls and insulating glass to stop the buildings radiating heat – maximising the amount of natural light in the building will become key to getting occupiers.
“Clients are beginning to appreciate how important it is to have as much natural light as possible. We are using more and more ways to push natural light back into the buildings. As a knock-on of that, we will see floor-to-ceiling heights increasing, to drag the light back.”
In the US, Hines says, the developers are leading the charge on green buildings. “We have to be able to anticipate the needs of the customer, or we wouldn’t stay in business for long,” he says. “We’ve learnt a lot. A lot of building stock has had to be upgraded to retain tenants and lower occupancy costs.”
Developers also have several guides to help them to provide better environmental conditions. In the US, the Environmental Protection Agency introduced Energy Stars, while in Germany there are strict building codes, and the UK has the redrafted Part L of the UK Building Regulations.
The sophisticated customer
“Customers and environmental improvements chase each other,” Hines says. “The customer gets more sophisticated and demands more. And investors want a green building because they know it will lease better. An attractive building is going to be the last to lose its occupiers and the first to gain them.”
Hines has easily had enough experience to have confidence in his predictions. He first started building more than half-a-century ago, in 1952, as a sideline to his engineering practice. In 1957, he turned pro – “when I had earned enough to feed the family” – and opened a one-man shop on Anita Street in downtown Houston, Texas.
The first building was just 3,000 sq ft of offices. The second was an indication of Hines’ ambitions, with 30,000 sq ft. But the breakthrough came in 1971 with One Shell Plaza in Houston. The 50-storey office building was, at the time, the tallest reinforced concrete structure in the world.
Although the company now had around a hundred projects in its portfolio, the scheme marked Hines’ arrival in the big league. Within a decade, from 1967 to 1977, the number of staff rose from 35 to 180.
As well as being a landmark in terms of scale, Hines sees One Shell Plaza as the moment when the company started to think about environmental issues. “The Shell building had some very innovative features,” he says. “We found out that Shell changed one-third of its space a year, and it was costing a lot of money to replace the infrastructure. So we put everything through stovepiping, which was very cheap and allowed things to be changed around more easily.”
But putting in the ducts – which were, Hines says, “enormous” – changed the shape of the building. “Most buildings had 11 ft 9in floor-to-floor height, but we did 13 ft, so we had a 9 ft space with a 4 ft void.”
Not only did this save Shell money, it also turned out to be a very smart move in the long term. “What hadn’t been predicted,” Hines says, “was the huge change in electronics, so when no-one else had anywhere to put all the wires, we had a 4 ft void because of the stovepipes. Shell signed for another 25 years.”
Other innovations that would now be encouraged under environmental codes in Germany, and the UK’s Part L, also featured in the Shell building. “We also used reflective glass,” Hines says as an example, “which minimised the effects of the Texas sun. It wasn’t pretty – it looked like a big mirror – but it did the job.”
The lessons learnt from One Shell Plaza were applied to Hines’ later projects. But while he agrees that the past has informed and allowed the company to tackle the changes to Western offices, he is convinced that the future lies in the emerging markets of the developing world.
“But that isn’t something that you can just wade into,” he warns newcomers. “We’ve been in China for about 10 years, Russia for 13, Mexico for 28 and Brazil for nine,” he says, proud of his company’s international spread. “We went initially because they were attractive markets in themselves – GDP was growing and there was a growing need for offices. But now they are all being tied together, as parts of the same global market.”
Painting a picture of the future
The picture Hines paints of the future of office development is certainly not rosy. “The amount of development is going to recede in the UK, just like in the US,” he predicts. “There isn’t going to be much development at all. There isn’t a market in the US where we can see a lot development happening, except some in New York and maybe Miami, because of the South America connection. And Europe is slowing down in the same way. “
And, painful though it may sound to some in the industry, the only way for developers to thrive is to think globally and, in the West, to adapt to the requirements of occupiers seeking smaller, better space.
“That’s the reality,” Hines says. “And I hope that we are realists. We built through some tough markets and tough times, but we are still here. You just have to see the opportunities.”
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Hines, the practice, at a glance Gerald Hines is speaking from experience when he says that developers should think globally. The company he founded is one of the few developers in the world with a truly international portfolio. Despite starting on a very small scale in Houston Texas, Hines has managed, developed and invested in over 244m sq ft of property across the planet. Its 700 property portfolio stretches across 13 countries in four continents, and Hines has no intention of stopping. The company is planning to set up a new office in India, probably in Bangalore, to be near the emerging hi-tech centre in the sub-continent, and is also looking to expand its presence in China with an office in Shanghai. The emerging markets are all important to Hines. Asked which markets he is most interested in, Hines doesn’t even pause to think: “India, Russia, Brazil and China,” he says immediately. “If you aren’t looking there you may as well give up now.” Hines has just over 5m sq ft of projects in China, 4m sq ft in Brazil and just over 1m sq ft in Russia. In India Hines wants to take advantage of the change in foreign direct investment laws, which will allow overseas players to develop 25-acre sites and hi-tech parks. |
