I sat down with Mike Gedye recently to understand his views on the evolving real estate market, the barriers to implementing Smart capabilities within property, as well as the challenges the property industry will face in the immediate future, public sector responsibilities and how future landlords must adapt to satisfy the changing requirements of occupiers.
Mike found himself in the right place at the right time and has become a market leader of all things Smart. After taking up an opportunity to join a small general practice in London’s Docklands, Mike found the location was struggling to attract people, mainly because it was hard to get to (before the Jubilee Line opened, and prior to Canary Wharf taking off as a viable commercial location). But the area did attract data and technology centres due of its extensive fibre capacity and diversity, as well as the availability of cheap space. They say timing is everything and with the onset of the Dot.Com boom, Mike was perfectly positioned to advise big telecoms and internet companies in building their networks across Europe.
I wanted to start at a basic level, by asking what Mike’s thoughts were regarding the key property drivers for Occupiers. “Firstly, flexibility, and I mean flexibility in every meaning of the word, how you procure space, how you deliver buildings, how you would use it and operate it … Secondly is the critical importance that space supports a great user experience. We’ve got to change the relationship between landlord and tenant and recognise the increasingly influential demands of the workplace consumer, the employee … Thirdly, the adoption of new technology. The digitisation of not just the work process that happens within a building, but also how you procure a space, how you deliver buildings, and how you deliver the experience. Increasingly these questions are being answered by connected devices, connected people and connected things”.
The image Mike portrays of a Smart technology future feels tangible, but why has this reality not been more apparent in most of our everyday building interactions, what barriers for implementation have been experienced? Mike believes it’s in part due to the technology itself and a skills discord between the technology producer and property professionals. “The challenge is often that the different technology systems deployed in buildings simply doesn’t talk the same language. The real estate industry is not tech savvy and the tech sector doesn’t understand building operations. This creates a siloed mentality. We’ve got to bring the two together. I think the organisations that first figure out that platform integration will be the ones that thrive. At CBRE, we are looking to acquire this capability or partner with people who can stitch together data and technology, to ensure we can continue to lead the industry’s smart evolution”.
To me, this discord exposes a potential skills gap, and Mike agrees. “We don’t have the skills in real estate – whether in the pure ability to manage big volumes of data and to manipulate it in the right manner, to digitalise the information to provide an insight, or skills to just digitise workflow”. How does Mike see this shortage being remedied? “You need to retrain or find new talent. For CBRE to take a lead, we want to partner more closely with Universities offering computer science degrees and say, “we sit on a pool of 5 billion sq. ft. of data, go play with it to see what you can find”, that’s a playground which is completely untouched. CBRE’s advisory business is needs data scientists, as opposed to traditional analysists, because we need expertise to manipulate increasingly complex patterns of data, through the application of AI, Machine Learning and Robotic Process Automation”.
With occupiers responding to technological advances in the way they occupy buildings, landlords must also adapt to provide suitably responsive assets in the market. Mike believes landlords need to readjust. “I think landlords will understand they need to create a central ‘back bone’ of smart infrastructure, but with the agility for occupiers to have some adaptability connect to that backbone, depending on their attitude towards untested innovation and risk investment. But principals are essential, and these need to make sure that the technology is open source, this should ensure that anything that connects across the built environment can be future proofed. Much of tomorrow’s Smart innovation will be built on aggregated data – with smart data integration, automation and diagnostics being cloud-based software solutions, rather than being embedded in the hardware, so you are not reliant on a single supplier to maintain the functionality of the smart network and infrastructure. Lastly, but possibly most importantly, it is critical to understand the business outcomes you want to promote this building around, so you can justify the investment strategy around the perceived challenges and goals, rather than just for the sake of trying something new. And crucially, make sure you have got some measures of success so that you can demonstrate the return of the investment.”
Mike’s views on how landlords should realign their development or refurbishment programmes makes sense, but if this is to become the norm, I wanted to know how this could impact traditional valuation parameters of a building. “There are certainly examples where buildings which have got a Wired score Platinum or Gold are attracting tenants faster and possibly at higher rents. When it comes to more agile spaces, tenants are more prepared to pay a premium for flexibility, so if you can demonstrate through technology that you can create buildings which are better connected, more agile, more flexible and more energy efficient, this will impact value. I think there is an opportunity to secure premium pricing from a more intelligent client who would see that as an enabler for attracting talent and retaining the best people. Our latest research indicates occupier’s willingness to pay a premium of around 10% for tech enabled spaces. They are prepared to pay an even greater premium for spaces which are amenity rich and offer a great user experience”.
“We don’t have the skills in real estate – whether in the pure ability to manage big volumes of data and to manipulate it in the right manner, to digitalise the information to provide an insight, or skills to just digitise workflow”
In Mike’s opinion, our project management team can add value to developments with their ability to ask the right questions – “you need to first understand, what are the components of a smart building, the rational for doing it, the cost of change. Going forward, our ability to advise will be more focused on who you partner with, given the growing complexity of the smart ecosystem. The capital planning and programming is where we really need to be quite smart, no joke intended. I also think we must educate the developers to think about what you want this building to become and the benefits that could be realised through investing in infrastructure. If you do that at the very beginning of a project we are talking about pennies to the pound of increasing capital as opposed to trying to expensively retro fit it afterwards”.
Reflecting on Mike’s thoughts, I find it abundantly clear that the real estate world is changing and property professionals are lagging behind other industries in serving that change. This is clear through the evolving workplace requirements of occupiers, and there are notable barriers to overcome before these are efficiently met – most obvious being the existing skills set in the industry and the lack of synergy between traditional practices and new technology. As we elevate this challenge to an urban or city scale, when there is a need for both smart buildings, smart infrastructure and the inter-connection with a wider ecosystem of stakeholders, then the public sector will play an increasingly important role in facilitating Smart investment and change. Our consultancy’s approach will need to be focused on delivering considered advice to help them in both their commercial and social responsibilities to promote the sometimes conflicting interests of the public and private sector.
Jason McEwen and James Bostock are part of CBRE’s Project and Cost Management team, within Building Consultancy, based in Manchester. They act independently from construction contractors in order to look after their client’s property interests.
They help clients make the most effective use of their assets, optimise value, and ultimately make businesses more successful.
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