18 November 2019
A personal view of the evolving role of real estate in a world of technological, social and business change, by Richard Pickering, Head of Futures Strategy.
Shifting gravity The UK is one of the most monocentric countries in Europe, with London’s dominance stretching out across market cycles. (London delivers 23% of UK GDP, whereas Berlin for instance delivers 4% of German GDP). More generally, the South significantly outperforms the North on just about every economic metric going (except obviously decent cups of tea, and the number of people willing to start conversations on public transport). As part of its election campaigning, Labour envisages a massive intervention designed to achieve an ‘irreversible shift in the centre of gravity in political decision making and investment’ in favour of the North of the country. This comes in two proposed funding packages and a major relocation. Firstly, a Green Transformation Fund, worth £250bn over 10 years, which will make investments in green infrastructure. Secondly, a Social Transformation Fund worth £150bn, focussing on the development of schools, hospitals, care homes and council housing in the North. Thirdly, Labour would north-shore a substantial element of the Treasury. By any standards these are huge amounts of money, or a John McDonnell states an ‘investment on a scale never seen before in this country’. And he’s right. For context, Crossrail was initially budgeted at ~£15bn, the UK’s gross contribution to the EU is ~£20bn and total annual public spending in the UK is ~£860bn. This is a move that is calculated to equalise the country and in doing so win over those Labour voters not convinced by their party’s position on Brexit. The question pointed to by the Conservatives is where will the money come from? At present, a Labour victory stands at an implied probability of ~8%. #politics #economy
Managed meeting rooms It has always struck me as curious that we block meetings in our diaries back-to-back with each other, usually at hourly or half hourly intervals. This makes the courageous assumption that all attendees can move from one meeting to the next and take their seats in essential zero minutes. Once one layers over the technology, this near-impossible task become actually impossible. Dialling into Skype meetings, connecting cables, and spinning presentations up to a screen are fraught with failure and lost productivity. A typical 5 minute set up equals a productivity loss of 8%-17% depending on the length of the meeting. A potential solution comes this week from Microsoft in the form of its new ‘Managed Meeting Rooms’ product. For a monthly fee Microsoft will set up your meeting rooms such that time loss is minimised, that the calls work seamlessly, the set-up is optimised to your hardware and you are then provided with a usage dashboard. The business driver behind the concept is that most businesses are not operated at a scale which has led to an investment in meeting room management systems and therefore a gap exists for the service. When we talk about productivity gains in real estate, we often look to more ethereal sources of gains such as wellness and environment controls. Here is an example of using technology to eliminate waste, that has a clear and correlating link to productive time. #workplace #productivity
Skinny coffee As we’re all aware, the coffee shop is the future of the office, an essential feature of every bike shop, a public toilet (see below) and the erstwhile saviour of the high street. Surprisingly, however, it turns out that some people are still actually visiting coffee shops to... buy a coffee. I know, right? Absent of all the experiential and social stuff that hangs off most coffee shops nowadays, those simply looking for a coffee to go tend to want two things: (1) good coffee (2) fast. Starbucks is responding to this need in the form of a new micro store concept, launched last week in NYC. At 300 sq ft front of house (small for the US market) there are some trade-offs: no pastries and limited seating. The store will also be much more digitally oriented than is typical. It is designed to cater for click and go orders made in advance on customers’ cell phones, with a digital display showing who’s up next (a bit like at McDonald’s). For those used to London-sized coffee shops, the dimensioning is no big news. However, the concept of a major operator designing a store around a new digital customer journey, should give cause for reflection as to where else this might apply, and how space might be rationalised as a consequence. #coffee #retail
Feel good Our world is becoming increasingly convenient. There was once a time when you had to venture away from your armchair to procure the things that you wanted in life. Not anymore. Nowadays, putting the customer at the centre of what you do means bringing your products to them, rather than forcing them to seek you out. In a world where you can have anything, anytime, the purpose of going out changes from consuming products and services, to conspicuously consuming products and services. A publication this week by our Leisure team (the first in a series of three) explores trends in the sector that are shaping consumer demand. Being seen to enjoy oneself and living the life to which one should aspire is an increasing behavioural driver; whether this takes the form of competitive socialising, picking holiday destinations on account of their ‘Instagram worthiness’ (depressingly, the #1 motivating factor for Millennials when doing so), or by being seen to espouse socially worthy causes such as the environment, are playing through to how people are spending their cash. From an operator perspective, this, combined with the value impact of ubiquitous live ratings, is lifting the bar. Having a ‘meh’ location where you can consume leisure services is no longer good enough – unique and conversation starting locations are sweeping up more spend. From a landlord’s perspective, good leisure has been empirically shown to add dwell time in the wider asset, and so getting this component nailed on has become an important driver of value. You can download your copy of the report here. #leisure #experience
Toilet troubles Restrooms are not usually at the glamorous end of real estate (although a public loo in Hull did make the Lonely Planet’s ‘Ultimate Travel List’ earlier this year); however, they do undeniably perform an essential function. The recurring questions are who should fund these, are what are the rules? Earlier this year Network Rail made all of their public bathrooms free to use. They’re not the only ones. Starbucks also adopted an ‘open bathroom’ policy last year, but the jury is out as to its impact. A recently published report by the University of Texas claims that visits to Starbucks have dropped 7% since the policy was introduced (and double this rate when the store in question was in close proximity to a homeless shelter). This assessment was predicated on cell-phone location tracking data and contends that customers are put off by free bathroom users. Starbucks disagrees, stating that real customer numbers and comparable store sales are in fact up. There is a serious social question posed by this report, and the playing out of a wider ethical discussion around business’s obligations to the wider public. However, it’s not just the way that the public uses your facilities that needs to be considered. The office toilet can also be a very divisive subject. Media this week has been flushed with corporate tales of irresponsible use, including an internal memo from the FCA, published in the Evening Standard. The City regulator’s COO was moved to write to her teams about their ‘distasteful and shameful’ behaviour that had resulted in rather messy toilets in their new headquarters. To avoid them taking the piss in the future, perhaps its time again to redeploy the trusted attendant to command control and hygiene, as well as espouse the corporate values... #weirdandwonderful #toilets
All referenced reports can be found on our website under 'snippets'. Take a look here.
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