Cookie Use Notification

This site uses cookies to provide you with a more responsive and personalised service.

By using this site you agree to our use of cookies as set out in our cookie notice. Please read our cookie notice for more information on the cookies we use and how to delete or block the use of cookies.


Productivity, performance and phraseology

13 February 2020

Share This:

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.

Coronavirus It is a sad inevitability that viruses continue to create a threat to humanity. The recent variant of coronavirus centred on Wuhan has already proven more deadly than the SARS epidemic in 2003. Whilst its mortality rate is comparatively low, its transmission is proving higher, in part due to the asymptomatic nature of carriers. The response to lock down affected regions will now also translate to global economic consequences. So far, the movement of some 50 million people has been curtailed and provinces accounting for almost three quarters of Chinese GDP have been closed for a week. Some businesses, such as Disney’s parks in Shanghai and Hong Kong could be directly impacted to the tune of $175m (estimated by Disney in a recent earnings call on the basis of a 2-month closure). In aggregate however, the bigger impacts will be on the global supply chain in which China plays a pivotal role for intermediate products. How might this be quantified? The World Bank estimated global SARS related direct losses at $33bn (a fraction of a percent of global GDP), but this ignores many of the indirect costs. The World Bank warned that a global pandemic lasting a year could catalyse a major global recession, with a ‘mild case’ such as the 1968 pandemic estimated to reduce the global economy by 0.7%. Perhaps as relevant to our industry, Bloomberg has described the lock down in China as the ‘World’s Largest Work-From-Home Experiment’. Places where interaction is encouraged (co-working, accelerators, gyms, leisure and shopping venues) are likely to be most impacted by the virus, however, more traditional workspaces are also being shunned either by diktat or choice. ‘It’s a good opportunity for us to test working from home at scale’, said one Chinese ad agency boss. The jury is out as to whether working from home is more productive than working in the office. The recent development of internet enabled workflows in theory builds resilience into the work model. The US apparently began mandating teleworking capability for some government employees in 2000, precisely to ensure that systems were in place in the event of a pandemic. We might get more evidence from China in the coming month to understand this better.

Why tech firms flock to expensive cities New evidence that agglomeration creates value comes from a review by the Brookings Institution of the US tech hubs. A report late last year, followed by a recent interview with the Wall Street Journal sets out how cities like San Francisco deliver higher tech productivity rates than other US cities. Report author Mark Muro puts this down to the close proximity of highly specialised workers in specialised businesses. The report finds that whilst higher personal productivity rates were found in top hubs for sectors such as manufacturing, the agglomeration benefit was much more in evidence in innovation industries. Typically, hubs have some form of academic operator at their core. The recent growth of Manhattan’s West Side was put down to (a) spillover effects from places like San Francisco and San Diego, (having exhausted their local talent pools), (b) the presence of nearby Cornell Tech, and (c) the rezoning for expansion of the West Side, led by the likes of Dan Doctoroff, which enabled for instance the development of Hudson Yards. Will this provide a runaway lead for the few superstar tech hubs? The author cautions that sometimes ‘even the winners don’t feel like winners’, and that local government needs to remain focussed on managing the negative side effects of agglomeration, such as affordability issues, congestion, and other talent attraction drivers.

Making Feelgood Pay The most obvious repositioning play for most shopping centres in the past few years has been to dial up the leisure component. But beyond diversifying the income, and filling in some voids, how can a leisure play impact on scheme performance? A recent publication by my Retail colleagues establishes how leisure can pay for itself. Firstly, it would be a mistake to think that the status quo can be maintained in a do-nothing approach. Shopping centres positioned as a destination (as opposed to local convenience) are in an increasingly competitive market, where differentiation counts. As competing centres look to clear capacity, a necessary intervention to stem rent erosion is often the first business case. At the other end, a major leisure extension of say 5,000 sq m with branded attractions and a cinema can significantly extend the geographic catchment limits, with corresponding footfall externalities and potential for improved demographics flowing into the principal retail offering. Before our current period of retail market stress, the same principles held true, and various historical academic papers have, for instance, found empirical links between entertainment orientation and performance outcomes (in 2006); that the dominant motivation to visit a mall is ‘to have fun’ (2007), and that ‘some people may now come to shopping centre without intending to buy a single thing’ (1991). Looking forward it is conceivable that for some centres the discussion might be about how much retail you want to introduce into your leisure mix, rather than the other way around.

One bed flats Of all the real estate sectors, perhaps intuitively surprisingly, residential has changed at a slower pace over recent history. Many of us still live in products substantially created over 100 years ago. Cosmetic changes and technological upgrades (such as electrification) are minor influences on the inherently slow rate of obsolescence. Underneath this, however, there has been a fairly fundamental shift. In most Western countries, the number of adults living alone has increased massively during the past 50 years. In the US for instance it has doubled, and in countries leading this trend (such as those in Scandinavia) the proportion now sits at over 50%. A recent report by Our World in Data shows that this trend is clearly correlated with GDP per capita; living alone is a luxury afforded by wealth. For instance, the proportion is as a low as 1% in some low-income Asian countries. Whilst culture does play a part, it seems that as wealth increases, so does the propensity to live alone, and that this trend is building y-o-y. A further finding is that this is due to choice, and that choosing to live alone does not equate to loneliness. As people stay single for longer (also correlated with wealth) and as they shun flatmates (plenty of good reasons for this!), one-bed flats are likely to remain in demand in the coming years.

Passive language We Brits have developed the art of tact to a level where we might fairly be accused of being indirect in our language. This is particularly the case in business, where delicately sidestepping the prospect of offence has become an art. Occasionally therefore, it is necessary to provide a translation to the true meaning of our vocabulary for those naive to our language or to the world or work. A recent thread I stumbled across on Twitter, asking users to call out corporate phraseology in emails, provides instruction. For instance, 'I'm a little confused', does not denote genuine bewilderment, but instead thinly concealed rage about something that clearly shouldn’t have happened. 'I'm sorry, I think my last email wasn't clear', actually means, 'I'm not sorry; my email was very clear; why have you done the opposite you imbecile?'. 'Per my previous email, attached for your convenience', means, 'You clearly couldn't be bothered to read my last email, so now no excuses'. On conference calls, ‘Sorry, I was on mute,’ translates as ‘Oops I haven’t been listening for the past 10 minutes and you’ve just found me out’. 'Team - let's make sure we're aligned', of course means 'Get on the bus, or you'll soon be getting your P45'. And a simple 'Regards' (no Best, Kind or Warm prefix) essentially means 'I hope you burn in hell'. Best regards, Richard.

All referenced reports can be found on our website under 'snippets'. Take a look here.

© Cushman & Wakefield 2018. This information contained in this briefing is for information purposes only. Accordingly, the information contained herein should not be relied upon or used as a basis for any business decision. Any such decision should be based only on suitable and specific professional advice. This briefing is not directed to, or intended for distribution or use in, any jurisdiction where such distribution or use would be prohibited. To the extent permitted by law, Cushman & Wakefield accepts no duty of care and cannot be held responsible or liable for any loss or damages which may be incurred by any person (directly or indirectly) as a consequence of relying or otherwise acting on the information contained in this briefing.

Back To Newswire