Last week CBRE published their research paper ‘Portfolio 2040’. This paper outlines their predictions of what the Corporate Real Estate (CRE) market will look like by 2040, based on qualitative and quantitative data gathered CBRE clients and subject matter experts.
We are already seeing attitude within the CRE market change with an increasing focus, and reliance, on data. The report only sees this trend continue and will see buildings and property evolve to take advantage as new technology is developed and deployed.
To manage the next wave of property data, Portfolio 2040 also outlines the importance of data analytics partners, citing the need for a partner that can advise the CRE market and support businesses with ongoing digital transformation.
Having discussed the report with our top consultants, we’ve distilled the top 3 disruptors that will change the corporate real estate market over next 20 years:
1. The concept of what ‘Property’ is.
Property today is seen as a static environment, consisting of a number of assets as part of its structure, and within its walls. The concept of what property is will change dramatically over the next 20 years. This idea that property is a fixed asset that is and solely owned and used will be challenged, with a more fluid ecosystem of shared properties, and outsourced assets replacing it.
“Flexible assets could account for as much as 50% of the portfolio.” – Portfolio 2040, CBRE.
What our consultants say: “CRE needs to evolve to become more flexible & adaptable to market triggers and changes, as well as having the capacity to be multi-purpose and technologically efficient.”
5 predictions of changes in property from the CBRE report:
1. “Leases will be shorter and more flexible”
2. “Flexible assets could account for as much as 50% of the portfolio”
3. “Rather than acquire specific buildings, companies will secure capacity across multiple buildings.”
4. “Headquarters will be significantly smaller, but of the highest quality, reflecting the company’s brand and desire to maintain a sense of purpose.”
5. “Portfolio planning cycles will become shorter, with a stronger focus on implementing flexibility in terms of space and leases.”
2. The Sustainable Use of The Built Environment.
Sustainable use of the built environment will become the norm by 2040 according to the CBRE report. With every lease becoming a ‘green’ lease – an agreement & commitment between landlords, occupiers and tenant to use their build assets as sustainably as possible, and strive to generate and use their own power (as by 2040 energy companies will be almost entirely focused on producing renewable energy products for consumers and businesses).
The Paris Climate Agreement, signed in April 2016 will come into effect in 2020. The United Nations Principles for Responsible Investments’ action framework for implementing the PCA outlined that Real Estate owners should “be more explicit about how sustainability affects the value of individual assets and the risk of depreciation of entire portfolios…. (and) measure how these factors impact on real estate investment performance and how they influence real estate market fundamentals.”
The UK has a current target of reducing emissions to ‘net-zero’ by 2050, and with new sales of petrol & diesel vehicles being banned from 2030, CRE must commit to playing its role in helping achieve this target.
Our consultants say:
“During the lead up to 2040 and beyond, owners & occupiers need to be highly informed of the effects in which sustainability (and also a lack of) impact their real estate performance. This is a driver to tackle climate change, but should also be seen as an opportunity for CRE to improve efficiencies and ultimately become more profitable.’
3. The Reliance on Data.
Data has already changed the face of CRE. Businesses are increasingly using data to make informed decisions on their estates, using big data analytics and software to save money, time and resource. The report only sees this reliance on data increasing drastically in the lead up to 2040 and beyond. As technology advances, the requirement of data to manage it, drive efficiencies and report on usage will become imperative.
iSite says “The fourth revolution is upon us….cloud computing, big data analytics, collaborative systems and IoT will soon be the norm reshaping the CRE world. We will see new models, blurring delivery models and the rules redefined”
5 predictions of usage of data in CRE from the CBRE report:
1. “Data (will) transform how businesses interact with their clients, employees, and the rest of the world.”
2.“In 2040 companies will behave with speed and flexibility at their core, and will rely on data for quick decision making.”
3.“Artificial Intelligence, 3D printing and other digital technologies will enhance the manufacturing process, delivering more customised, personalised solutions based on customer data.”
4.“Recognising the increasing reliance on data to shape operation, design and experience of environments will require increasingly sophisticated storage, analytics and autonomous data strategies and partners who can advise on this digital transformation.”
5.“Data will fundamentally transform how businesses interact with stakeholders.”
Technology, Sustainability and Data.
These three words will not only change Commercial Real Estate over the coming decades, but will ultimately change the landscape of the world.
Data is now a currency, it is as becoming as vital to businesses as human resource, stock, service and turnover.
Taking advantage of your data and how to use it to drive intelligent data-led decision making, will help to strongly position your business, and your career within CRE.
To view the full report click here