In my 2021 predictions, I acknowledged that in many aspects, our thinking had moved forward a decade in 10 months.
The ‘people agenda’ of keeping employees safe, well, supported and effective during the pandemic has moved to front and centre in the boardroom, as has real estate, as organisations seek to understand how to transcend the pandemic and get ready for the return to the office.
Here, I would like to consider the opportunities for real estate in this process of transforming business to the new normal.
An aspiration to unlock real estate’s potential was clear at our recent Capital Markets conference, which focused on establishing a clear vision for new horizons. The potential that these new horizons offer is exciting on many fronts, whether for diverse portfolios or a single asset, or if you are an investor or occupier.
The opportunity is to do things differently, focusing on value creation combined with cost reduction, while enhancing real estate users’ experience through design and incorporating digital technology. This will require new ways of thinking about real estate assets. The next decade could indeed be fast-paced and exciting for the real estate sector.
What is changing is investors’ and landlords’ increasing focus not just on understanding occupiers’ businesses, but on better reflecting their business-to-customer requirements and what occupants, users or the public want from property.
The provision of on-demand services and adaptation of space, enhanced security and flexibility will be key to transforming real estate’s potential for the occupier.
Investment portfolios are shifting towards sectors such as beds, sheds and meds that have the potential to enhance asset value. New metrics and drivers for creating asset value provide new opportunities for longer-term investment in infrastructure and areas with huge future potential, such as green energy.
Repurposing assets, shopping malls and secondary retail in particular, as mixed-use schemes combining experiential retail and leisure, and a drive to adapt to changing shopping patterns, have also boosted industrial demand. A ‘build-to-suit’ model is needed, with space located close to the source of demand, enabling rapid delivery.
Sustainable offices in prime locations will continue to deliver value. How investors transform and adapt their portfolios, combining their risk appetite with market opportunity, will be interesting to watch in the next 18 months of economic recovery.
Business models that create post-Covid confidence will come from assets well-placed in terms of aspects such as sustainability and transport links, while offering something different in terms of culture and intelligence. Location will continue to be key, but is likely to be different post-Covid. City locations will remain key, but localism will start to influence the dynamic.
At the boardroom level, the key questions are: how can real estate adapt to present and future business demands, create value and be flexible, as businesses grapple with the role of the office going forward?
For those with a complex corporate portfolio, it will be important to rapidly deliver a transformational strategy to disrupt the status quo, optimise potential value and eliminate costs – to truly ‘sweat the asset’.
Counting the cost of the past year has provided disruption enough, and an opportunity for transformation. With the return to the office imminent, the focus will shift to the transformation agenda – so, are you ready?
Amanda Clack is an executive director and head of strategic advisory at CBRE