Thriving cities will be those most capable of adapting to change

Thursday 27 July 2023

walid
Author: Walid Goudiard

More than three years on from the start of the COVID-19 pandemic, cities are at an inflection point. The way people use, live and work in them has changed dramatically. The transition to hybrid working has altered the commercial real estate (CRE) market profoundly and irrevocably.  A focus on sustainability and the need to build future-proof offices that can meet the needs of a shape-shifting workforce has become paramount.

Research suggests that, as of last year, when the final lockdown restrictions were lifted, around 60% of office workers expected to be offered flexible working arrangements, with employees working an average of 2.3 days per week remotely. And it’s been a time of reckoning for cities looking to keep central business districts relevant.

Bustling commercial centres built on decades-old habits have undergone massive change in recent years. Evolving business needs and the way people think about health, wellness and their work-life balance are upending some of the time-tested draws of the central business district.

Cities in North America have faced the most intense adjustment, as return-to-office levels typically range between 45% and 65%, lower than the 65%-85% in Europe and 70%-100% in Asia-Pacific. The successful central business districts of the future will be those that can make the leap from being primarily places of work to mixed-use destinations attracting greater use intensity thanks to their enviable transport links and access to amenities.

New, vibrant mixed-use neighbourhoods such as Fulton Market in Chicago, Shoreditch and King’s Cross in London, MediaSpree in Berlin, and Roppongi in Tokyo, are emerging across the world’s largest cities attracting a growing share of businesses, residents, and investment. These districts, home to rapidly expanding creative, technology and research and development clusters, are diverting investor focus from more established submarkets and spurring new development of office, multifamily, boutique hotel and retail properties.
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The Rise of Technology

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While the dynamics at play in each market and in each city are different, one accepted truism to have emerged post-pandemic is that the cities that will thrive in this new fluid environment are those most capable of adapting to change. And crucial to how the CRE sector negotiates these seismic shifts will be the role of technology in maximising the potential of the built environment to respond to people’s evolving needs while combating the climate emergency.

A multitude of Proptech applications are already helping to manage buildings, drive sustainability, and improve the new hybrid workplace environment for employees. Combining software with the Internet of Things (IoT), smart building platforms analyse data and generate real-time insights about buildings’ usage patterns to optimise their environment and operations. 

Already the most forward-looking organisations are incorporating a new concept into their facility management (FM) model to exploit this potential.

Dynamic service provisioning involves a building’s FM team proactively curating and managing a flexible level of workplace services in response to real-time occupancy.

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Unpicking the role of data

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Any new application is only as good as the data that powers it.

And converting the data -such as that generated by building sensors, workplace apps, employee surveys- into something which can drive improvements in the efficiency and capabilities of buildings, districts, entire cities even, is complex and demanding.

Moreover, the volume of data generated by the built environment will only increase. By 2025, we believe that 78% of companies plan to incorporate 10 or more of the 15 technologies which it has identified as being key to the shift to hybrid working, adding to the reams of data already being collected. 

This is where the much-heralded explosion of AI has the potential to assist CRE professionals, by rapidly evaluating dynamically changing inputs then producing occupancy stacking plans that best utilise space or optimising systems and engineering equipment for comfort and efficiency.
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Green progress in CRE 

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As more companies commit to science-based targets, data is the catalyst that will help the CRE sector deliver real change and meet the world’s net zero targets. According to the Climate Group, around 40% of carbon emissions come from the built environment. Even before the pandemic many companies were looking at adjusting their buildings’ temperature levels and schedules to improve their energy efficiency ratings and meet their ESG commitments.

But this has now become an urgent imperative as companies seek to shave costs. The energy crisis, supply chain volatility, rising interest rates and soaring inflation have conspired to raise operational costs across real estate portfolios. However, by combining existing and new data sources with built environment knowledge and cutting-edge technologies, organisations can tackle both their cost and energy challenges.

This approach will involve adopting a new mindset. Companies will need to ask themselves what assets they wish to maintain and when they should invest in new, more efficient systems, a challenge at a time when budgets are constrained, and markets are volatile. It seems, however, that many companies are buying into this argument. Research suggests that more than half -56%- are planning to adopt predictive facility management technology to improve the performance and the overall life cycle of their assets.

The rewards for those companies that combine data and new technology to drive change are impressive. One global financial services company recently had their onsite teams conduct an energy audit which identified a raft of energy reduction measures across their portfolio. This included tweaks to their heating ventilation and cooling (HVAC) systems, one of the most intensive consumers of energy in commercial offices.

Combined, these changes drastically reduced excessive consumption. In one large building alone, annual savings totalled $664,158. And in California, one real estate investment firm successfully cut energy use by 45% in a multi-tenanted building using AI and algorithms to run their HVAC systems more efficiently.

For now, these examples are outliers, glimpses of the future. But soon, as the true potential of technology to transform the built environment is realised, they will be the norm not the exception. 

 

 

walid

Walid Goudiard is Head of Project and Development Services EMEA, JLL

 

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