Disruptions Through the Lens of Opportunity

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Amid competing to be a top performer in macro real estate markets, there are certain traits that distinguish the good from the great. Many occupiers have been forced to adjust to market demands, specifically – new technology, the battle for talent, and slower economic growth – compelling investors to adjust to meet the needs of their tenants. Huge demand across global markets is the result.

Technology continues to influences our everyday lives more and more whether we are paying attention to it or not. Technology continues to mold the way in which we conduct business. Traditional businesses are having to adapt to the new methods to stay competitive. The ‘how?’, ‘why?’, and ‘where we work’ has been completely deconstructed taking on new meaning. In a recent McKinsey Global Survey, 71% of individuals believed that enhanced digital capabilities increased profitability. On the other hand companies resistant to change may face uncertain futures due to the magnitude of the digital disruption.

The work force has also seen a large disruption due to technology. In a survey of C-suite level executives 90% report that a retention among technology talent is a priority amongst the gamut of business challenges. To expound upon this, in the U.S.A.’s Council of Advisors on Science and Technology predicted by 2020 for there to be a shortage of 1 million technical professionals. Therefore, the battle for technical talent will continue to grow, according to statistics.

Recently, the International Monetary Fund (IMF) issued a global economic forecast called ‘Too slow for too long’. Although the IMF does not seem optimistic, there is always opportunity. Disruption through corporate response combined with slow economic growth is a breeding ground for ideas. On one side, stymied growth has forced businesses to become savvy in reducing operational costs and protecting margins. However, corporate confidence is low and acts as a brake on business investment. Many commentators are referring to this established reality as a ‘new normal’.

Global Cities are seeing increased levels of occupier mobility as disruptions continue and new geography of occupancy emerges. Foreign direct investment (FDI) has been steadily increasing since 2012 and provides strong evidence to support the globalization of occupier activity. As reported by, the Organization for Economic Co-operation and Development (OECD), global FDI flows were up 25% year-on-year in 2015 at around $1.7 trillion. Both financial and corporate restructuring contributed to this being the highest volume of flows since the beginnings of the financial crisis in 2006.

The traditional spatially fixed occupier is being questioned and redesigned to accommodate a nomadic type of worker. It is noted in Knight Frank, Global Cities, that “fragmentation of business processes ha[ve] led to the rapid rise of ‘shoring’. . . [and] relocated to locations that have clear labour or cost advantages.” Cities that have benefitted greatly from this are Bucharest, Manila, Shanghai, Warsaw and Bangalore. There is also anticipated growth in Trinidad & Tobago, Kenya and Peru.

Young vagabond workers are seeking a more flexible space in densely populated cities such as Berlin, Austin, London, Seoul, Tel Aviv, and San Francisco. These cities have prospered due to the strong digital demographic. An example of corporate leadership through future foresight can be observed in General Electric’s decision to relocate from Fairfield, Connecticut to Boston, Massachusetts. Their vitality as a company is contingent upon their success in the software innovation and finding tech talent. Another example is Amazon’s decision to move from Slough, in Berkshire to the Shoreditch tech cluster of London. Also noting this shift is Integrale Advisors’ Keith Knutsson, claiming “flexibility is the driving force today for choosing a dream workplace.”

Emerging in the background, there will continue to be an onset of robotics and Artificial Intelligence (AI) that will disrupt current market conditions and create new business processes. As these altering forces take root, new property and location choices will be essential. Dr. Lee Elliott, head of Commercial Research for Knight Frank, said it best, “as many age old businesses will testify, complacency never pays in a disruptive environment.”

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