WeWork And CBRE On How Companies Are Consuming Real Estate In A Shifting Macro Climate

Businesses facing real estate decisions today have many factors to contend with. To name a few: the geopolitical climate, the rapid growth of artificial intelligence and the formalisation of hybrid working in a post-pandemic world.

Bisnow spoke to WeWork Regional President of EMEA and Asia-Pacific Luke Armstrong and CBRE Technology Media, Telecom Sector Vertical leader Mike Gedye about how global volatility is impacting the way companies consume real estate and how uncertainty is becoming universal. 

Bisnow: From your vantage point, what are the big themes playing out in conversations you’re having with occupiers?

Armstrong: The first is the geopolitical landscape, which continues to be more complex and is having a broader and deeper impact on world economies. 

I think about this in two ways. First, the undoing of globalisation as a consequence of U.S. tariffs. The protective stance of the U.S. demonstrated through the attempted renegotiation of trade deals has had a major impact on global business. 

As a consequence, companies and countries that once relied on trade in certain markets are having to focus on driving growth in noncore markets or stand up operations in entirely new markets.

The other is global conflict. We’re facing an energy security crisis, which is causing inflationary pressures that will impact almost every company globally. 

Both of these factors are causing huge volatility and uncertainty across the globe, making it extremely complex for companies to commit to, or even justify, high cost commitments like real estate. As a result, companies are increasingly focused on flexibility to build resilience and protect capital.

Gedye: A third is AI and the continued uncertainty about its impact on what business operations will look like in the future. 

We’re seeing a decoupling in how businesses operate based on whether companies are leveraging AI purely as an efficiency play or whether they are leveraging AI to drive growth and new products or services in their sector. In turn, this is determining what kind of workspace they might need to support their activities. 

Bisnow: What different types of businesses are emerging as the AI sector grows? 

Gedye: Companies in the AI space fall into three layers. First, there are businesses creating the foundational "infrastructure layer" on which to develop the emerging technology — data centres, energy infrastructure and semiconductor production. 

The middle "platform layer" is being created by businesses that use the infrastructure layer to establish and run their large language model platforms that operate the new technologies. Lastly is the emergence of the "application layer" where the technology is monetised at scale to business and consumer markets.

Armstrong: AI has driven growth in many areas, both at the infrastructure level and the company level. More recently, particularly in London, we’ve seen companies representing the application layer become a significant driver of growth in office markets. 

It's an arms race which requires a speed-to-market approach, often leading companies with exponential headcount growth to leverage space and services offering speed and complete flexibility. 

Bisnow: How are these two themes impacting the way companies consider consuming real estate? 

Armstrong: There is a strong interplay between AI and geopolitics. On the one hand, as a consequence of instability and the need to continue to drive sustainable profits, companies are using AI to reduce costs and drive efficiency. 

On the other hand, the emergence of this new wave of AI-based technology is driving new demand at an unprecedented rate. 

I recently spoke to a head of real estate at a legal AI startup who is looking to expand into 10 markets in three months. We’ve never seen that need for speed and agility on such a large scale before.

Gedye: As Luke says, the key word is agility — flexibility in the way a business procures services or space, or agility in how they adapt physical design because teams grow at different rates. 

Agility could also be geographic because if you put your eggs in one basket, for example, a back-office function in one region, and something unplanned impacts that market, you’ll be exposed. 

Resilience is critical as the world becomes more fragmented. You could say business has become more unified as the management of uncertainty has become business as usual.

Bisnow: The way people evaluate and procure real estate has been consistent for decades. How has that changed now?

Gedye: Fundamental to procuring real estate today is to operationalise what you have as efficiently as possible at the lowest possible cost to deliver the best possible employee experience. 

Businesses are targeting capital interventions that can help to transform their business as they adapt to new ways of working, which is shifting the conversation. How much of our real estate do we need to control and own? Acquiring space turns into buying an experience. 

Bisnow: Alongside the growing need for speed and agility, how have occupier demands shifted from five years ago?

Armstrong: We’re seeing the consumerisation of the workplace, where expectations have never been so great. More often than not, people can choose when and where to work, and flexibility is now a non-negotiable part of working life. 

An employer has to offer increasingly personalised and adaptable environments to meet expectations and needs of the workforce. Design is at the absolute centre of the office conversation today.

Gedye: We’re also seeing more demand in central locations around transport nodes because in an agile, hybrid-working world, people need to get in as fast as possible. We’re seeing more mixed-use opportunities as people want to create vibrant places. 

Part of the challenge is that the office is not just a place to do functional work; it’s also where organisations can have a competitive advantage in terms of attracting the best people.

Bisnow: Looking ahead, will we look back at this moment as a temporary adjustment period, or has the way we occupy real estate changed forever? 

Armstrong: The defining theme in business today, as it relates to real estate, is resilience. Today, real estate needs to clearly demonstrate value while carefully managing capital that is often needed to support growth in other areas of the business. 

Flexibility is now coupled with agility, which is increasingly crucial for the new generation of technology companies, which are scaling rapidly and expanding across global markets.

Gedye: We’ll also see space procurement in the next five years become incredibly forensic, data-driven and enabled by AI. 

This allows us to look at complexity and multiple triggers and therefore become increasingly predictive when mapping supply and demand. It also allows us to track outcomes and experiences, helping us to evaluate workplace effectiveness and closer alignment to business objectives. 

This article was produced in collaboration between WeWork and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.