Landlords And Developers: Chill, You Don't Need The Most Advanced Smart Buildings

You could forgive office owners and developers for having sensor envy. Given the hype around smart buildings and the way that technology will change the workplace, and hence offices, it would be easy to think you need to have the smartest, most technologically advanced building to have any chance of finding a tenant in the future.

Actually, just chill and don’t overdo it was the message from one of the world’s biggest professional services firms and office occupiers and other members of a panel on smart buildings and flexible working at Bisnow’s London State of the Market event.

More than 450 people at Twentytwo, the London skyscraper which is itself looking to redefine how buildings adapt to the future of the workplace, heard how office owners and developers who overdo it on the technology front risk making their buildings less flexible, less appealing to occupiers and potentially obsolete. And when it does come to technology, community beats spatial analysis hands down. 

“I don’t think [developers and owners] should be doing as much in the way of smart buildings and technology as is being proposed,” EY EMEIA Real Estate Leader Andrew O’Donnell said. EY employs around 250,000 people worldwide and O’Donnell is responsible for the real estate strategy that ensures the 90,000 or so in his region are as productive as possible.
 
“If you look at the coworking market, how it has grown and why it works so well for a corporate occupier, partly it is the connections you can develop with startup and scale-up businesses and mitigation of risk, but a lot of it is you don’t have to make a long-term play and investment into experience and sensors and connectivity. You can be adaptive and change, and I think this smart market, beyond the building infrastructure, will be more and more taken up by the facilities management providers and will become a service, providing that service for the occupier for two to three years at a time.

“If landlords spend too much time focusing on every sensor and every piece of infrastructure, there is risk that it will be the wrong hardware, and in two to three years time someone else will come in with something new and take the opportunity away.”

“A phrase we use a lot is 'long life, loose fit',” Gensler principal Duncan Swinhow said. “We can’t quite see what’s coming, so building less, giving more flexibility to the user to adapt and develop over time builds greater resilience at lower cost for buildings and developers. As the world of work changes and stretches, it’s not about rows of desks anymore and the conventional metrics we used to talk about. And buildings need to be able to respond to that.”

For landlords, it becomes a question of how far you go and what level of technological infrastructure you provide in a building. 

“We’re being challenged on all sides, by what occupier businesses are doing in their own space, by what the flexible office providers are doing, and what the role of the landlord becomes in that situation,” AXA Investment Managers - Real Assets Head of U.K. Development Harry Badham said. AXA is developing Twentytwo. “Real estate is a capital-intensive business, we’re not doing it for fun, we’re doing it to collect rent, we’re not trying to build operational businesses. We continually have to asses what does a smart building mean to us, how does it enhance our sale to our customer? Where do we break the line between what the landlord should be providing, what we call the backbone, providing connectivity, wireless, mobile phone connectivity, but making sure a business can come in and overlay their own technology and make sure it's fully integrated?

"We’re not interested in putting sensors in loos to monitor how many times people use the cubicles, but if the occupiers want to do that they can knock themselves out.”
 
More important than that kind of smart building, the panellists agreed, was a building which creates an environment people want to work in because it is open and flexible. That sounds like a bland truism, but given the changes in the way people work, it is not easy to get right.

“From our point of view as a landlord we need to make sure our buildings deliver the sorts of environments that our customers need, but inherent in that is creating a place that works for people,” Badham said. “Where we’re going further than we've ever gone before is opening up an element of the landlord offer that is flexible and putting in a set of amenities that traditionally a corporate [occupier] might have provided themselves but may not have wanted to because they are non-core, and opening the building up to the outside world.”

Gyms, restaurants and lobbies that are open to the public rather than just the building’s occupiers were the examples given.

“Far more interesting to us is the community and flexibility piece, having spaces that are open to the public, having that feeling going through the building, having the amenities, having the coworking and flexible options,” O’Donnell said. "Turning it into a community is really what enhances value for our people, that is why they come to work, to engage with other people, to engage with EY, but also to engage with people outside of our business, that’s more important for us.”

The same is true of the smart technology that EY does want to utilise.

“There’s a lot of talk about experience and that is central to all of this,” he said. “People say, 'I need a smart building, I need technology,' and the first question we ask is, 'why?' A lot of what we do internally is built on the human experience first, looking at tech providing a service. So where we look to use technology and smart buildings is asking how it can provide better connection, better community and better use of services. If I can't get a presentation on a screen, can I hit a button and someone can help me with that straight away? Can I find the right space to work, a quiet space if I need one?

“While we’re working with developers on developing smart buildings in the Netherlands, we are also working with the facilities management providers to create a service-driven approach where the building provides the backbone, but the facilities management providers take an experience-led approach and help us to optimise performance and adopt a service-led approach.”

Further exacerbating all of the above will be that tech firms run their businesses completely different to the closed corporate monoliths of the previous generation. Businesses are open, so real estate and its owners and developers need to be open and flexible also.

“With a building like this, 10 years ago a bank would lease the space and put a ton of marble up that would say, 'don’t come in here unless you are an employee,'” Badham said. “It would build its own systems to have ownership of everything going on it that space. Those big tech businesses like Amazon and Google are still only teenagers, they are evolving, and they are totally different. We’ve built for them both in London and their systems are open. Whether that’s a top-down decision or a function of how humans are evolving, I don't know. But when we developed for Amazon [at Sixty London] we had a typical user clause, and we had to rip up everything we knew about commercial property and say, 'you can share the building with whoever you want to, as long as you don’t create a landlord and tenant relationship.'”

“The structure of the relationship between the occupier and landlord becomes plug and play in the same way that the technology allows you to plug and play experiences,” Cushman & Wakefield Head of Occupier Business Performance Despina Katsikakis said. 

So put down that smart building catalogue: Having a sensor in every wall is not going to guarantee that you bag the tenant you want.