The future of real estate

[Pages:11]THE MARKET FUTURE OF REAL ESTATE

The future of real estate: a next-generation view

Over the past five years EG has been engaging with and highlighting some of the brightest next big things in the built environment. Through our Rising Stars awards and Future Leaders training programme we have amassed an alumnus of close to 100 potential new leaders of real estate. After a year like no other, EG asked the next generation three questions about the future of real estate: 1. What is the outlook for real estate in 2021 and beyond? 2. What will be the biggest catalyst for change in the sector? 3. Who or what will be the most influential in real estate in the next five years? Here is what they had to say. A unique look into how to future-proof your business for success.

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Tushar Agarwal, chief executive, Hubble OUTLOOK 2020 was the year that changed everything about property. This is just the beginning of hybrid working and 2021 will be the year when every organisation and individual starts to configure their perfect version of hybrid working.

MOST INFLUENTIAL Those who solve hybrid working. WeWork may well see a huge revival as the thesis it wrote 10 years ago starts to become very real.

Sarah Bissessar, senior estimator, Willmott Dixon Interiors CATALYST Construction and real estate are major employers in the UK and we must use this moment in our history to strengthen our commitment to being flexible and inclusive workplaces. This will require a considered approach in how we recruit, induct, train and develop our teams for the next decade and require an ongoing shift in mindset at all levels of the industry to make this work.

MOST INFLUENTIAL The next generation of apprentices and leaders coming into our businesses will be key in supporting and leading the charge on issues such as sustainability, adopting new tech solutions, further embracing diversity and engaging with agile working.

Richard Brazier, senior acquisitions manager, The Office Group OUTLOOK Landlords who are able to adapt their operating models quickly to accommodate what tenants really want in a post-Covid world will be the real winners, while those who are holding onto the prospect of leasing their entire portfolios on a 20-year, FRI basis will ultimately become obsolete. The significance of technology in the underlying real estate will make the price per square foot occupiers pay much less important going forwards. Instead, value will be derived from the overall experience and service tenants and their employees are able to extract from their offices, whether they are physically there every day or predominantly working remotely.

MOST INFLUENTIAL The tech behemoths. Over the last few years, they have led to the boom of the logistics and data centre sectors, been the primary catalyst to the demise of the retail sector and helped change the way we think about how we live and work. It will be fascinating to see the impact they have on the wider real estate sector going forwards.

Lee Butz, founder and chief executive, District Technologies MOST INFLUENTIAL The most powerful sector in real estate worth getting to grips with will be proptech. Particularly as we move into a post-Covid world, CRE providers will need to adopt the right technology to offer occupiers the best solutions that support hybridised working.

Joseph Daniels, chief executive and founder, Project Etopia OUTLOOK 2021 is the year of net zero, smart construction, connected living and sustainable communities. The real estate industry is going through a shake up and that's about getting net zero. Connected net zero living will become the key driver and change the landscape of the industry forever. It's very much a "go green or get left behind" moment.

Joyeta Das, chief executive and cofounder, Gyana MOST INFLUENTIAL AR/VR start-ups will gain more prominence. Sustainability leaders will win the main brownie points, and opening doors to new ways of thinking will be the primary driver of leadership success as diversity of thought will be needed to survive.

Adina David, director of flexible housing, Greystar OUTLOOK 2021 will give us the chance to test new ways of building and managing property which have the potential to reshape our industry for the better in the long term by seeing real estate as a service, not a

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As an asset class, retail is dead

Tripty Arya, founder & chief executive, Travtus OUTLOOK 2021 will be challenging for some asset classes and will create demand for others. Multifamily and industrial assets will see an increase in allocation from institutional investors. Offices will return but in a new physical and psychological role. They won't be the crown jewel they were. Retail is dead.

MOST INFLUENTIAL The disruptors who have no real estate background and are entering the industry. The people who are going to break the idea that the industry knows itself.

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yield. The most successful real estate will be that which blends operations and allows for flexibility in tenure and use as society readjusts to coming together again.

We have a chance to be intentional in repositioning or creating places that are fully inclusive to all demographics and that bring people together in new ways. After a year of social isolation for many, the ability to create communities again will be crucial and possible at scale only in cities.

MOST INFLUENTIAL Private equity real estate firms will be some of the most powerful groups to watch as they often take more risks, seeking outsized returns, and thus end up supporting innovative ideas that look to disrupt the industry. That innovation will be crucial in the coming decade.

Tom Drogman, cofounder and chief technology officer, Smart Spaces CATALYST ESG is the perfect vehicle for businesses to drive change and deliver people-centric experiences while effecting sustainability strategies through healthier buildings in operation to the benefit of all. Evidencing building credentials through in-use metrics which support both the landlord and occupier's ESG policies will become increasingly the focus.

MOST INFLUENTIAL Technology providers with a proven background in delivering smart buildings at scale. I expect leading companies like Smart Spaces, which can help clients adapt to the new hybrid working model at rapid pace and have comprehensively delivered for funds and global occupiers during 2020, will be key stakeholders in the success of any new development, refurbishment or occupier workplace strategy over the next five years.

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recent years. But, in the wake of Covid-19 and the significant effect it has had on working habits, even corporates are now increasingly seeing the benefits of flexible working. Those looking to recalibrate their workspace after this year's protracted lockdowns and reunite teams in prime central locations on a flexible basis are the ones to watch as a major growth opportunity for the market.

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Megan Hanney, UK development advisory, CBRE CATALYST Growth of the data centre market and deployment of 5G. Digital infrastructure will serve a plethora of technological advances, including the internet of things, artificial intelligence, data exchanges, blockchain and more ? all of which will impact the composition of future developments, net zero strategies and the curation of ecosystems in the built environment.

MOST INFLUENTIAL Data scientists and infrastructure specialists. The two combined are pretty much shaping the redesign of the next decade and those seeking to play a part in the development and delivery of commercial real estate should be actively engaging with both.

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Robert Godwin, managing director, Lamington Group CATALYST Innovation and adaptation. Companies need to reflect on their business models, defensiveness of income, and alignment with current and future trends. If you are not growing, you're dying, and the need to act to maintain market has been exacerbated during Covid.

Kat Hanna, masterplan strategist for Euston, Lendlease Europe OUTLOOK 2021 will be the year that real estate gets serious about mixed-use ? within buildings, across developments, and in investment portfolios. The experience of the past year has shown that diversity of uses is key to resilience to major and rapid change.

Beth Hampson, commercial director, The Argyll Club OUTLOOK Real estate that offers a place for people to connect, regroup and collaborate with teammates will be the most sought after in 2021. The office now needs to be a "one-stop-shop" if it is to incentivise workers to return ? this of course means a well-designed, safe place to work, but also a place to catch up, eat and drink with colleagues after months apart. Just as shops had to move fast to combat the rise of e-commerce, so too must offices transform in a post-Covid world to become a lifestyle destination that meets employees' high expectations.

MOST INFLUENTIAL In the world of offices, the key needle-mover is the corporate. Businesses of all shapes and sizes have been steadily moving away from conventional leases and taking up more flexible workspace options in

Emma Harvey, programme director, Green Finance Institute OUTLOOK As the UK and other major economies emerge from the pandemic and pursue a "green" recovery, the focus on building-specific emissions and climate resiliency will continue to gather momentum. The urgent need for practical actions that decarbonise the built environment will become increasingly apparent in 2021 and beyond, as tighter regulations and more granular disclosure requirements come into force.

MOST INFLUENTIAL Partnerships between the property and finance sectors, focused on developing the technical and funding mechanisms to enable change without compromising commerciality, will become increasingly important over the next decade. In addition, consumers of the built environment ? whether individual homeowners, tenants or occupiers ? will be key influencers in the future, with their power to demand greener properties and to reflect their lifestyle choices in the physical environment.

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Autonomous vehicles and high-speed wifi infrastructure will transform how and where the nation lives and works

Alanna Hasek, legal director, DLA Piper CATALYST A combination of the 2050 net zero emissions laws, changing consumer lifestyles and autonomous vehicles will drive significant change across all property sectors. As nearly all existing and new-build properties will be in use in 2050, every facet of how we design, construct and use these buildings will need to change to be carbon-neutral. The impending adoption of autonomous vehicles and high-speed wifi infrastructure will also transform how and where the nation lives and works.

MOST INFLUENTIAL You, me, the normal man and woman on the street. We all have the power to determine the future real estate landscape. How we each respond to the questions of how we want to live, shop, work and play in a (hopefully) post-Covid world will be key. Those players within the sector that are most able to listen to these customers, be creative and adapt quickly to their voices will emerge as the winners.

Hana Hassan, senior project surveyor, Willmott Dixon CATALYST We have seen how powerful nature can be, and also how effective humanity can be in solving problems when the world works together. Clearly the shortterm environmental benefits which were realised during the height of the lockdowns came at too high a human and economic cost, but they re-emphasised the need for balance between human activity and the environment. Integrating green policies, putting sustainability at the heart of the agenda and investing in technologies that support this can help the sector achieve its goals. The construction and development sub-sectors of real estate are hugely impactful; we have a responsibility to lead change, to restore and protect our planet and to use our precious resources in a more sustainable manner.

MOST INFLUENTIAL The most useful type of individuals to know in real estate now and in five years' time are the late teen to young adult group. This group can tell us what they are looking for in the future, as well as what they would be attracted to now. The industry needs to note the different demographics and backgrounds of our future consumer.

Adam Hinds, director, LifeProven Wellbeing Property Consultancy OUTLOOK The property industry will change more in the next 10 years than it

has over the last 50. Changing consumer lifestyles, demands, net zero carbon emission laws, autonomous vehicles, climate change and technology advances are transforming how we design, build and operate the built environment. The most successful property businesses and individuals moving forwards will be those most able to understand, adapt and capitalise on these future changes.

Victoria Martin, residential consultancy partner, Cluttons MOST INFLUENTIAL 2020 has taught us more than ever that the real estate industry has to be resilient and adaptable to change. With further impending disruptors, such as Brexit, changes in legislation and emerging trends, the performance of the property industry does not rely solely on the success of certain individuals or sections of society but on the ability of all sector participants to work together to achieve a common goal.

Becky Jones, head of partnerships, Appear Here MOST INFLUENTIAL Collectively, independent brands. Lockdowns made us (as consumers) realise how much we need our local high streets and independent stores, not just as places for transactions, but as places for human connection and community. We are now seeing a really wholesome shift back to shopping locally and neighbourhood retail. Customers want to shop and

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interact with real people, not faceless chains ? they have realised the value of knowing their local butcher's name.

Eva Kiivit, regional operations manager, Greystar MOST INFLUENTIAL Anyone who has the ability to adapt to the ever-changing environment sustainably. Businesses that genuinely strive to make a difference and provide benefit for the environment/consumer, not just their bottom line.

Prasanna Kannan, co-founder, Native Finance OUTLOOK Covid-19 has turbocharged long-term tech trends, and changes we thought might take decades have happened overnight. Beds, sheds and meds might stay the same, but every other asset class needs to reinvent itself and embrace technology.

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MOST INFLUENTIAL Policymakers will be the most powerful and useful to know in real estate over the next five years, as they will mediate the competing interests of bosses, landlords and workers when it comes to offices. The impact of their decisions ? on everything from business rates to social care ? will have ramifications for decades to come.

Amanda Lim, flexible offices solutions partner, Knight Frank OUTLOOK With regards to the commercial property market, and how businesses organise their real estate portfolios, we expect to see an increased demand for flexible office space, as businesses value more flexible arrangements amid the current uncertainty. Monthly rolling contracts, the ability to scale your space up or down, and the chance to be led by expert providers (in regards to Covid-secure workspaces) make the flex offering all the more appealing.

Helen Lowe, senior business development manager, BW OUTLOOK Agility will be key and any investment will be evaluated for reversibility. If the virus declines but fails to go into remission, the changes to the economy and real estate are likely to be more enduring. If vaccines are genuinely the cavalry riding to the rescue, and the government takes the right actions to stabilise the economy, life might return to something like normal more swiftly.

Tom McWilliams, development director, Property Alliance Group MOST INFLUENTIAL It has got to be Generation Z. This is the generation who will have grown up with BTR, Amazon Prime, Deliveroo, etc. Their approach to living in and using property is completely different to the generations before them.

Understanding and learning from them will be fascinating.

Cal Lee, global head of Workthere, Savills OUTLOOK Change is coming and with it a huge opportunity for those ready or already adapting. Over the next decade sustainability and data will transcend all aspects of real estate and our roles as investors, developers, advisers and occupiers. Together they will define what the future of real estate looks like, and those who don't adapt will find it more challenging to survive beyond.

CATALYST Most importantly, data on the environmental impact of our space and occupation of that space will improve significantly ? that alone will be a huge driver of change as expectations of what is acceptable and what is not evolve. The next decade is hugely exciting for real estate as we transition from a sector of great tradition to one at the forefront of technological and sustainable evolution.

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James MorrisManuel, managing director, EMEA, Matterport CATALYST Technology and digitalisation will be the biggest catalysts for driving the sector forward and allowing safe interactions and exchanges to take place. As the effects of the pandemic progressed, so too did the efforts and innovations of tech companies as they quickly responded to a growing demand for datadriven solutions and technology.

Josh Myerson, head of rating, Montagu Evans CATALYST Now is the time for innovation to pervade the core of the industry ? how we value, manage, buy and sell real estate, and how we create social value. Property is so often cited as a people business, but we should still look for ways that new tech can cover day-today work and free up our teams for the areas where they can add most value.

MOST INFLUENTIAL It might be a truism, but the graduates and young entrepreneurs of today will be the leaders and placemakers of tomorrow. They need more voice now so they can set the agenda for the change we know is coming.

Rajeev Nayyar, managing director, Fixflo MOST INFLUENTIAL Over the next five years, the most critical person for property professionals will be a competent and commercial lawyer. We are going through periods of rapid

change both in terms of the macro environment and the way physical assets are used and leased. A top-drawer lawyer who understands the regulatory and legal developments, and the changing market norms will be able to come up with creative and viable solutions against a backdrop of uncertainty. It's in these times of great changes that the best lawyers more than earn their fees.

Rupert Parker, founder and chief executive, Building Passport MOST INFLUENTIAL The most powerful people to know in the real estate world will be those owning and controlling distribution channels and hubs for online goods.

Manreet Randhawa, director, Janus Henderson UK Property PAIF CATALYST The change in human behaviour will be the biggest catalyst, as the pandemic has fundamentally shifted the inner psyche of people in varying ways. Real estate will need to reflect on evolving priorities, such as an increasing demand for wellness and contactless convenience.

Charlie Pool, founder, Stowga OUTLOOK I can't see us ever again having as much need for office space as we did pre-pandemic. Even once the pandemic is long gone the working from home trend won't be. This shift was happening anyway among smaller companies and

now has spread to every company. There simply isn't the need for everyone to be in the office every day. So what happens to thatexcess space? If it can be, it will be turned into residential because that's where the highest rents/values are, but a lot of office space isn't suitable for that. If it can't be residential then we will see

Death knell for the 1954 Act is only the tip of the iceberg

Mark Reading, legal director, Mishcon de Reya CATALYST The death knell for the Landlord and Tenant Act 1954 seems to have been sounded by the government's recent comment that the act "does not reflect current economic conditions". The Franses decision, delivered almost two years to the day prior to the government's recent comment, represented one of most significant changes in the commercial landlord and tenant arena in more than 60 years. But if the government has its way, Franses will be only the tip of the iceberg. The key question that it needs to carefully reflect on, though, is whether widespread reform in this area, at a time of unprecedented economic uncertainty, is really the best way in which to address perceived shortcomings in the current regime.

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