What was The Buzz in October?The Buzz
Our monthly roundup of real estate industry news.
What was The Buzz in October? Our monthly roundup of real estate industry news. Here are a few of the stories that caught our attention in October. From re-evaluating office needs, a lifeline for London homes and the growing adoption of tech in the CRE industry, there’s a lot being discussed in the UK property market.
Re-evaluating office needs
The shift to hybrid working is prompting companies to re-evaluate their office needs, leading to cost-cutting and downsizing, reports Raconteur.
Meta recently cancelled its office lease in London, paying £149m for the early exit, as they prioritise investments to adapt to changing work dynamics. HSBC is aiming to reduce its global office footprint by 40% in response to remote work patterns. A survey shows that 50% of large companies with 50,000+ employees are looking to decrease office space due to the impact of hybrid work, leading to increased office vacancies.
Office space vacancies across the UK have risen by 60% since the pandemic began, with projections for further increases. Cost considerations and inflation are driving office relocations, while different regions in the UK show varying levels of resilience in office demand.
High-quality office spaces with modern amenities, technology, and environmental credentials are in high demand, even as overall vacancies rise. Companies still value high-quality office spaces in desirable locations for talent attraction and retention, suggesting that the office will remain a crucial part of future working habits despite the rise of hybrid work. Read more.
Productivity with AI could shorten work weeks
JPMorgan CEO, Jamie Dimon says AI could bring a 3½-day workweek, reports Make it CNBC. Already being used by thousands of employees at his bank, he predicts AI will usher in the norm of a shortened workweek.
“Your children are going to live to 100 and not have cancer because of technology,” said Dimon. “And literally they’ll probably be working 3½ days a week.” Dimon says the bank’s investments in AI “will add huge value” and is being leveraged across the firm’s research, trading, customer service and other functions. When asked if the technology is likely to replace some bank jobs, he responded that “of course” it will, but that “technologies always replace jobs.” Read more.
CBRE says obsolete office conversions offer lifeline for London residential market
The conversion of vacant London offices could create 28,000 homes in London at a time when the new homes pipeline is reaching a critically low level, reports CBRE. CBRE’s analysis of historic sales rates finds the stock of unsold homes in London could be absorbed in two years. Applying this to the total pipeline of homes, CBRE suggests there is an approximate lifespan of six years’ worth of supply across the UK capital.
CBRE says there is a partial solution in converting existing office stock, which it describes as a major opportunity to add housing and partly respond to the shortfall. At the same time it would help solve increasing difficulty filling secondary offices space as a flight-to-quality trend continues.
Scott Cabot, head of residential research at CBRE, said that market conditions are making office owners consider conversion to residential more. “The risk of stranded offices that no longer meet occupier needs or proposed regulatory requirements is pushing the repurposing of these assets to the forefront of investors’ minds, and we are already seeing some evidence of this. “Our data shows that between the start of 2022 and the end of May 2023, around £1.3 billion worth of Central London office stock had been purchased with the intention of converting it to another use, and there’s more under offer. While only a small percentage of this stock has been allocated to residential use, it does highlight that investors are increasingly pursuing the opportunity to convert obsolete offices.” Read more.
Over 80% of CRE companies increasing technology budgets despite challenging market
Commercial real estate occupiers are willing to put their money where the tech is, according to new research data from JLL’s 2023 Global Real Estate Technology Survey.
91% of occupier respondents are willing to pay a premium for tech-enabled space as they look to technology for strategic value and increased revenue. In fact, real estate tech budgets are set to grow faster than investments in headcount, footprint and operating budgets.
JLL’s research finds that AI as well as sustainability tools will account for the largest share of increases in technology budgets, underscoring the business and regulatory pressures driving the race to net zero. “Organizations are shifting their tech priorities from cost reduction to strategically improving their business,” said Sharad Rastogi, CEO of Work Dynamics Technology. “Occupiers are looking for technology that helps increase revenue, enhance business decision-making and improve their sustainability metrics.” Read more.
The importance of getting hybrid work policies right
Hybrid work could be a win-win — if employers handle it right, reports Business Insider. There’s a way to structure hybrid policies that keep employees productive, Gallup found.
Managers should explain the rationale behind return-to-office policies and, striking the right balance, can help workers find a better work-life balance. When managers fail to communicate why they enacted hybrid strategies that may not consider the preferences and needs of employees, productivity and team culture may erode.
“Too often, leaders get locked into only focusing on mandating the perfect policy and do not put enough work into ensuring the manager and team are empowered to make smart adjustments to the policy that support how they best work,” Ben Wigert, Director of research and strategy, workplace management at Gallup, told Insider. “When teams are not empowered to collaboratively tailor their hybrid work approach within a set of guidelines, they tend to feel like the rules are being forced upon them—even if leaders actually intend to provide guidelines that make hybrid flexibility possible and more effective,” Wigert said. Read more.