Big buildings move slowly
It is a truth universally acknowledged that artificial intelligence will change everything. In the next few decades, the world will become intelligible, and in many ways, intelligent. But insiders suggest that the world of big office real estate will get there more slowly – at least in the world’s major cities.
The real estate industry in London, New York, Hong Kong and other world cities moves in cycles of 10 or 15 years. This is the period of the lease. After a tense renewal negotiation, and perhaps a big row, landlord and tenant are generally happy to leave each other alone until the next time. This does not encourage innovation, or investment in new services in between the renewals. There are alternatives to this arrangement. In Scandinavia, for instance, lease durations are shorter – often three years or so. This encourages a more collegiate working relationship, where landlord and tenant are more like business partners.
Another part of the pathology of major city real estate is the landmark building. With the possible exception of planners, everyone likes grand buildings: certainly, architects, developers, and the property managers and CEOs of big companies do. A mutual appreciation society is formed, which is less concerned about the impact on a business than about appearing in the right magazines, and winning awards.
Outside the big cities, priorities are different. To attract a major tenant to Dixons’ old headquarters in Hemel Hempstead, for instance, the landlord will need to seduce with pragmatism rather than glamour.
Tim Oldman is the founder and CEO of Leesman, a firm which helps clients understand how to manage their workspaces in the best interests of their staff and their businesses. He says there is plenty of opportunity for AI to enhance real estate, and much of the impetus for it to happen will come from the employees who work in office buildings rather than the developers who design and build them. Employees, the actual users of buildings, will be welcoming AI into many corners of their lives in the coming years and decades, often without realising it. They will expect the same convenience and efficiency at work that they experience at home and when travelling. They will demand more from their employers and their landlords.
Christina Wood is responsible for two of Emap’s conferences on the office sector: Property Week’s annual flagship event WorkSpace, and AV Magazine’s new annual event AVWorks, which explores the changing role of AV in the workspace. She says that “workspaces are undergoing an evolution that increasingly looks like a revolution, powered by technology innovation and driven by workforce demands for flexibility, connectivity, safety and style.”
Buildings should be smart, and increasingly they will be. Smart buildings will be a major component of smart cities, a phenomenon which we have been hearing about since the end of the last century, and which will finally start to become a reality in the coming decade, enabled in part by 5G.
Buildings should know what load they are handling at any given time. They should provide the right amount of heat and light: not too little and not too much. The air conditioning should not go off at 7pm when an after-hours conference is in full flow. They should monitor noise levels, and let occupants know where the quiet places are, if they ask. They should manage the movement of water and waste intelligently. All this and much more is possible, given enough sensors, and a sensible approach to the use of data.
Imagine we are colleagues who usually work in different buildings. Today we are both in the head office, and our calendars show that we have scheduled a meeting. An intelligent building could suggest workspaces near to each other. Tim Oldman calls this “assisted serendipity”.
Generation Z is coming into the workplace. They are not naive about data and the potential for its mis-use, but they are more comfortable with sharing it in return for a defined benefit. Older generations are somewhat less trusting. We expect our taxi firm to know when we will be exiting the building, and to have a car waiting. But we are suspicious if the building wants to know our movements. Employees in Asian countries show more trust than those in France and Germany, say, with the US and the UK in between.
RPA and helpdesks
Robotic process automation, or RPA, can make mundane office interactions smoother and more efficient. But we will want it to be smart. IT helpdesks should not be rewarded for closing a ticket quickly, but for solving your problem in a way which means you won’t come back with the same problem a week later – and neither will anyone else.
That said, spreadsheet-driven efficiency is not always the best solution. Face-to-face “genius bar”-style helpdesks routinely deliver twice the level of customer satisfaction as the same service delivered over the phone, even when they use exactly the same people, the same technology, and the same infrastructure. There is a time and place for machines, and a time and a place for humans.
Rolls Royce is said to make more money from predictive maintenance plans than it makes by selling engines. Sensors in their engines relay huge volumes of real-time data about each engine component to headquarters in Derby. If a fault is developing, they can often have the relevant spare part waiting at the next airport before the pilot even knows there’s a problem. One day, buildings will operate this way too.
The technology to enable these services is not cheap today, and an investment bank or a top management consultancy can offer their employees features which will not be available for years to workers in the garment industry in the developing world. There will be digital divides, but the divisions will be constantly changing, with laggards catching up, and sometimes overtaking, as they leapfrog legacy infrastructures. China is a world leader in smartphone payment apps partly because its banking infrastructure was so poor.
Accelerated by Covid
Covid will bring new pressure to bear on developers and landlords. Employees will demand biosecurity measures such as the provision of air which is fresh and filtered air, not re-circulated. They may want to know how many people are in which parts of the building, to help them maintain physical distancing. This means more sensors, and more data.
The great unplanned experiment in working from home which we are all engaged in thanks to covid-19 will probably result in a blended approach to office life in the future. Working from home suits some people very well, reducing commuting time, and enabling them to spend more time with their families. But others miss the decompression that commuting allows, and many of us don’t have good working environments at home. In the winter, many homes are draughty, and the cost of heating them all day long can be considerable.
Tim Oldman thinks the net impact on demand for office space will probably be a slight reduction overall, and a new mix of locations. There are indications that companies will provide satellite offices closer to where their people live, perhaps sharing space with workers from other firms. This is the same principle as the co-working facilities provided by WeWork and Regus, but whereas those companies have buildings in city centres, there will be a new demand for space on local High Streets.
Retail banks have spotted this as an opportunity, a way of using the branch network which they have been shrinking as people shift to online banking. Old bank branches can be transformed into safe and comfortable satellite offices, and restore some life to tired suburban streets. Companies will have to up their game to co-ordinate this more flexible approach, and landlords will need to help them. They will need to collect and analyse information about where their people are each day, and develop and refine algorithms to predict where they will be tomorrow.
Some employers will face a crisis of trust as we emerge from the pandemic. Millions of us have been been trusted to work from home, and to the surprise of more than a few senior managers, it has mostly worked well. Snatching back the laptop and demanding that people come straight back to the office is not a good idea. Companies will adopt different approaches, and some will be more successful than others. Facebook has told its staff they can work from wherever they want, but their salary will be adjusted downwards if they leave the Bay Area. Google has simply offered every employee $1,000 to make their home offices more effective.
The way we work is being changed by lessons learned during the pandemic, and by the deployment of AI throughout the economy. Builders and owners of large office buildings must not get left behind.