| Major
shake up in corporate real estate investment and management warns Futurist
Dr Patrick Dixon warned Corenet Global delegates that the
Corporate Real Estate industry is being rapidly overtaken by events. Watch video (2002).
“With large corporations disappearing in a week, the world
is changing up to a hundred times faster than most real estate companies,
and many players will not survive. Expect huge consolidation among
medium to large real estate players, while numbers of smaller companies with
local niche expertise will grow.”
At the same time a huge amount of private equity is now chasing real estate investment - especially in the premium commercial market where capital growth can be high in cities like London and New York despite falling rental income. Middle East oil wealth has traditionally found a home in major real estate deals, providing a safe refuge against unstable oil prices: a process accelerated by rising oil revenues.
Future of corporate real estat industry - global real estate trends video
Dr Patrick Dixon lecture to Corenet on corporate real estate trends - conference speaker China looking at regional real estate investment.
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Slides of Corenet
Global real estate presentation
One
hour realvideo of Corenet Shanghai China keynote speech
He pointed out the real estate chaos created recently by mergers,
acquisitions, bankruptcies and post 11/9 security fears:
“In 2001 a total of 1,492,129 businesses in America alone
filed for bankruptcy– an all time record – broken again
in early 2002 - while 9,265 US corporations changed status in a
single year, merging assets of $1.4 trillion. All this impacted
corporate real estate investment, HQs, and factory sites, and country offices. At the same time hundreds
of organisations have reduced numbers of essential personnel in
single locations. We have seen similar patterns in Europe.”
Old-style HQs create problems in real estate management
Dr Dixon raised fundamental questions about the future of old-style
HQs.
“All corporations have to change faster than ever –
and buildings are their most inflexible resource. Large fixed, corporate
HQs belong to the last century. New mergers are complete before
you finish a new HQ for the last one. Country operations open and
close before you’ve bought the land. Whole organisations rise
or fall in a month. Real estate equirements are constantly changing. New technologies
and standards shorten building life to less than 15 years.”
Despite all this Dr Dixon expects the number of mega-HQs to grow,
in line with the growth of super-corporations – and the number
of embarrassing real estate investment mistakes.
“Ownership forces businesses to tie up valuable real estate capital.
What kind of business are you in anyway? Property speculation or
provision of goods and services? Releasing real estate capital gives flexibility
and can increase returns and we’ll see far more of it.”
But Dr Dixon predicted that lease-back of corporate real estate would mean even greater
performance pressures, as markets expect the same or higher returns
in future, and may be a one-way ticket, with investors unwilling
again to take a big hit on working capital and return on equity.
Most new offices totally unsuited to next generation
technology
Dr Dixon warned that most offices being built today are totally
unsuited for the next wave of new technology with web-enabled real
estate management, flexible internal environments, wireless working,
home working, everywhere mobile, and video on desk tops.
“The current fad of open plan offices is a future nightmare
for video links – it’s too noisy, you can’t control
the lighting and it’s visually distracting. Forget the net
– another last century idea. Forget landlines and switchboards.
Think instead of complete wireless environments where everyone will
have up to two megabits per second online connectivity all the time
in their pockets. That’s enough bandwidth to run a couple
of videoconferences as well as an office switchboard. It will change
how we think as well as how we work. Think of a world where huge
video walls are running 24 hours a day at almost zero cost, uniting
teams in different countries.”
Cities rule OK – so long as you’re
twenty minutes from the plane
“Big cities will continue to draw large companies like magnets,
with their large pools of talent. People attract people. London
has grown by a million over a decade. Being no more than 15-20 minutes
from a large airport hub will be a number one factor for CEOs and
senior executives who are already spending six weeks or more a year
at 35,000 feet.”
The future is integration of real estate into
the heart of corporate strategy – while also contracting out
more
“Corporations will try to contract out even more when it comes to real estate investment and property management, but will
be constantly looking for value and arguing on price. We will see
new global real estate players, with many creative alliances and
partnerships to get round the problem of quality service in many
different locations and cultures. Real estate companies need to
think globally but only a few will succeed. Managing client relationships
will become very complex.
“IT, HR and Real Estate are three critical areas that until
now have often been separately managed and poorly represented at
board level. In future all three will have to work far more closely
together, also integrating outsourced activity. Expect real estate
issues to become totally integrated at board level into strategic
thinking, with direct reporting to the highest levels, as the process
of contracting out becomes more mature.
Values revolution will have huge impact on
real estate investment, development and management
Finally Dr Dixon predicted that real success in future would only
come by “doing great things in the right way – building
a better world for customers, workers, communities, shareholders
and nations as a whole”.
“Get ready for a values revolution that has the power to
destroy large corporations in a week as a result of bad publicity.
Corporations are already struggling to keep pace with new expectations
– for environment, corporate governance, working conditions
and staff integrity.
“Real estate companies feed on the crumbs off the table of
corporate profits – and those crumbs can be big. But watch
out: how those companies made those profits will come under far
greater scrutiny, and that means the ethics and practices of all
real estate companies will also be in the firing line.
“Take a textiles company already on notice because of allegations
of child labour in a factory in India. What happens if CNN finds
out that three children under the age of ten were killed last month
working on the building site of the new country HQ in Cambodia?
What happens when news breaks of a big fat back-hander given to
a government minister to get planning permission?
“Real estate companies need to be cleaner than clean, whiter
than white, more legal than legal, with total transparency and commitment
to the community as well as to the environment – seeking to
build a better world.”
Slides of Corenet
Global real estate presentation
One
hour video of Corenet Shanghai China keynote speech on real estate investment, corporate real estate and property management trends
• Dr Patrick Dixon is often described as Europe’s leading
Futurist. He is author of twelve books including Futurewise and
is Chairman of Global Change Ltd.
• Interviews: patrickdixon@globalchange.com or mobile: 00
44 (0) 7768 511 390
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