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edgethe occupier

FALL EDITION 2015

Insights and Trendsfrom Cushman & Wakefield’s

Global Real Estate Experts

Change for the Best ................................................................................................................. 3

M&A: Getting the Real Estate Right ..................................................................................4

Brexit: Could the UK Leave the EU? .................................................................................. 5

Executive Communication Techniques.............................................................................6

Oil & Gas CREs Face Unique Challenges .........................................................................9

World War for Talent ............................................................................................................. 10

Sustainability: Can it Give Occupiers an ‘Edge’? .........................................................13

The Future of the TMT Workplace ................................................................................... 14

Flexible Offices Come of Age ........................................................................................... 20

Where in the World? Manufacturing Index 2015 ........................................................22

Real Estate Impacts of Global Urbanization ................................................................24

Table of Contents

2 | Cushman & Wakefield

Change for the BestTrue leaders don’t just track and respond to change, but effect it themselves. Cushman & Wakefield has done just this with the merger of DTZ and Cushman & Wakefield, official on September 2, 2015. On that day, we grew our employee base from 16,000 to 43,000 and expanded to more than 60 countries globally. We created a new company which will be the best, most innovative Occupier services organization possible, leading and changing the industry to the benefit of our Occupier clients.

This issue of Occupier Edge demonstrates one way Cushman & Wakefield successfully keeps corporate real estate executives informed of change, of where our world is going, and how clients can get there now. Our Occupier clients rely on us to help them understand and benefit from change in the real estate markets as well as in their industries. They look to us to provide local and global expertise for today and tomorrow and to support and enhance corporate strategy in a changing business environment. We deliver, and now with exceptional strength in geography, service lines, and infrastructure.

Cushman & Wakefield has a truly international reach in addition to expertise and history in every market. We provide a complete, global suite of integrated services with flexible, committed local teams backed by more resources and a global reach. Furthermore, our larger talent pool provide combined expertise for our clients and these professionals are constantly looking for new ideas to develop and deploy.

I hope you enjoy this inaugural issue of Cushman & Wakefield’s the Occupier Edge. I look forward to bringing the benefits of a truly world-class Cushman & Wakefield to our current Occupier clients, and to building partnerships with new clients.

STEVE QUICKChief Executive, Global Occupier [email protected]

The Occupier Edge | 3

M&A: Getting the Real Estate RightA STRONG DUE DILIGENCE PROCESS PAVES THE WAY FOR M&A SUCCESS

Worldwide volume of merger-and-acquisition (M&A) activity reached $3.3 trillion in 2014 and a reported $1.7 trillion in the first six months of 2015, the fastest pace of transactions in nearly a decade. Some 7,000 transactions closed in the first half of this year, touching every market sector and region of the globe, and M&A experts say the pace of deals is still accelerating.

Corporate real estate departments support these transitions throughout the process. Mergers are frequently catalysts of change, and for many employees some of the biggest changes involve adjusting to new work environments. Before CRE pros can help ensure post-merger integration success, they must first have detailed data on legacy portfolios. The due diligence phase of an acquisition process enables real estate to be one of the drivers for coordination so that companies are aligned on day one.

Data is kingAn accurate picture of owned and leased properties can help companies make informed and better decisions in relation to the newly joined portfolio. In many cases, companies that don’t have a thorough understanding of their own portfolio kick into high gear on data gathering and analysis when an M&A opportunity arises.

Completing due diligence quickly and accurately on a large portfolio can be a monumental task, particularly when data is incomplete or out of date at the start. It takes a robust national due diligence team to provide the 360-degree view that’s needed to ensure correct pricing of real estate assets, calculate the impact of lease liabilities, identify opportunities to monetize excess properties quickly, and realize operational savings in the critical first year.

Armed with this data, CRE leaders can help their companies get quick capital wins and protect against potential financial losses in the short or medium term. Questions such as where regional offices will be located and what workplace efficiencies are possible can best be answered by a CRE team that has the appropriate data and the analytical capability to make value-driven decisions.

Cushman & Wakefield has assisted companies with several M&A due diligence exercises this year, typified by tight timescales and a high degree of confidentiality. These projects often involve mobilizing multinational teams and installing robust program management, using a centralized approach with local experts in the field. Every engagement requires

an approach and reporting format tailored to suit the M&A team’s specific requirements. Common elements include timely reporting, engaging with stakeholders throughout the organization, robust governance and confidentiality requirements.

Whilst property is rarely the driver for occupiers in such transactions, the approach undertaken on real estate during the due diligence process can set the stage for a smooth transition and an ultimately successful M&A process.

ROB HALLSenior Director, Global Occupier Solutions [email protected]

LILIANA STOIANOVAAccount Manager, Global Occupier [email protected]


Brexit: Could the UK Leave the EU?

Brexit Loss of access to the single

market

Positioning of taxes and tariffs on UK exports

to the EU

Increasing costs of doing

business on the EU from the UK

Decreasing occupier

demand in the UK

Reduction in rental values

BR

EX

IT W

OR

ST-C

ASE

SC

EN

AR

IO F

OR

RE

AL

EST

AT

E

Sometime in the next couple of years, the British people are expected to decide whether the UK will continue to be part of the European Union. Known as Brexit (British Exit from the EU), the referendum is expected to be held in 2016 or 2017.

Current polls suggest that the British public will vote to stay in the EU, and less than one in five firms expects a Brexit to occur. But nothing is certain.

The UK government has been unable to win public support for EU reforms in the past, and the vote comes amid increasing public tension over immigration controls, red tape and the powers of the European Parliament. Passage of Brexit could reduce regulation and allow the UK to make trade agreements without approval from the European Parliament.

However, the EU is the UK’s largest trading partner, accounting for half of all exports and 55 percent of imports. Membership in the EU’s single market allows for the free movement of goods, services, people and capital. That has allowed the UK to become

Europe’s foremost destination for foreign direct investment (FDI). Multinationals and investors from the US and elsewhere often choose the UK as the first step toward expansion into the EU.

Brexit could cost UK access to the single market, thus harming its competitiveness. Deutsche Bank and Goldman Sachs have said they would consider relocating London operations to Dublin, Frankfurt, Paris or Geneva.

It’s possible the UK could retain access to the single market without being part of the political union—as Switzerland and Norway currently do.

This is unlikely, however, because the UK would still have to comply with EU regulations on exports and contribute to the EU budget, with no receivables and no voice on future regulations passed in Brussels.

Brexit would most likely result in a clean break, with no access to the single market and a migration of jobs and capital out of the UK and into remaining EU countries, among other detrimental effects. For that reason, the British people are more than likely to reject Brexit. And when they do, C&W professionals in London and 12 other UK cities will breathe a little easier.

SOPHY MOFFATAssociate Director, Central London Agency & [email protected]


DAVID KAMEN Senior Managing Director

CHRIS STAALDirector, Global Real Estate Bose Corporation

MICHELLE MYERVP Americas Real Estate & Facilities Oracle America, Inc.

Thank you both for agreeing to sharing your thoughts on communicating

the organization value of good real estate strategy. Chris, let’s start with your experience

since you started at Bose in 2014. How do you interact with senior management?

Chris: My position was newly created when I started about a year ago. So, my initial

communication function was to introduce senior executives to the idea that real

estate strategy can impact the business. I’ve spent a lot of time talking to our leaders,

to understand what issues they’ve trying to resolve, and where they are in terms of

understanding the role of real estate. And I’ve gotten to understand the dynamics of

the portfolio – the types of real estate assets, locations, cost basis, and other factors – to get

a better idea of what strategies will help drive the business.

The key to getting a seat at the strategy table is in knowing how to communicate with key internal constituents.

Navigating and engaging the C-suite requires corporate real estate directors to discover what ideas and messages will resonate with top executives, as well as the best times and delivery methods to catch their attention. Accomplishing

business initiatives with distributed teams, virtual workforces, and flattened hierarchies requires having outstanding strategic communications abilities. To explore these challenges, Cushman & Wakefield’s David Kamen spoke with Michelle Myer of Oracle and Chris Staal of Bose, two CRE directors who have cultivated effective communications with internal constituents.

Executive Communication Techniques TO GET BUY-IN FOR REAL ESTATE STRATEGY


Since this is new ground for senior executives at your firm, how receptive have they been to your proposals?

Chris: Everything has been extremely positive. The important thing is that leadership is drinking up, if you will, visibility into real estate strategy. If they’re trying to solve X, and a real estate strategy might enable a solution, they’re more than willing to examine that to see how much value it can bring.

Most companies, when they first start looking at real estate as a way to drive value, spend the first

few years focusing on cost reduction. Has that been your experience at Bose?

Chris: The ability to achieve cost savings in the first year has been a key element in the success of the program. We’ve been able to demonstrate value through cost reduction in operations and in transactions, and that helps get people on board with the idea of real estate strategy. Fortunately, Bose’s thinking all along has been broader than cost savings. We have reduced spend, but that’s table stakes – more broadly, we’re making sure that real estate supports the direction the company is taking.

Michelle, I think senior management at Oracle is further along in its understanding of the value of real estate strategy. Is that right?

Michelle: Yes, I feel very fortunate that the most senior executives pay attention to the details of the business and are willing to look at ideas that we have, as long as we don’t waste their time. You have to know what’s important to them and what drives them. And not just at the overall corporate level. These days, it’s all about the needs of each business unit. It’s not one size fits all any more – for every transaction we start with the business unit that will occupy the space, determine what’s important to them in terms of customer base and employee base, and their growth prospects, so we can plan for future expansion.

Do you have an example of a strategy or initiative that required buy-in from top executives, and how you interacted with them?

Michelle: Recently, the CRE team helped to support the rapid growth of one of our sales business units. Their goal was to recruit recent college graduates. Once we understood their business unit objectives – competitiveness, growing our own talent, providing an enticing and fun urban workplace – we worked with them to develop and execute a real estate solution to help them achieve their goals. The cost-effectiveness of different real estate options was balanced with the focus on attracting the right talent.

Having an advocate within the business unit is critical. In this case, we had a strong advocate for bringing about a new workplace. We held ongoing bi-weekly calls to review hiring trends and to educate the business unit on our real estate project process – from the site search process, lease negotiations to design and construction.

Chris, do you have structured interactions the way Michelle does?

Chris: The heads of all support functions within the firm sit on a real estate steering committee to discuss how real estate strategies can help them with their priorities. It’s an opportunity for me to stress-test ideas and to socialize with peers. I have some agenda items and printed materials to spark a conversation, but I make sure the meeting is not ‘Death by Power Point’. These are the most senior executives of the company, so they need to feel like they’re getting something out of these meetings. Most of the time is set aside for dialogue, and after the first couple of meetings it was clear that everyone was very engaged.

Michelle: I agree that you can lose your audience with a long presentation. But PowerPoint can be useful if it’s used correctly. You can tell your story with charts, key messages, maps and photos. If you’re brief and to the point, it’s better than a long written report that executives won’t have time to read.


NOT THE PLACE YOU DO IT

WORK IS SOMETHING YOU DO,

Michelle, workplace strategy typically needs to be communicated well to the employee base. What communication or change-management strategies did you use?

Michelle: We enlisted the assistance of our architect and created a change-management roadmap with key points of communication along the way. For example, we asked the VP to create a message for her team updating them on what to expect in the new work environment. We created materials welcoming the new employees to their environment and identifying how certain spaces should be used.

How did you measure success?

Michelle: We utilized workplace surveys, both pre and post occupancy, to measure our success. We traded individual workstation sizes for more generous collaborative areas throughout the floor. The ultimate measure of success was user satisfaction, as indicated in our post occupancy survey.

Any other words of wisdom on building internal strategic partnerships?

Michelle: Only to emphasize what I said at the start: You have to understand the business objectives before you can propose an appropriate corporate real estate solution.

Chris: It’s important for real estate to be an integrative function. I’m working toward integration with HR, with our leaders in supply chain and distribution, and even R&D and product development teams. I think a lot of companies don’t have strong integration of these functions, but real estate is a natural place to start. Real estate touches every part of a company, and the nature of the business is changing. I remind people that work is something you do, not the place you do it.


Oil & Gas CREs Face Unique Challenges

What’s the current role of real estate departments at oil and gas sector companies?

How does real estate play a role in the war for talent?

What kind of assignments does Cushman & Wakefield perform for oil and gas companies?

What other challenges do oil and gas CREs face?

Real estate is a globally centralized function at all oil

and gas companies, and is part of the Procurement department at approximately 50% of companies. From the survey results we found that 54 percent of CRE departments are consulted on major business decisions, and about one-third have a role in strategic decision-making. Almost all real estate leaders have a well-defined short-term strategy, but just 15 percent said they have good insight into long-term strategy, an issue that many regard as one of their greatest challenges.

They have many of the same issues and priorities as their counterparts in other industries, such as talent attraction and retention, cost containment, safety and security, and getting accurate portfolio data. But oil and gas companies

approach some of these universal issues from a unique perspective.

For instance, better knowledge of future exploration areas around the world would give CREs more time to understand regional variations in ownership structures, overcome language and cultural barriers, and deliver facilities that meet the demanding standards imposed by the sector. In some extreme cases because CREs are expected to complete all “infrastructure” development, including residences, hotels, schools and retail components, before on-site worker hiring can begin. So while every CRE wants to understand long-term strategy better, it’s especially critical in the oil and gas industry. Oil and gas companies also have more rigorous safety and security needs than most industries. In addition, CREs have a major focus on space flexibility due to the volatility of oil and gas prices, which can lead to big fluctuations in headcount.

We have a full range of services and a strong track record of

helping oil and gas companies achieve peak performance and results. We have advised leading companies on location strategy, project management, workplace strategy, portfolio administration, space utilization and integrated facility management. Our success in working with sector real estate leaders has resulted in strong relationships which enabled us to get candid, in-depth participation in the survey. I want to thank all the survey participants for their time in sharing real estate trends across the energy sector.

Survey respondents rated the quality of real estate as a major

factor in attracting talent, more than most industries. Oil and gas companies need to attract STEM (science, technology, engineering and math) workers, so they compete with tech and life sciences companies. But some young people have negative perceptions of the industry, and often you are asking people to work in remote areas with no real amenities outside the company compound. So it’s important that companies offer the most spacious and appealing places to work and live.

JAMES TAYLORDirector, Global Occupier ServicesEMEA Energy Sector [email protected]

LILIANA STOIANOVAAccount Manager, Global Occupier ServicesEMEA Energy Sector [email protected]

Cushman & Wakefield’s new Global Oil & Gas Survey sheds light on macro issues in the sector that drive real estate strategies at the world’s largest oil and gas companies. Corporate real estate (CRE) leaders in the sector shared their insights with Cushman & Wakefield through a combination of survey responses, conference calls and face-to-face meetings. To download the full survey visit cushwk.co/oil-gas.


World War for TalentGLOBAL WORKFORCE IMBALANCE WILL DRIVE CORPORATE STRATEGY IN THE COMING DECADE

Globalization has created, or at least exposed, an imbalance of workers with in-demand skills: There aren’t enough of them in the developed world to meet demand, but in the developing world there are more talented people than jobs.

Some people claim we’re on the verge of a workforce crisis which could jeopardize trillions of dollars of economic output and wealth creation. More likely, companies will resolve the skills gap in the developed world by leveraging skills surpluses elsewhere.

Talent crunch in the developed world The number of unemployed people in industrialized countries exceeds 40 million, yet companies that operate in those countries face a severe shortage of workers with in-demand skills:

Digital skills – Technology and information activities, underpinned by the ‘internet of things’, continue to grow and proliferate.

Agile thinking – Uncertainty and risk associated with greater interconnectedness requires innovation and problem solving.

Communication and interpersonal skills – Collaboration and networking are replacing traditional command-and-control corporate structures.

Global operational skills – globalization requires ability to manage an increasing diversity of people, processes and strategic goals.

Consequently, the need to educate, train and reskill has become a pressing concern for corporates and public policy makers alike in an increasingly competitive world.


Source: Cushman & Wakefield, Oxford Economics, Boston Consulting Group

Technology Manufacturing Business Services

Financial Energy

Western Europe

MENA

North America

Latin America

Developed Asia

Emerging Asia

Eastern Europe

20%

60%

25%

50%

25%

60%

30%

-10%

30%

0%

20%

5%

50%

10%

5%

30%

10%

25%

30%

40%

15%

-10%

30%

-5%

40%

5%

30%

10%

-15%

15%

-25%

20%

8%

20%

10%

4%

30%

8%

30%

15%

40%

15%

The need to educate, train and reskill has become a pressing concern for corporates

and public policy makers alike in an increasingly competitive world.

Demand for talent goes global We see a global shift in the demand for talent, driven in part by demographics and technological interconnectedness. Emerging markets in Asia, Latin America, Africa and Eastern Europe have seen economic gains from fulfilling the West’s low-cost manufacturing needs, and are now ascending the value chain to capture jobs with in-demand skills.

Western Europe is expected to experience much weaker growth, reflecting a relative lack of competitiveness and investment compounded by austerity economics. North America is positioned to do better, driven by technology giants, cheap energy and expanding population. But developed countries around the world will increasingly look to developing nations to fill the gap of workers with in-demand skills.

CHANGING WORLD DEMAND FOR TALENT OVER THE NEXT DECADE


CRE’s role in the global talent warCompanies facing a shortage of STEM workers will increasingly leverage talent in markets with surpluses. The role of corporate real estate departments depends on the approach that companies take to fill the gap.

One common approach is to bring STEM workers to the countries where they’re needed; however, public policy in many countries can limit the use of this strategy. For example, in the US applications for skilled-worker visas, known as H-1B visas, this year exceeded the entire annual supply in the opening week of filing, causing the government to set up a lottery system. Yet, U.S. policy is considered immigration-friendly compared to the policies of some other developed countries.

Another approach is for companies to establish operations in countries with talent surpluses. In many cases, these centers for skilled-worker employment are also good markets for expansion of products and service businesses. As companies increasingly choose this approach to winning the global war for talent, corporate real estate (CRE) departments need more in-depth understanding of developing markets around the world.

Over the past 20 years, CRE leaders have taken on increasingly strategic roles in analyzing foreign markets to identify the best countries for business growth, skilled labor, or both. The importance of accurate information and local expertise can’t be overstated. Whether the focus is on labor characteristics, economic incentives, regulatory policies, cultural issues or regional business practices that can help or hinder offshoring efforts, the ability to tap into local expertise and relationships is paramount to corporate success in the world war for talent.

India

Indonesia

Japan

USA

10%

6%

2%

0.5%

Germany

UK

Brazil

China

7%

5%

1%

-0.3%

GROWTH IN COLLEGE GRADUATES OVER THE NEXT DECADE

Source: Cushman & Wakefield, Oxford Economics, Boston Consulting Group


Advanced education shifts to developing worldJob growth in developing countries is increasingly driven by rising numbers of college educated workers. India, Brazil and Indonesia are amongst the emerging markets with large surpluses of workers with advanced degrees, particularly in science, technology, engineering and math (STEM) fields that are prized by employers. By contrast, many developed countries are experiencing a declining birth rates and aging populations, resulting in fewer college-age workers.

Over the next decade, more than half of the world’s college-educated workers will come from the emerging world—some 200 million new graduates by 2025. China will overtake the US as the country with the largest pool of college educated talent. And eight of the 10 countries with the greatest surpluses over the next decade will be emerging markets.


At its heart, a well thought-out sustainability strategy will:

• Translate the corporate values of the organisation into its day-to-day operations

• Reflect the values and aspirations of your customers and staff

• Acquire and occupy resource-efficient buildings

• Occupy buildings which deliver optimum environments for your staff

At a real estate level, a sustainability strategy should deliver:

• Resource-efficient buildings within a resource-efficient portfolio

• Benchmarks which allow for the comparison of new and existing buildings

• Financial savings across the portfolio

To create a leading sustainability strategy, an organisation needs to have clarity on objectives, targets and benchmarks. In order to deliver improvements, it is necessary to understand the current building performance through the analysis of data. Traditionally, the metrics recorded are energy, waste, water and transport. However, many office occupiers are now measuring metrics related to health and wellbeing.

The World Green Building Council recently produced a new report entitled Health, Wellbeing and Productivity in Offices: The Next Chapter for Green Building, which presents overwhelming evidence that office design significantly impacts the health, wellbeing and productivity of staff.

One of the key barriers to incorporating health, wellbeing and productivity considerations into business decisions has been confusion around what metrics to track. The wellbeing report finds that a range of factors – from air quality and lighting, to views of nature and interior layout – can affect the health, satisfaction and job performance of office workers.

SustainabilityCAN IT GIVE OCCUPIERS AN ‘EDGE’?

The definition of sustainability has changed as occupiers understand of the benefits which result from a focus on sustainability.

This report proposes a simple, high-level framework for measuring organisational or financial outcomes like absence rates, staff turnover and medical complaints. This framework relates the outcomes to the physical features of buildings and employee perceptions.

Many organisations are sitting on a treasure trove of information that, with a little sifting, could yield immediate improvement strategies for their two biggest expenses› – people and places, and the relationship between the two.

ALAN SOMERVILLE Director Head of Strategic Energy & Sustainability [email protected]

PHYSICAL

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Phys

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con

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des Physical conditions and

financial outcomes

Worker attitudes and financial outcomes

SUMMARY OF METRICS FRAMEWORK AND KEY RELATIONSHIPS

Source: WGBC


The Future of the TMT WorkplaceTRANSFORMATION, DISRUPTION AND WORKPLACE STRATEGY IN THE TECHNOLOGY, MEDIA AND TELECOMS SECTOR

When Mervin J. Kelly became president of Bell Labs in 1951, he reconfigured the company’s research facility in Murray Hill, N.J. Kelly – a maverick who had resigned and re-joined Bell Labs twice before becoming president – knew that encouraging interactions among researchers would lead to the development of novel ideas. At Murray Hill, offices were spread along far-reaching corridors, ensuring that physicists, engineers and manufacturing specialists would bump into each other in hallways, if they weren’t already working side-by-side on projects. By the time Kelly stepped down in 1959, Bell Labs had invented lasers and solar cells, laid the first transatlantic phone cable, developed the technologies which enabled the rise of the microchip, and created the foundation for information theory through its pioneering work on binary code systems.


TMT companies make possible

Self-driving cars

Additive manufacturing

Artificial intelligence

Transformation and innovation are essential to survival

in the TMT sector

Technology, media and telecoms (TMT) businesses should take note: The design of physical space can catalyze innovation and create successful organizations. With the pace of technological change accelerating and new sources of competition emerging faster than ever before, the successful TMT players of tomorrow are those that can both drive growth in their existing business units and develop entirely new products and services.

TMT - ‘Totally Meaningless Term?’

A decade ago the phrase ‘TMT’ was beginning to look slightly outmoded – a useful category to lump any business doing something vaguely IT-related into, but hardly a meaningful term that captured the diversity of the businesses it described.

Today, however, companies across the sector are focused on providing the gadgets, apps and infrastructure that we use to communicate and process information. TMT companies are at the frontier of the digital economy, making possible advances like self-driving cars, additive manufacturing and artificial intelligence.

Transformation and innovation are essential to survival in the TMT sector. The challenge of keeping up with the changing demands of consumers and innovations of competitors forces TMT companies to acquire complementary firms, shed underperforming business units and enter new geographic markets. These changes are reflected in the workplaces and real estate requirements across the sector, as firms aim to create work environments that support the development of new products, services and organizational capabilities.

For example, Vodafone is developing an Internet pay-TV service to round out its ‘quad play’ offering of broadband, fixed line, mobile and TV. The headquarters for the new unit will be based in London’s TV triangle in Hammersmith. The talent pool that the new service is drawing from is significantly different to its core telecoms business, and Vodafone has found itself in competition with the likes of Sky, the BBC and Virgin Media for top TV talent.


TMT PLAYERS ARE CREATING WORKPLACES WHERE IDEAS CAN BE DEVELOPED FASTER

CO-LOCATING WITH STARTUPS ALLOWS EMPLOYEES TO RUB SHOULDERS WITH THE ENTREPRENEURS CREATING NEW PRODUCTS

The Changing Role of Workplaces in the TMT Sector

TMT players are creating workplaces where ideas can be developed faster, often alongside customers and partners. AT&T, for instance, has four centers, known as AT&T Foundry Innovation Centers, where its engineers work with outside experts to develop consumer and enterprise products.

In Detroit, where the telecoms company has its Drive Studio, it works with systems integrator Accenture and car manufactures GM, Tesla and Audi on ‘connected car’ solutions. Projects at these centers are completed three times faster than anywhere else within the company.

Accelerator and incubator spaces are becoming increasingly important for TMT players, who recognize that the next big thing is more likely to come from a plucky startup business than an industry incumbent. Wayra, a global network of business accelerator spaces established by Spanish telecoms group Telefonica, has twelve locations across Europe and Latin America. Startups are given access to the space, along with networking opportunities within the telecoms giant, for a three-month period in exchange for an equity investment.

Even if they’re not setting up their own accelerator spaces, TMT companies are locating in areas where they have easy access to the local start-up community. Factory Berlin, a 16,000 square meter co-working campus adjacent to the remains of the Berlin Wall, is home not just to many of the most vibrant members of Berlin’s startup community, but also Twitter, Uber and SoundCloud. Co-locating with startups allows employees at these more established companies to rub shoulders with the entrepreneurs creating new apps and products.


MOVING FROM ALLOCATIONS OF SPACE that rely on ‘one person, one desk’ can UNLOCK SIGNIFICANT SPACE SAVINGS by freeing up under-occupied space

Firm’s use of a serviced office provider should be simple, cost effective and does not require a long term

commitment that either hinders growth or wastes money on unnecessary space

Agile Workplaces and Flexible Real Estate

The accelerating pace of technological change is empowering the rise of disruptive new entrants to the TMT sector and making it increasingly difficult to develop strategies for the long-term. In this context, forecasting workplace and real estate requirements is a significant challenge. Heads of real estate need to understand how they can increase flexibility within their portfolios.

Moving away from allocations of space that rely on ‘one person, one desk’ can unlock significant space savings by freeing up under-occupied space. New business units can be scaled up within existing portfolios, rather than requiring the acquisition of new office space. Some firms are developing relationships with large-scale portfolio owners, to ensure extra space can be taken when needed.

Flexible offices are becoming a core part of property strategies in the TMT sector. The ability to scale up quickly and minimize long-term lease liabilities in a highly volatile

environment is a source of considerable competitive advantage. Wolfgang Gollub, a senior manager at Toshiba, says that his firm’s use of a serviced office provider is ‘simple, cost-effective and does not require a long-term commitment that either hinders growth or wastes money on unnecessary space.’ This is particularly relevant for TMT companies expanding their presence in emerging markets, where finding suitable space can be a significant challenge.

Flexible offices are becoming a core part of property strategies in the TMT sector


TMT players don’t need to dedicate space for gyms,

restaurants and other facilities, as they do in out of

town locations

Cities can act as a testbed for new technologies, business models and applications for

TMT players

Cities vs. Out of Towns

Sprawling out-of-town campuses have been fashionable among the more established TMT companies for a long time. However, a number of pull factors are driving TMT players into locations in the center of towns and cities.

First, a TMT company’s customers, partners and staff tend to be concentrated in urban areas. The sector’s top talent is much younger than in other industries, and gravitate to the lifestyle and amenities offered by city living. John Schoettler, the director of global real estate at Amazon, explains that its new headquarters in the heart of Seattle enables the firm to “attract the type of employee that wants to be urban and live in an urban environment.”

Second, as cities provide amenities like gyms, restaurants and retail within walking distance, TMT companies

don’t need to dedicate space to providing them in their offices, as they do in out-of town-locations. Third, cities can act as a testbed for new technologies, business models and applications for TMT players. The Internet of Things and smart cities are high on the agenda of many technology and telecoms companies – being based in cities enables faster testing and refinement of these technologies.

Enterprise technology firm Salesforce has made a strong commitment to cities in its global real estate portfolio, abandoning plans to build a corporate

campus in out-of-town Mission Bay, despite having already acquired a 14-acre site. In San Francisco, where the company is headquartered, Salesforce will have 2 million square feet of office space by 2017 – including Salesforce Tower, a 61-story tower in which the company is an anchor tenant. Salesforce’s London office is similarly central, located in the city’s financial district alongside many of the company’s clients. Its Paris office is adjacent to the Eiffel Tower.

Customers, partners and staff are all concentrated in

urban areas


The TMT Workplace of the Future

Building 20, the latest addition to Facebook’s sprawling Menlo Park campus, is topped with a nine-acre rooftop park which, claims the tech company’s head of HR and recruiting, gives employees ‘space to think.’

About twenty miles away at Cupertino, Apple is building a new flying-saucer-shaped headquarters that, when completed, will be about two thirds the size of the Pentagon and house more than 12,000 employees. Halfway around the world in Shenzhen, Chinese Internet portal Tencent is building two sky-scraping office towers connected by three horizontal bridge structures – which are themselves large enough to accommodate basketball courts and swimming pools for the company’s employees.

These are not the TMT workplaces of the future. While many in the world of workplace will look to these companies for inspiration, creating world-class workplaces doesn’t require matching the financial resources of Apple or Facebook. Instead, heads of real estate at TMT companies can set in motion a number of processes to ensure they can create successful workplaces.

Heads of real estate at TMT companies need to understand that change in the sector is the new norm. As the products and services that TMT companies create change, so too must their working environments. Flexible real estate strategies and modular

workplaces that can easily be refitted to new roles and workstyles are essential. Property teams should also spend more time scenario planning to increase the agility of their organizations.

With the sources of disruption increasing and M&A activity at a record high, planning for ‘what if’ scenarios – ‘what if we acquire a business of 2,000 people?’, ‘what if our new business unit exceeds growth expectations?’ – will significantly speed up decision making when it’s needed most. More fundamentally, workplace and real estate strategy must be aligned with business strategy. Too often property is siloed from the rest of the business. Without frequent discussions between the property team and the business leadership, companies can’t create work environments to support the aims of the business, and strategy consequently fails.

The environment in which work gets done – as Mervin J. Kelly showed at Bell Labs – is the missing link between strategy and implementation. The TMT companies that realize this now will be the ones that are successful in the future.

Flexible real estate strategies and modular workplaces that can easily be refitted to new roles and workstyles are essential

The Future of the TMT Workplace report, jointly produced by Unwork and Cushman and Wakefield, will be published in November 2015.

OWEN KINGWorkplace Consultant, [email protected]

RICHARD GOLDING International Director, Head of Global Occupier Services UK & [email protected]


“The ability to take up space quickly and minimise long lease liabilities means that Flexible Offices are now an integral element of a company’s property portfolio.”

Will Duncan, Head of Brokin, The Instant Group

“I don’t have to find a space, furnish it, connect IT and all the other things that go into setting up an office. It boils down to the convenience. The Flexible Office is ready-to-work.”

Bill Earnheart, Vice President, Neiman Marcus

“A well-known electronics company makes use of our coworking offering. The company have their main office outside London, and their product design team had an office in Central London. Once their lease ended, they decided to use Club as their London base, which gave them the flexibility to work in both the city and their headquarters.”

Andrea Kolokasi, Head of Club Workspace, Workspace Group

Economics The global financial crisis forced many businesses to reassess their real estate holdings. Office consolidations and closures enabled companies to realise immediate cost savings, while the introduction of flexible working solutions offered long-term strategic benefit. Short lease durations, remote working programs, hot-desking and ad hoc space rental are among the strategies helping firms reduce costs, enhance flexibility and manage uncertainty.

Simplicity With digital commerce easier than ever, consumers expect the same level of immediacy and simplicity across all transactions, including property. Providers of flexible office space have created plug-and-play offices with streamlined check-in processes to help tenants focus on core activities rather than on administration.

Location Global construction fell 5 percent during the global recession, and the effects are still felt today despite renewed development activity. CBD rents in global financial centres have soared more than 10 percent in two years due to low Class A vacancies, combined with a 7 percent increase in suburb-to-CBD commuters in the past decade. Coworking spaces and serviced offices alleviate high occupancy costs and reduce staff travel time.

Flexible Offices Come of AgeThe world of work is changing. Flexibility is sought not only by tech, creative and media companies but also by corporations in every sector. Today, key corporate decision-makers embrace flexible offices for a variety of benefits they bring:



“Using Regus is simple, cost effective and does not require a long term commitment that either hinders growth or wastes money on unnecessary space. Flexible Offices make setting up in a new country low risk and hassle free.”

Wolgang Gollub, Senior Manager, Toshiba Europe

“There is massive potential in our network of offices within corporate real estate. One of our tech customers is moving out of our space in Dublin and transferring that capacity to Singapore and Sydney in a short space of time. The ability to do that is unique, since it is only really possible to do that within one global operator.”

Ben Munn, Director of Enterprise Services, Regus Plc

“Flexible working is central to BT’s competitiveness. Not only does it help us continuously improve our cost base and productivity but it brings important human benefits, such as a better work life balance and underpins the resilience of our business in turbulent times.”

Dave Dunbar, Former Head of Mobility Consulting, BT

“Being in a coworking space has improved my company’s network particularly on the funding side of the business. It has created more connections to venture capitalist funds which is critical for us to expand and grow.”

Chantelle White, Senior Vice President, YouAppi

At a time of global skills shortages when employers are striving to attract and retain the world’s top talent, flexible work strategies can help improve enterprise performance and surmount a range of business challenges.

Growth As multinationals expand into new markets, flexible offices have proven to be effective entry-level solutions, particularly through global office networks with consistent service standards. Regus’ Businessworld and WeWork’s Commons memberships provide customers with access to a global network of offices, accessed via a ‘passport’ system. This enables companies to manage globalisation, mobility, fast-paced growth and risk more effectively.

Advocacy Flexible working has been embraced by national governments as well as private sector companies. In China’s largely traditional business culture, Shanghai has been named a ‘Free Trade Zone’ with relaxed restrictions on work hours and encouragement of flexible work environments. Similarly, the UK government has introduced the right for all employees to work flexibly. These changes not only serve to enhance productivity of existing companies, but also to attract additional multi-national corporations.

Recruitment & RetentionMore than a third of employers globally say talent management is the single biggest challenge facing their business today. A Regus survey found that 72 percent of corporate decision-makers believe flexible working attracts top talent and 74 percent believe it improves employee retention. Remote locations offer employees a balance of main-office space for meetings, and an alternative creative space for solo work.

Networking The flexible office market attracts a diverse tenant mix, and in doing so, connects a variety of complementary services under one roof. Members have access to professional networks, enabling them to introduce their customers to potential partners and customers within their portfolio.


Where in the World?MANUFACTURING INDEX 2015

Malaysia has retained pole position in the 2015 ‘Where in the World? Manufacturing Index’ as its low-cost business environment proves increasingly attractive to manufacturers. The Index also shows the dominance of the Asia Pacific (APAC) region in manufacturing, as the region secures seven of the top 10 spots in the Main Index.

APAC roars on – Malaysia ranks in first position While APAC countries still dominate the top half of the Index, there remains some underlying volatility. Rising labour and operational costs in China – the world’s largest source of manufacturing output – are adding to the attractiveness of lower cost regions such as Malaysia, Indonesia and Vietnam.

Re-shoring to the west is on the rise, benefitting Europe and the USRising global operating costs are contributing to a trend for re-shoring facilities to the West with stronger prospects for the US (ranked fourth) and certain European locations. Supply chain management and perceptions surrounding brand and where a product is produced are also high on a manufacturer’s agenda, adding to the attraction of manufacturing in home markets.

In Europe, Turkey has climbed three places to eighth position. It is positioning itself at the crossroads of Europe, Asia, Russia and Africa, and has benefitted from significant investment in its infrastructure. The UK has also strengthened its foothold, moving into the top half. An increasing number of manufacturers are opting to re-shore facilities, attracted by the higher-end manufacturing capability, science and design skills available in home markets.

Improvement of the US market has been driven by a low risk environment and a stronger energy platform in terms of security and cost. Canada and Mexico also made the top half of the table, finishing in sixth and 14th places, respectively. Mexico continues to absorb a significant proportion of US export-oriented middle- and high-end manufacturing, and is also benefitting from stronger demand for low-end manufacturing as a result of higher Chinese labour costs.

Emerging markets – risk & reward?Companies typically take six months to decide where to locate – collecting and analysing all the necessary data to ensure the right decision is being made. While most corporates remain focused on mature markets, some are attracted to emerging markets for the cost benefits for lower-margin products. For example, Vietnam continues to grow as a manufacturing destination in part due to growth in its retail market, which presents opportunities for retailers and manufacturers of fast-moving consumer goods (FMCG) alike as the sector expands.

ANDREW HEARDChannel [email protected]


“The growing trend for re-shoring is driven by both cost and branding.”

Global Manufacturer

The Index ranks the world’s 30 largest markets in terms of manufacturing output against key criteria which has been pre-weighted. The strongest 15 performers can be seen below.

1 Malaysia

14 13

3

6Canada

20 2

17

11Japan

11 11

18

2Taiwan

Province of China

5 20

9

7Singapore

1 19

19

12Poland

21 15

14

3China

13 16

7

8Turkey

18 26

10

13Philippines

23 22

5

4USA

15 1

16

9Thailand

12 28

11

14Mexico

25 18

8

7 24

12

5Republic of

Korea

24 21

4

10Indonesia

10 4

20

15UK

APAC

EMEA

Americas

Co

nditi

ons

Cost

Risk

Criteria Ranking


Sources: UN; World Bank; McKinsey and Company; RICS

URBAN AND RURAL POPULATIONS, 1950-2030

In 1950, about 750 million people — one-third of the world’s population — lived in cities. Today, the world is coming up on four billion urban dwellers, more than half the people on the planet. That’s a worldwide urban expansion of 3.2 billion people in 65 years.

Real Estate Impacts of Global UrbanizationAS THE WORLD’S POPULATION RISES AND BECOMES INCREASINGLY URBAN, HOW ARE CITIES TO COPE WITH GROWTH?

Worldwide population growth is on pace to add another one billion people by 2030, and cities will absorb all the growth while worldwide rural population will remain flat. Just seven countries will account for half of this growth to 2030 – India, China, Nigeria, Indonesia, USA and DR of the Congo.

Understanding these trends can help corporate real estate executives make better real estate decisions ranging from regional office locations to supply chain operations. Issues to consider include:

More million-plus citiesIn the next 15 years, 140 cities worldwide will cross the one million population mark, resulting in an estimated 558 cities with populations of one to five million. For multi-national companies, the proliferation of large cities can lead to greater opportunity as well as more intense global competition for customers and employees.

Eastward shift in GDPA majority of the anticipated new million-plus cities are located in Asia, and the epicenter of economic growth is moving eastward as well. A study by McKinsey and Company found that half the world’s gross domestic product (GDP) in 2007 was generated from just 600 cities, rising to an estimated 60 percent by 2025. But the makeup of those top 600 cities is changing—a third of cities in developed economies will fall off the list of top GDP producers in the next decade, replaced by cities in China and India. Despite its recent market shakeup and readjustment of its growth targets, China is expected to be a major engine of growth for the foreseeable future.

1950 1970 1990 2010 2030

Rural population

Urban population

30%

70%63% 57%

48% 40%37% 43%52%

60%


McKinsey and Company: 600 global cities generated half of all world GDP in 2007, rising

to 60 percent by 2025

As cities increase in size and global importance, the need for comprehensive real estate expertise increases. Cities are the centers of commerce, education and governance, and to thrive in a competitive global economy, governments need expertise in areas such as land planning, project management and property management. And companies are pursuing ways to use space more effectively, as evidenced by the wave of Chinese companies implementing workplace strategy to improve collaboration and innovation.

It is clear that the global urban landscape will continue to change rapidly in the future. Population growth and demographic shifts are contributing to a broad trend of rising GDP and job growth opportunities in developing nations, compared to relatively flat populations and economies in many developed nations. Corporate real estate leaders can add significant value to strategy discussions by anticipating what these trends mean to the war for talent and the ongoing battle for competitive market share.

Developing nations have the workersThere will be a 310 million increase in working-age people in the world’s top 600 cities by 2025, of that 295 million will be in developing regions. And this trend is seen across entire countries. For example, Japan is forecast to endure a 7 million population decline between 2010 and 2030, during which time senior citizens will grow from 23 percent of the population to nearly one-third. At the same time, the bloc of 10 Association of Southeast Asian Nations (ASEAN) countries will see a 25 percent increase in working-age population, adding 93 million potential employees.

CBD expansion Expanding economies require increased office development. Asia’s entire office inventory is expected to increase by nearly 60 percent in the next five years, adding 57 million square meters. European office stock is forecast to increase by just 8 percent, but since its base is three times larger than that of Asia Pacific, that still equates to 21 million square meters of new space. Some growth cities will need to get creative to accommodate increasing space demand; for instance, both Hong Kong and Singapore have vacancy rates in the 6 percent range, with limited CBD expansion space available.

DOMINIC BROWNHead of South East Asia / Australia and New Zealand [email protected]



SANJAY VERMAHead of Global Occupier Services, [email protected]

JAMES MADDOCKHead of Global Occupier Services, [email protected]

STEVE QUICKChief Executive, Global Occupier [email protected]

CONTACTS

For more information please contact:

@CushWake www.twitter.com/cushwake

Cushman & Wakefield www.linkedin.com/company/cushman-&-wakefield


Copyright © 2015 Cushman & Wakefield. All rights reserved.

About Cushman & Wakefield

Cushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm’s 43,000 employees in more than 60 countries provides deep local and global insights that create significant value for occupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms in the world with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facilities services (branded C&W Services), global occupier services, investment management (branded DTZ Investors), tenant representation and valuations & advisory. To learn more, visit www.cushmanwakefield.com or follow @Cushwake on Twitter.

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