JLL’s perspective on top 10 global corporate real estate (CRE) trends for 2016

Top 10 Global CRE Trends for 2016

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CORPORATE SOLUTIONS RESEARCH

Threats

Ownership

Convergence

M&A

Experience

Coworking

Digital Drive

Data Intelligence

Sustainability

Cities of the Future

2 Copyright © JLL 2016 - Corporate Solutions

Greatest risks to business over the next 6-12 months

Impact of cyber attacks increased(Oct 2014 - Oct 2015)

110010100110101010100011DoS

18%increase inaverage impact of cyber attacks

56%increase in politically motivated cyber attacks

100%increase incriminal targeted attacks

Source: Control Risks, RiskMap 2015

Balancing risk and transparency

29% increased global and regional political instability

24% increased volatility in commodities and curencies

23% economic and political situationin the Eurozone

18% slowing growth in key emerging markets

6% timing and pace of interest rate rises in the US

Source: Capital Confiedence Barometer, EY October 2015

Source: JLL Global Real Estate Transparency Index 2014

Transparency improved in over

80% of marketssince 2012, however

41 countries (out of 102) have low transparency or are opaque

Threats:Security, risk and transparencyElevated geopolitical risk, security concerns and volatility will impact CRE policies and strategies


Source: JLL Global Corporate Real Estate Trends 2015 Source: Gallup, How Employee Engagement Drives Growth 2013

High expectation from C-suite to improve worker productivity

ImprovePEOPLE productivity

ImproveBUSINESS productivity

ImproveWORKPLACE productivity

ImproveASSET productivity

4%

8%

8%

8%

20%

No expectation

31%

32%

32%

76%

61%

60%

60%

Moderate expectation High expectation

Base: 277 respondents

Source: JLL Global Corporate Real Estate Trends 2015

Impacts of high level of employee engagement

HR and CRE integration is increasing

Current In 3 years

34%

6%

36%Ad-hoc/project basis

Frequent interaction but separate divisions

Shared servicesintegration

40%

19%

25%

HR

22%increase inprofitability

21%increase inproductivity

Convergence:HR, IT (digital solutions) and CRE strategies convergeCloser integration between Human Resources and Real Estate as CEOs demand performance


Source: JLL, WGBC Health, Wellbeing & Productivity in Offices: The next chapter for green building 2014

*design based on the concept there is an instinctive bond between human beings and other living systems and the wider natural environment

Experience:Its all about User Experience (UX)CRE & FM will continue to enhance user experience

76% of respondents from JLL’s Global Corporate Real Estate Survey, report high expectations from leadership to enhance workplace experience over the next three years

10-25% 23% 11% 3% 18%Better mental functionand memory

Productivity increasesfrom better lighting

Productivity increasesfrom better ventilation

Productivity increasesfrom individualtemperature control

More productiveworkers in daylight

Happy employees have, on average, 31% higher productivity;their sales are 37% higher - their creativity is three times higherSource: https://hbr.org/2012/01/positive-intelligence

Look and feel, sensory triggers

Quality views and Biophilia,*noise and acoustics

Interior layout and active design, access to amenities

Indoor air quality, day lighting and lighting, thermal comfort

Building design features that are known to have positive impact on the health, wellbeing and productivity of office building occupants

Wellness and Well-being

Source: WGBC, The Business Case for Green Building Note: Operational cost and productivity benefits of LEED certified buildings


Digital Drive:Technology transforms organisations, Real Estate and PEOPLEThe ubiquity of digital and third platform technology will have a profound impact on real estate and its users

By 2020, total mobile subscription is expected to reach 9.2 billionSource: Ericsson Mobility Report

“From the dawn of civilization until 2003, humankind generated five exabytes of data. Now we produce five exabytes every two days…and the pace is accelerating.”

Google Executive Chairman Eric Schmidt

Number of devices in use (in billions) by 2018

The Internet of Things

Tablets

Smartphones

Personal Computers2004 2018

Wearables

Smart TVs

Source: HBR – “Digital Ubiquity How Connections, Sensors and Data Are Revolutionizing Business”

Organisation Building Workplace

Human cloud, dispersed,mobile, embedded culture of outsourcing

Smart, cost effective, efficient, attract smart talent

Productive, flexible, virtual collaboration, coworking,on demand workplace

Implications


Sustainability:Building a sustainable future for CREWith COP21 setting ambitious goals for sustainable real estate, our industry will need to respond with aggressive operational and strategic plans

Source: http://climateaction.unfccc.int/cooperative-initiatives

COP21LIMITING GLOBAL WARMING TO BELOW 2˚C THIS CENTURY

ENERGY ACTION AND EFFICIENCY

RENEWABLE ENERGY

CARBON PRICE INNOVATION EMISSION REDUCTION

Commitments To Action

51%

CRE Response:

51% of respondents from the JLL Global Corporate Real Estate Trends

2015 cited growing pressure fromthe C-suite to drive the corporate

sustainability/CSR agenda

Source: JLL Global Corporate Real Estate Trends 2015

Coworking

Retro

fitex

istin

gas

sets

Inte

llige

nt b

uild

ing

syst

ems

Zero energy buildingsVirtual workmodel

Improve operationalperformanceFlexible building

design

Harness big data

Collaborativeworking

Renewableenergy use

Live work campuses


Ownership:Own vs lease in 2016?Corporate disposals are at record highs, but lease accounting will alter portfolio strategies and decision making at the board level

The criteria for deciding whether to lease or own real estate will be re-examined by large corporations

Source: JLL,Global CRE Trends 2015

Source: JLL, Raising Capital From Real Estate, 2015

Lease accounting standard

All leases will come on to company balance sheets

potentially shifting the balance toward

ownership

40% of CREleaders reported

increasing demands to

raise capital through the real estate portfolio

Corporate disposals

reach highest point in

8 years

OWN vs LEASE


M&AM&A is business as usual for CREWith M&A volumes at record levels it is a crucial area of value of CRE

Source: JLL Successful M&A: capturing value through real estate 2015, Intralinks Deal Flow Predictor 2015

How?

Turning your real estate into a factor of success:

1 2 3 4 5Start thinking about RE at the earliest opportunity

Manage confidentiality requirements

Speed is crucial to maximise value

Build a RE solution fully aligned with the acquisition strategy and objectives

Adopt an integrated approach and resource appropriately

MITIGATERisks

OPTIMISECosts

ACCELERATEOperationalStrategy

ENSURESuccessfulIntegration

59% of global senior executives expect to pursue acquisitions in the next 12 months

The global number of announced M&A deals in Q1 2016 will be approx. 7% higher y-o-y

CRE can help create value for companies throughout the M&A lifecycle

Coworking for corporatesCorporate clients are embracing coworking to drive innovation and growth and meet CRE strategic plans (reducing footprint + increasing employees satisfaction and growth)


Source: JLL

The number of coworking spaces worldwide grew to 7,800 in 2015 compared to3,400 in 2013

The number of members using coworking space is predicted to reach 1 million by 2018

Key expectations from coworking members: Sharing Knowledge (68%), Brainstorming or sharing new ideas (60%), Sharing opportunities for new jobs or projects (55%)

Source: DeskMag,The Global Coworking Survey 2015

InternalCollaborationInternal coworking for employees only

CoworkingMembershipExternal coworking membership for employees only

ExternalCoworking Space

Collaboration space for employees shared with external organisations/individuals in an external coworking environment

InternalCoworking SpaceInternal coworking space open to organisations/individuals


Data Intelligence:Data & Analytics are transforming decision makingIntegrated business intelligence will optimise CRE performance

Source: Mind the data gap: Aspiration vs. reality in corporate real estate, Forrester Consulting on behalf of JLL, 2014, JLL Global Corporate Real Estate Trends 2015

52%

56% 2017

57% of respondents surveyed globally will enhance their company's data gathering capabilities (over the next 1-3 years)

Use of data and analytics Aspiration vs Reality

Lack of effective data and analytics tomeasure insights Top constraint hindering CREfrom enhancing itself as a strategic value-add

Aspirations could be curtailed by current capabilities

Addressing gaps in people and process is critical

Having the right people, process and technology in place fundamentally drives data and analytics

33% need training to understand proper usage and application of data and analytics

31% have trouble accessing data necessary to make decisions

28% Today


Cities of theFuture:New urban hubsare boosting CREopportunities26% of firms with revenueabove US$1 billion, basedin ‘Emerging World Cities’,potentially reaching 50%by 2025

Source: JLL Globalisation and Competition: The New World of Cities 2015

Emerging world cities will transform CRE portfolio strategy

Established World Cities – ‘The Big Six’New York • London • Paris

Tokyo • Hong Kong • SingaporeEmerging World Cities

New World CitiesMunich • Oslo • Vancouver

Barcelona • Denver • Brisbane

FutureChallengers

SeoulSydneyToronto

NearlyEmergedShanghai

Beijing

CompetitiveMegacities

IstanbulKuala Lumpur

TaipeiMexico City

Agile Higher-Quality Emerging

ShenzhenGuangzhou

DubaiBangalore

High Potential/Weakly Governed

MumbaiManilaJakarta

LaggingMegacities

DhakaLagos

Karachi

Implications and Key Recommendations for CRE

Portfolio:

IMPLICATIONS KEY RECOMMENDATIONS

Workplace:HR and CRE convergencemeans User Experience isbecoming preeminent

Strategy:Digital transformation is changing corporate strategy AND the form and function of Real Estate

Platform:CRE processes andskills need to evolveto meet emergingchallenges

Reevaluate...your footprint and increase its flexibility to manage volatility and change

Redesign...your workplace to improveuser experience andproductivity

Digitize...your processes andplatform to meetthe expectations oftomorrow

your CRE strategy toalign with new operationalrealities and enhancesustainable growth

Increasingly fluid portfolios are calling for dispersed, diverse Real Estate

Redefine...


Contact us

Tom CarrollHead of EMEA Corporate [email protected]+44 (0)20 3147 1207

Marie PuybaraudGlobal Head of Corporate [email protected]+33 (0)632 879 748

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IF YOU WOULD LIKE TO DISCUSS FURTHER, PLEASE CONTACT US

Karen WilliamsonAssociate Director – EMEA [email protected]+44 (0)20 3147 1197

Richa WaliaSenior Analyst – EMEA [email protected]+44 (0)20 3147 1861