Archive for the ‘Technology’ Category

Are Savings Just Thin Air?

Thursday, April 25th, 2013

On a trip back to Scotland a couple of weeks ago, what jumped out at me was how much better the air quality was in comparison to Hong Kong.

This is far from a new topic, but realistically how do we address air quality in emerging Asia? In thinking of the interest groups and stakeholders involved this reminded me of the dilemma originally raised by ecologist Garrett Hardin. His theory tackled the socio-economic dilemma of a group of individuals when sharing a common resource. Known as “the tragedy of the commons,” this theory can be applied to a myriad of scenarios when society shares a common resource – in this case the wider environment.

In its simplest sense, the theory references the practice of medieval common grazing by herdsmen for their cattle. It goes something like this. Any single herder will have a personal motivation to add one more cow to his herd, because even if the results of adding additional cattle to his herd cause overgrazing and damage to the pastures, the herdsman receives all the economic benefit of adding those additional cattle, whilst the damage to the lands is shared by all.

Now, I’m not going to solve the air quality issues in Hong Kong in 500 words, but what is clear is that we all have a stake and responsibility in tackling these issues and this applies as much to real estate professionals just like myself. With a significant proportion of energy consumption being taken up by real estate, globally we have a duty and a responsibility to drive forward change to improve the impact we have on our “pastures.”

Now what Hardin did not address in his paper was technology. Technology provides solutions to problems. Yes we can legislate, but the winning argument in relation to real estate in this debate in my mind is simply the bottom line. When businesses start to see the savings and benefits to their bottom line of adopting more sustainable new technologies in real estate, adopting new best practice will just become the natural course. Technology is already moving fast and the real estate industry has some brilliant technologies at hand already.

The savings from sustainability are very real, not just on the impact we have on our “pastures” but on the bottom line. A great example is our new LEED Platinum office in Hong Kong. Our new office consumes 13% less energy per sq ft and better air quality has greatly improved the environment, indeed we’ve seen a 32% reduction in absenteeism.

I’m not saying technology has all the solutions now and that the payback times and the investment are not prohibitive at times. However, what is true is that the more it’s adopted, the more the costs will come down making it a more viable option.

A project we undertook in New York on the Empire State Building is a great example of how savings can be made even today. Not only did we deliver a project to improve sustainability which would pay for itself in three years by saving US$4.4m per annum in energy savings, the energy reduction and thus the impact on the planet, was in the region of 38%.

So the lesson is this, not only is the technology here to save us from a similar “tragedy of the commons,” but it’s improving every day. The savings to the bottom line are real and it’s up to us as real estate professionals to promote best practice in our industry. We can’t solve transport and factory pollution; however, with a little effort from all stakeholders, there will be some very tangible benefits for the wider environment and also the bottom line of developers, tenants and landlords – our clients.

About the author
Roddy Allan is a Director, Asia Pacific Research for Jones Lang LaSalle, based in Hong Kong.

Posted in Affordability, Air Quality, Asia Pacific, Asia Pacific Economy and Property Markets, Commercial Property, Corporate Real Estate, Economic Research, Economy and Real Estate Markets, Finance, Hong Kong, Occupier Strategies, Pollution, Real Estate Research, Sustainability, Technology, Urban Issues, Workplaces | No Comments »

Winners And Losers – Activity Based Work And Technical Progress

Tuesday, December 4th, 2012

Asked in 1930 to speculate about the world his grandchildren would inherit, the economist John Maynard Keynes foresaw a society of “three hour shifts or a fifteen hour week”

In 1867 Karl Marx predicted that in the future we would “hunt in the morning, fish in the afternoon, rear cattle in the evening, discuss philosophy after dinner”.

Confronted with the same question, these prominent thinkers gave the same answer – future productivity gains would be taken out as more leisure, less work.

Now we know that they were both wrong.

Productivity growth opens up multiple options. Increased leisure is only one of them. The past hundred years suggests that we have chosen to take out the benefits of productivity not as leisure, but as increased consumption. We work the same, even longer, hours. But we trade off working hours against two cars in the driveway, an electric toothbrush and an annual holiday in Bali.

The serious question for property investors is how we take out the benefits of productivity gains, because this has long-term impacts on investment returns and on the location and type of assets likely to be highly valued in the future. As the illustration above suggests, technological progress is predictable, but forecasting how it will play out is hazardous.

Activity-based work (ABW) is a recent response to advancing technology in offices. ABW promises flexibility, enhanced mobility and an escape from the tyranny of being anchored to a desk in a particular building.

How will the benefits of ABW be taken out?

Many hands are in the air:

  • Landlords look for higher rents, reflecting increased productivity
  • Leasing agents explain that increased efficiency will offset higher rents, combined perhaps by a reduction in space requirements
  • HR departments predict lower staff turnover, fewer sick days, greater worker commitment
  • Clients expect improved services
  • And, another ghostly spectre – the tax collector will skim off a percentage of everyone’s winnings.

    • The benefits of ABW (and there may be costs also) are still emerging.

    How will the cake be sliced? Does increased productivity support higher rents? Does ABW necessarily give an advantage to modern, large floor-plate, office buildings? Maybe the major winners will be clients with access to staff who are more mobile, with better on-line information. Or perhaps it’s a combination of all of these.

    Pragmatically, and with deference to Comrade Marx and Lord Keynes, the last is probably the right answer.

    Further, winners from ABW are likely to vary between markets and through the business cycle. It is possible that the early adopters of ABW, as with many new technologies, will derive big benefits before gains are competed away by later arrivals. Losers will be those slow to adopt and adapt. The other lesson from history is that it’s very hard to capture the benefits of technological progress in the long term. In the end the final customer is usually the winner.

    About the author
    David Rees is the Head of Research for Jones Lang LaSalle in Australasia, based in Australia.

    Posted in Australia, Technology | No Comments »

    Intelligent Push to Indian Real Estate

    Tuesday, February 14th, 2012

    From the basic telegraph to analog phones, from the swanky and smart androids and tablets, from terrestrial television to the thin LCD/LED TVs, from the first generation mainframe computers to mini netbooks, the penetration of technology in India has increased multifold over the past decades. Real estate in India is no exception to this technological transformation. With the emergence of Intelligent Buildings, technology has emerged as a critical tool in improving the structure of India’s real estate sector.

    Today, the biggest challenge facing facility managers and maintenance engineers in India is to seamlessly integrate all building systems and make them function as a unified entity. Rising energy costs, high maintenance expenditure, less reliance on manual monitoring, the growing complexities of building controls, the mounting pressure on network administrators and facility managers, have all resulted in the quest for a more simple, more user friendly, and more reliable Building Automation System (BAS).

    Such a system in an Intelligent Building provides occupiers, building managers, and homeowners, with the ability to use mobile phones or PDAs to remotely control various systems, seamlessly interconnecting technology and work or home life. Today’s Intelligent Buildings have the capability to integrate biometric access control with finger print and cornea recognition, along with automatically initiated fire alarm systems – all with the help of a single core computer. This reinforces the real estate sector’s increased dependence on technology to ensure effective building management solutions in order to achieve sustainable goals.

    Traditionally, real estate – a tangible asset, has been marketed as a product in India. However, in recent years, there has been a paradigm shift in the way real estate is positioned and marketed. Space selling in recent times has been perceived by marketers as selling a service rather than a product. Technological advancements in the real estate world could be cited as one of the key reasons for such a change in perception.

    Nonetheless, the concept of intelligent buildings is still in its growth phase across office, retail and residential sectors in India despite the country’s geographical immensity and development density. Some of the intelligent buildings in India include – TCIL Bhawan in Greater Kailash-1 (Delhi), IL&FS Centre and Wockhardt Towers in Bandra Kurla Complex (Mumbai), L&T ECC’s Engineering Design and Research Centre (EDRC) in Manapakkam (Chennai), amongst others. On the residential front, Lodha Developers in Mumbai, Total Environment in Bangalore, and Paranjpe Group in Pune, are among those developers who offer smart homes targeted at the luxury segment.

    With a steady rise in population along with an increasing urbanisation rate, the focus on technologically advanced developments will enable India to compete with the other mature economies of the world. The fact that nearly eighty percent of what India could be in 2030 is still to be built (McKinsey Research) confirms the potential that the country’s real estate offers on the Building Technology front. However, such a transformation is challenged by cost and will be possible only through proactive policy support by the government in a timely manner.

    I believe that ‘now’ is the right time for all the stakeholders of the Indian Real Estate sector to put the strategy in place of offering active participation in a technological metamorphosis which will build an intelligent and sustainable future.

    About the author
    Hariharan Ganesan is the Manager, Research for Jones Lang LaSalle in India, based in Mumbai.

    Posted in India, Technology | No Comments »

    So you work in an office?

    Thursday, June 16th, 2011

    Every week-day morning around two million Australians tumble out of bed and, with varying degrees of enthusiasm, go to work in an office.

    Nothing surprising about that – but if you are an office worker, here are a few questions.

    Firstly: did either your father or mother work in an office? If the answer is “yes”, then here is a second question: did any of your grandparents work in an office? If the answer to all these questions is “yes” then you are a third generation office worker, and this makes you are a very rare person indeed.

    I estimate no more than 5% of today’s office workers in Australia are descended from two generations of office workers.

    It can be argued that a generation is a long time. But commercial property assets have long life expectancies. Almost half the Sydney CBD office stock is 30 or more years old.

    Does this matter? Perhaps not, but here is a fourth and final question – do you think that your grandchildren will work in an office? If the answer is “yes” then you believe that the waves of demography and technology that propelled so many of us from farms, factories and corner stores and into offices in just three generations have suddenly skidded to a halt.

    The facts suggest otherwise. The pace of change seems to be speeding up, not slowing down.

    A popular metric of efficiency in the use of office space is the workspace ratio – the number of square metres of space occupied by each office worker. A typical office workspace ratio is 15 square metres per person. Reliance on simple metrics can be handy but risky. Technology is freeing up office workers to leave the office. Occupancy in offices has been falling and is now often between 40% and 50%. A 40% occupancy rate means that the average workplace is only occupied for two days out of a five-day working week. That’s expensive space.

    No-one knows for certain how these trends will play out in the future. Rules of thumb like workspace ratios and turnover per square metre in shopping malls are convenient short term indicators. But prepare for a life of surprises: Technology is challenging many of these benchmarks. Property investors make big commitments to assets with a long life expectancy. More than any other sector of the economy, property investors and developers need to think outside the box.

    About the author
    David Rees is the Head of Research for Jones Lang LaSalle in Australasia, based in Australia.

    Posted in Demography, Technology, Workplaces | 1 Comment »