SHAPING OUR CITIES How Digital Technology is Disrupting Global Real Estate GLOBAL RESEARCH REPORT SHAPING OUR CITIES How Digital Technology is Authors: Disrupting Global Real Estate Léan Doody Zung Nguyen Vu Pooky Mitchell Real estate has always shaped cities, and Alannah McCartney technology has always shaped real estate. From the elevators and telephones that made Editors: the skyscraper usable, to the car’s impact on Nicola Hudson the suburbs in the 20th century, technology Brice Richard has an intimate relationship with space – Stephen Hill and with value. Léan Doody The skyscraper solved a real estate problem by allowing for large amounts of rentable space on comparatively small Contributing plots of land in places where land is expensive: city centres. companies: The advent of the motorcar allowed vast areas of land to be opened up for residential use, rapidly increasing Accenture the value of – and demand for – suburban and rural land. Allianz Real Estate Boston Properties Will digital technology have a similarly transformative effect on cities and real estate? At a city scale, the answer is yes CBRE Global – one only has to look at how online shopping continues Investment Partners to reshape asset classes like logistics, as well as the high Charter Hall street. But what about digital technology in the building; Eir will it be as transformational as the elevator? Goodbody This report looks at how the commercial real estate industry GRESB is changing and explores how new business models will Heden enable digital technology within buildings to create value. Investa IPUT ISPT Knotel KPMG Legal & General LinkedIn UBS University College London Urban Land Institute WeWork COMMISSIONED BY IPUT PLC Published November 2019 ISBN: 978-1-5272-5269-1 Copyright © 2019 IPUT PLC CONTENTS Foreword Page 02 Executive Summary Page 04 Section 1 Drivers of Change The climate crisis Page 07 New competition Page 10 Opportunity: what does this mean for landlords and developers? Page 15 Section 2 Towards Better Workplaces User centred places and buildings Page 17 Sustainable and resilient assets Page 23 Section 3 Barriers to Uptake Value proposition Page 27 Legacy systems and proprietary solutions Page 30 Technology leadership Page 31 Risk Page 31 Section 4 What Does This Mean for Real Estate? New business models aligned with user experience Page 33 New approaches to technology Page 34 New leadership roles Page 39 2 IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate SHAPING OUR FOREWORD CITIES Shaping Our City IPUT takes pride in being an Irish real estate company with a 50-year track record. As the largest owner of offices in Dublin, we recognise our responsibilities and take our presence in the city seriously. Niall Gaffney Chief Executive, IPUT By investing in sustainable In formalising our development buildings and public realm, we strategy, we visited some of place an emphasis on people. the world’s leading office and mixed-use schemes – such as We are investing in buildings Broadgate and King’s Cross that enhance the occupier in London and Hudson Yards experience, enabling us to set in New York, amongst others. new environmental standards for We have seen the increased offices in Ireland and marking us prevalence of digital technology out as a landlord of choice. in these cutting-edge schemes and recognised the growth in Our business model has evolved, demand from both investors and and we are now developing a occupiers for more sustainable, number of major projects in efficient and environmentally For the past five years, we have Dublin city. This has prompted us friendly properties. strived to align our own portfolio to explore what are the drivers with best-in-class standards, of change in real estate and how Against the backdrop of a recognising our corporate they are shaping the projects we growing climate crisis, investors responsibility to our investors, are planning for our city. now want more detailed asset occupiers and wider society. We level data to evaluate the have made significant progress Over the course of the past sustainable performance of their achieving gold & platinum LEED decade, we have seen technology investments ensuring that the and Wired Score certifications disrupt business models globally companies they invest in are across our major holdings. Our with significant implications for socially responsible stewards own office became the first office the world of work. The real estate of their capital. In addition, in Dublin to be awarded WELL sector has been slow to embrace occupiers are seeking quality Certified Gold. this digital revolution, however office spaces and a greater this is now rapidly changing. investment in the public realm to attract and retain talent but with more flexibility within the office environment. 3 Foreword Computer generated image of IPUT’s Wilton Park development in Dublin 2 As we commence the We would like to acknowledge the We have strived development of almost 65,000 contribution of Léan Doody and sq m of mixed-use space in her team at ARUP in producing to align our Dublin city centre, we recognise this report. We are also grateful “ portfolio with that now is an opportune time to the various contributors from for us to explore the key digital across the global real estate best-in-class drivers of change in the real world who were so generous standards, estate industry. We partnered in sharing their experiences with ARUP to evaluate the with us. This report sheds some recognising readiness of the industry to adopt interesting light on the challenges our corporate these changes and to learn how and opportunities facing the responsibility we could apply global best- real estate sector and how the practice to our projects for the property owners should begin to to our investors, benefit of our future occupiers reassess their business models occupiers and and support long-term returns and leadership over the next for our shareholders. decade. Our ambition is to ensure wider society we align our future plans with the learnings from this report. 4 IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate SHAPING OUR EXECUTIVE SUMMARY CITIES Disrupting Real Estate Commercial real estate The climate crisis is provoking Commercial property developers has been slow to adopt investors to look for more themselves are starting to wake up sustainable assets and more asset to the new opportunities unlocked new technologies. The level data will be needed to help by digital technologies, to manage traditional business model them evaluate the sustainable complex portfolios, make better of letting properties on a performance of their investments. informed development decisions, 10-20 year basis has not decrease project management Meanwhile occupants are looking demanded it. But things costs, and even extract more value for higher quality services and from the operations of complex are changing. more flexible real estate to attract properties. and retain talent – and they are increasingly seeing flexible office providers as part of the solution. the real estate industry has been sluggish about adopting digital “ technology – one study puts it behind other industries by as much as five years Pictured centre of image 1 Grand Canal Square, Dublin 2 5 Executive Summary These changing business • Better occupancy data allows So what are the implications models, new technologies and for more understanding of new for real estate? pressures from occupants and space confi gurations and the • Organisations should take investors mean that there are productivity and satisfaction a more strategic view of user opportunities to use digital outcomes they enable. experience and the changing technology to deliver better • More informed portfolio role of asset managers to workplaces, for instance: management and reporting be curators of services for • Experience design and relies on asset level data about tenants, managing ecosystem placemaking allow for better the condition of buildings, of partners. They will need to understanding of the needs visualised by dashboards. decide whether to outsource or hire Service Designers and of people from their spaces • Despite these opportunities perhaps consider employing and how technology can help the real estate industry has a Chief Experience Offi cer. deliver great experiences. been sluggish about adopting For example, Knotel relies on digital technology – one • New lightweight approaches its tenant engagement app study puts it behind other to retrofi tting and construction to help their customers get industries by as much as mean buildings can be smart what they need, and help them fi ve years. There are multiple enabled without carrying out better understand how they reasons for this: the diffi culty costly systems integration. can design better spaces of upgrading legacy systems, • New types of leadership roles and experiences for their the conservative nature of will be needed to identify customers. the industry, and the lack of technology opportunities and alignment with real estate lead implementation. Some business models. organisations are hiring Chief Technology Offi cers as well as data scientists into their real estate functions. Ensuring privacy and security of data will be a key responsibility. 6 IPUT REAL ESTATE DUBLIN | ARUP How Digital Technology is Disrupting Global Real Estate SHAPING OUR SECTION 1 CITIES Drivers of Change KEY TAKEAWAYS • The climate crisis has forced all sectors and • Beyond the climate crisis, tenants and occupants industries to step up to take action. In order to are demanding more fl exible working spaces. safeguard investors’ portfolios and buildings The traditional ‘9 to 5’ workspace has changed against the threats of climate change and future dramatically. Tenants want spaces that can reporting requirements, more operational data encourage, inspire and attract a creative and is needed to assess these risks. Buildings must productive workforce, with services and digital be equipped to collect operational data.