What creates real Real Estate value?


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Philip Tidd
Director Europe, DEGW

Published in: Business, Real Estate
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  • Original text from the hoax:

    Scientists from RAND Corporation have created this model to illustrate how a 'home computer' could look in the year 2004. However the needed technology will not be economically feasible for the average home. Also the scientists readily admit that the computer will require not yet invented technology to actually work, but 50 years from now scientific progress is expected to solve these problems. With teletype interface and the Fortran language, the computer will be easy to use.
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  • Fun fact: this photo (supposedly of the RAND corporations 1954 vision of a 'home computer') is actually an internet hoax! The main console pictured is that of a nuclear submarine on display at the Smithsonian.

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What creates real Real Estate value?

  1. 1. What creates real Real Estate value? Twynstra Gudde Real Estate Masterclass Amersfoort, 21 st September 2006 Philip Tidd Director Europe, DEGW
  2. 2. <ul><li>Content </li></ul><ul><li>‘ Rear view mirror’ </li></ul><ul><li>- ‘A brief history of the office’ </li></ul><ul><li>‘ Work and the City’ </li></ul><ul><li>Workplace Trends: </li></ul><ul><li>- what’s so new about ‘New ways of working?’ </li></ul><ul><li>- Working and Learning </li></ul><ul><li>Measuring benefits/ creating value: </li></ul><ul><li>- the link between productivity and office design </li></ul>
  3. 3. What are office buildings for? <ul><li>Not just commodities but </li></ul><ul><li>instruments to: </li></ul><ul><li>support businesses </li></ul><ul><li>generate wealth </li></ul><ul><li>open up possibilities for future growth and change </li></ul><ul><li>communicate ideas and values </li></ul>
  4. 4. <ul><li>19 60’s : efficiency </li></ul><ul><li>19 70’s : effectiveness </li></ul><ul><li>19 80’s : added value </li></ul><ul><li>19 90’s : innovation </li></ul><ul><li>20 00’s : Dynamism </li></ul>or ‘survival through dynamic innovation’ The Big Picture: Key drivers for new Workplace solutions and Innovation
  5. 5. Three basic Office Typologies <ul><li>The Taylorist Office </li></ul><ul><li>The consequence of the late Nineteenth Century discovery of ‘Scientific Management’ </li></ul><ul><li>The Social Democratic Office </li></ul><ul><li>The consequence of Post Second World War social and economic reconstruction </li></ul><ul><li>The Networked Office </li></ul><ul><li>The consequence of robust, reliable, ubiquitous early Twentieth First Century Information Technology </li></ul>
  6. 6. Taylorist The Larkin Building, Buffalo Architect : Frank Lloyd Wright Date: 1904
  7. 7. Taylorist Seagram Building, Chicago Architects : Mies van der Rohe & Philip Johnson 1958
  8. 8. Centraal Beheer, Apeldoorn, The Netherlands Architect : Herman Hertzberger 1974 Social Democratic
  9. 9. The Networked office Pre-2002 $$$$ Client Site Large Metro Centers Long term, fixed cost with limited flexibility Integration of fixed, variable, shared and no cost facilities Emerging $$ Front Door Delivery Center Client Site Increasing remote working Service Centers BPO Satellites HUB New Workplace Models Variable cost Shared Global management consultancy flexible workplace blueprint “ Our new workplace strategy responds directly to the workforce model, reduces costs and wherever practical will shift from fixed toward variable costs to reduce our long term commitments.”
  10. 10. Technology changes fast: buildings do not 1954: Prediction: The Home Computer of the Future 2004 2004 : Reality: Pervasive, mobile technologies
  11. 11. Office buildings have changed very little in 100 years 1904: The Larkin Building 2005: Chinese Workplaces
  12. 13. reflect work styles that are no longer relevant…. rely on symbols that convey the wrong values…. constrain today’s dynamic knowledge based businesses the ‘clerical factory’ <ul><li>control </li></ul><ul><li>hierarchy </li></ul><ul><li>processing </li></ul><ul><li>silos </li></ul>MOST OFFICES SPEAK MORE ABOUT THE PAST THAN THE FUTURE
  13. 14. Over time work culture has changed to support flexible and innovative workstyles Hierarchy & Status Function & Need Time & Location Traditional ‘ 9 – 5’ workplace Innovative Everywhere, every time 1900’s 2000’s
  14. 15. <ul><li>Content </li></ul><ul><li>‘ Rear view mirror’ </li></ul><ul><li>- ‘A brief history of the office’ </li></ul><ul><li>‘ Work and the City’ </li></ul><ul><li>Workplace Trends: </li></ul><ul><li>- what’s so new about ‘New ways of working?’ </li></ul><ul><li>- Working and Learning </li></ul><ul><li>Measuring benefits/ creating value: </li></ul><ul><li>- the link between productivity and office design </li></ul>
  15. 16. Work and the City Futurists : Original Cartoon drawing for the film Metropolis, Fritz Lang 1927
  16. 17. WORK = IDENTITY- Group, Community, Self
  17. 18. 19 th Century: WORK drives city form - manufacturing
  18. 19. IP Densities in London 21 st Century: WORK drives city form - Knowledge IP Densities in London region, 2004
  19. 20. GLOBAL FINANCIAL WHEEL Breathing cities pg107
  20. 21. Globalisation drives city form – ICONS of commerce
  21. 23. <ul><li>Physical place </li></ul><ul><li>[bodily presence] </li></ul><ul><ul><li>territory </li></ul></ul><ul><ul><li>rigidity </li></ul></ul><ul><ul><li>visible </li></ul></ul><ul><ul><li>tangible </li></ul></ul><ul><ul><li>unpredictable </li></ul></ul><ul><li>Virtual space </li></ul><ul><li>[tele presence] </li></ul><ul><ul><li>network </li></ul></ul><ul><ul><li>mobility </li></ul></ul><ul><ul><li>invisible </li></ul></ul><ul><ul><li>intangible </li></ul></ul><ul><ul><li>predictable </li></ul></ul>Experiencing Virtual + Physical worlds
  22. 24. Hypothetical distributed working real estate strategy Physical team working Virtual team working (LS) Lone working Virtual team working (non LS) Communicating CORE SPACE Managed by organisation NON-CORE SPACE Managed by others    Ž Training centre Specialist facilities Canteen Restaurant Garden Cafe Airport Train Car Project Room Office Building Team Table Home ” Client site Allocating space on the basis of work pattern We are designing for populations of people working across multiple locations
  23. 25. Mapping distributed work centers across a city International Transport Hub Secondary Town Centre Business nodes Accessible Suburban Location Home CB D Corporate centre Neighbourhood centre Operations centre Personal centre Central Transport Hub
  24. 26. Corporate centre Neighbourhood centre Operations centre Personal centre … .and across multiple locations and shared service centers
  25. 27. <ul><li>Content </li></ul><ul><li>‘ Rear view mirror’ </li></ul><ul><li>- ‘A brief history of the office’ </li></ul><ul><li>‘ Work and the City’ </li></ul><ul><li>Workplace Trends: </li></ul><ul><li>- what’s so new about ‘New ways of working?’ </li></ul><ul><li>- Working and Learning </li></ul><ul><li>Measuring benefits/ creating value: </li></ul><ul><li>- the link between productivity and office design </li></ul>
  26. 29. The ‘world of work’ is changing rapidly <ul><li>Convergence of three powerful trends: </li></ul><ul><ul><li>Globalisation </li></ul></ul><ul><ul><li>The New Digital Economy </li></ul></ul><ul><ul><li>Demographic change </li></ul></ul>Now
  27. 31. <ul><li>networking will be critical in blurring rather than reaffirming barriers </li></ul><ul><li>work will become more decentralised </li></ul><ul><li>the working population will be comprised of several generations of employees </li></ul><ul><li>the working environment will be less corporate and more business like – and short-term </li></ul>BBC, London Understanding Global Work Trends Google, London Morgan Stanley, London
  28. 32. Change 1 <ul><li>More external and internal mobility </li></ul><ul><li>Technological developments are enabling people to be increasingly mobile, both inside and outside the office </li></ul>ARRIVE AT MOBILE BASE CHECK-IN GO TO LOUNGE INTERACT WITH COLLEAGUES DEPART
  29. 33. <ul><li>New conventions in the use of time and space </li></ul><ul><li>Ubiquitous networks are likely to have a big impact on the ways in which we use time as well as space </li></ul>Change 2
  30. 34. Change 3 <ul><li>Different life/work balances </li></ul><ul><li>Distributed working will make it possible for people to balance work and life in different, more convenient ways </li></ul>
  31. 35. Change 4 <ul><li>Knowledge management </li></ul><ul><li>Information in the knowledge economy, paper as well as electronic, will be managed increasingly as a precious collective resource </li></ul>Knowledge web Knowledge cluster
  32. 36. Change 5 <ul><li>More shared rather than individually owned space </li></ul><ul><li>Shared space is growing as a proportion of the space budget. The area given over to individual workstations is declining </li></ul>
  33. 37. Change 6 <ul><li>Change Management </li></ul><ul><li>Change Management provides powerful means of using the design and construction project as means of accelerating cultural change </li></ul>productivity time Change event with Change Management without Change Management duration of adjustment work disruption
  34. 38. Change 7 <ul><li>Space as a Medium of Communication </li></ul><ul><li>The working environment is a powerful way of reinforcing and communicating values internally and externally </li></ul>
  35. 40. Change 8 <ul><li>Pervasive computing </li></ul><ul><li>Workplaces can be now designed to display and manipulate information in ways that go well beyond what can be displayed on conventional computer screens </li></ul>
  36. 41. Work-Life or Work-Work balance? The Inversion of Home and Office. As more people work from home or from small, purpose-built offices, the line between work and home life will blur. The office will become a place for the social aspects of work such as celebrating, networking, lunching, and gossiping. “ In the future, connectivity will no longer be a problem, the ability to disconnect will become far more important” Source: Francis Cairncross, ‘The Death of Distance’ 1998
  37. 42. Workspaces are generally used less than we think
  38. 43. Office buildings only ‘occupied’ for ~ 40% of the time Data is key: most offices are under-utilised 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 08:30 09:30 10:30 11:30 12:30 13:30 14:30 15:30 16:30 17:30 60% 35% ACTIVITIES IN WORKSPACES Empty Temporarily unoccupied Typical daily work activities mapped by Time Utilisation Study © DEGW 30% - 40% of time is out of the building 30% away from the desk but somewhere else in the building 35 - 40% at desks Empty Unoccupied Not obtainable Pausing Paper handling Reading Writing Talking Telephone Computer Meeting
  39. 44. <ul><li>Typical occupancy decreases as level of seniority increases </li></ul><ul><li>When in, senior people spend most of their time in meetings and talking </li></ul>Occupancy by job level SVP VP Director Manager Assistant President 52% 23% 25% 40% 23% 37% 35% 19% 46% 32% 17% 51% 23% 11% 66% 23% 14% 64%
  40. 45. Knowledge Management and Team Work Rate <ul><li>Cross-functional teamwork </li></ul><ul><li>Continuous communication on all levels of hierarchy </li></ul><ul><li>Co-location on team- and sector-levels </li></ul><ul><li>Networking with external partners </li></ul><ul><li>Specific training strategies </li></ul><ul><li>Co-operative decision processes </li></ul><ul><li>Use of intranets for internal </li></ul><ul><li>identification of experts </li></ul>0 10 20 30 40 50 60 70 80 [%] 100 100 53 100 53 93 33 93 27 73 20 60 25 53 7 Source: McKinsey-study, 2001 Realisation quotas in successful/ less successful enterprises Realisation quotas in successful enterprises Realisation quotas in less successful enterprises
  41. 46. ‘ New ways of working’: a definition “ working (to mutual benefit) without the conventional understandings and constraints of time, method and place” <ul><li>when </li></ul><ul><li>flexi-time </li></ul><ul><li>staggered hours </li></ul><ul><li>compressed working week </li></ul><ul><li>annualised hours </li></ul><ul><li>shift working </li></ul><ul><li>shift swapping </li></ul><ul><li>self rostering </li></ul><ul><li>working outside normal ‘business’ hours </li></ul><ul><li>how much </li></ul><ul><li>part-time </li></ul><ul><li>job-sharing </li></ul><ul><li>voluntary reduced hours </li></ul><ul><li>term-time working </li></ul><ul><li>overtime </li></ul><ul><li>phased return </li></ul><ul><li>career breaks </li></ul><ul><li>sabbatical leave </li></ul>Time
  42. 47. <ul><li>New processes, practices and behaviours </li></ul><ul><li>less paper </li></ul><ul><li>less bureaucracy </li></ul><ul><li>new technologies </li></ul><ul><li>greater interaction </li></ul><ul><li>more collaboration (within and across organisations) </li></ul><ul><li>cross-functional working </li></ul><ul><li>less hierarchical </li></ul><ul><li>informal working relationships </li></ul><ul><li>team based working </li></ul><ul><li>casual dress code </li></ul><ul><li>more empowerment/ more trust </li></ul>‘ New ways of working’: a definition “ working (to mutual benefit) without the conventional understandings and constraints of time, method and place” Method
  43. 48. <ul><li>Employer’s premises </li></ul><ul><li>homing from work </li></ul><ul><li>dedicated desk / office </li></ul><ul><li>non-assigned shared workspaces </li></ul><ul><li>non-desk, informal shared worksettings </li></ul><ul><li>colleagues’ workspaces </li></ul><ul><li>‘ distributed’ workplace </li></ul><ul><li>working from home </li></ul><ul><li>remote location - satellite offices / telecottages </li></ul><ul><li>mobile working - hotels, transport, cafes, services, roadside </li></ul><ul><li>clients’ or partners’ premises </li></ul>‘ New ways of working’: a definition “ working (to mutual benefit) without the conventional understandings and constraints of time, method and place” Place
  44. 49. new workplace choices plus opportunities to work : in other parts of the building at client / customer / partner premises at home Making the shift From: single desk provision To: Variety of worksettings which reflect actual workstyles
  45. 50. ‘ VicUrban: offices for the Victoria regional Government , Australia
  46. 53. ‘ New Ways of Learning’
  47. 54. 21 st century learning: a blending of leisure, education and work in both physical and virtual places © DEGW quiet confidential 10/10 meet ‘ Look who’s here today’ shhh ... Drop-in Group work Individual work linger fun chance encounter visible accessible activity noise 1 to 1 informal Open Non-hierarchical Kitchen table
  48. 55. Learning Landscapes Hogeschool Van Amsterdam: Briefing for a new university
  49. 56. Visualization Labs Stanford SMILE Project Concepts Special Equipment / plotters / storage Immersive table Projection Screen Plasma Screens Immersive Wall Immersive desks Visualization viewing & data manipulation Discussion / Screens Lab workstations Modeling / Preparation Immersive Walls Stanford I-Space
  50. 58. Settings for Active Learning with networked information and simulation technology Creative Classroom, Rensselaer Polytechnic Institute Greg Seleman Architects, P.C.; illustrations shareDesign, LLC) TEAL Classroom, MIT
  51. 59. Moving from physical to hybrid workplaces <ul><li>Convergence of physical & virtual spaces </li></ul><ul><li>Mixed reality/role playing </li></ul><ul><li>Access to virtual labs </li></ul>Stanford I-Space Stanford School of Medicine
  52. 60. <ul><li>Content </li></ul><ul><li>‘ Rear view mirror’ </li></ul><ul><li>- ‘A brief history of the office’ </li></ul><ul><li>‘ Work and the City’ </li></ul><ul><li>Workplace Trends: </li></ul><ul><li>- what’s so new about ‘New ways of working?’ </li></ul><ul><li>- Working and Learning </li></ul><ul><li>Measuring benefits/ creating value: </li></ul><ul><li>- the link between productivity and office design </li></ul>
  53. 61. Latest DEGW research <ul><li>DEGW-led literature research on the link between Productivity and Office Design, 2005 </li></ul><ul><li>Sponsored by the Commission for Architecture and the Built Environment (CABE) and the British Council of Offices (BCO) </li></ul><ul><li>Downloadable version from: </li></ul><ul><li>http://www.cabe.org.uk </li></ul>
  54. 62. Research summary: health, safety and comfort have attracted most attention
  55. 63. Research Framework: The balanced scorecard Efficiency Effectiveness Expression ? ? ? ? Business Imperatives Collaborative Development of Research Filters Recommended Workplace Initiatives and Performance Metrics Customer Human Capital Finance Business Processes
  56. 64. Financial Targets Business Process Customer Human Capital Finance
  57. 65. Financial Targets Business Process Customer Human Capital <ul><li>Finance </li></ul><ul><li>Churn Cost </li></ul><ul><li>Health Care Costs </li></ul><ul><li>Turnover Costs </li></ul><ul><li>Cost of Occupancy </li></ul><ul><li>Project Budget Changes </li></ul><ul><li>Personal Productivity </li></ul>
  58. 66. Business Process Targets Customer Human Capital Finance <ul><li>Business Process </li></ul><ul><li>Collaboration & Knowledge Sharing </li></ul><ul><li>Mission Achievement </li></ul><ul><li>Enabled Remote Work </li></ul><ul><li>Sustainable Practices & Design </li></ul><ul><li>Cycle Time </li></ul><ul><li>Change Orders </li></ul>
  59. 67. Human Capital Targets Business Process Customer Finance <ul><li>Human Capital </li></ul><ul><li>Retention of Key Knowledge Workers </li></ul><ul><li>Job Satisfaction </li></ul><ul><li>Effective Ways of Working </li></ul><ul><li>Personal Comfort & Well-being </li></ul><ul><li>Absenteeism </li></ul><ul><li>Wellness or Illness </li></ul>
  60. 68. Customer Targets Business Process Human Capital Finance <ul><li>Customer </li></ul><ul><li>Brand / Image </li></ul><ul><li>Organizational Reputation </li></ul><ul><li>Customer Satisfaction & Engagement </li></ul><ul><li>Strategic Level of Engagement </li></ul>
  61. 69. Workplaces matter today more than ever before <ul><li>Philip Greenspun, the founder of Arsdigita and a professor at MIT once said: </li></ul><ul><li>“ … the challenges of a software engineering manager first and foremost are: </li></ul><ul><li>(1) creating a work environment where good programmers will be satisfied enough to stay </li></ul><ul><li>(2) creating a system via which average programmers can become good.” </li></ul>A worthwhile goal is to have at least one thing that is extremely attractive about the physical environment for any particular prospective software engineer. For example, dog-friendly policy.
  62. 70. Measuring Success <ul><li>the easiest things to measure are often </li></ul><ul><li>the least important to organisations </li></ul><ul><li>Efficiency – how much can be achieved with less </li></ul><ul><li>Effectiveness – what value can be added by imagination </li></ul><ul><li>Expression – the messages that clients wish to convey </li></ul>
  63. 71. EFFICIENCY : making the most of the space EFFECTIVENESS: making the most out of people EXPRESSION: making the most of the brand Measuring workplace performance MOST VALUABLE TO MEASURE messages to staff messages to customers messages to shareholders MORE VALUABLE TO MEASURE attracting/retaining staff Supporting interaction Accommodating change density cost of occupation cost of change EASIEST TO MEASURE
  64. 72. The big picture: how office design could affect business performance Respond to business and technological change Attract & retain customers Drive down total cost of occupancy Support internal values: e.g. facilitate culture shifts Increase staff productivity Motivation and retention Knowledge management Innovation & creativity EXPRESSION EFFECTIVENESS EFFICIENCY external expression adaptability & flexibility efficiency in real estate and space planning internal expression health, safety and comfort staff performance 4 2 1 support to work processes 3
  65. 73. Appraising property portfolios 0% 50% 100% 50% 100% Efficiency space planning/flexibility/use of resources Effectiveness team communication/interaction optimal good marginal sub - optimal
  66. 74. Complex ‘value constituencies’ in Higher Education <ul><ul><li>Differing needs of various interest groups </li></ul></ul><ul><ul><li>Old’ vs. ‘new’ institutions </li></ul></ul><ul><ul><li>Small vs. large institutions </li></ul></ul><ul><ul><li>Research based vs. teaching based institutions </li></ul></ul><ul><ul><li>Higher Education vs. Further Education </li></ul></ul><ul><ul><li>Academics vs. Management vs. Estates </li></ul></ul>College Principal (€’s/student) Head of Real Estate (€’s/sqm) Head of Department (sqm/student) €’ s Sqm Student
  67. 75. EFFICIENCY EFFECTIVENESS CURRENT VALUATION CRITERIA FUTURE VALUATION CRITERIA $ per Sqm Maximise lettable area Maximise efficiency of cores and circulation Maximise density of occupation by - Efficient zoning of enclosure/static - Efficient planning of open areas Minimising waste: fit factor Regular, orthogonal structure and planning grids Reduce construction costs Reduce costs of planning change/churn by regular, repeatable floor plans <ul><li>$ per person </li></ul><ul><li>Maximise attraction of space : </li></ul><ul><li>More interaction </li></ul><ul><li>More common areas </li></ul><ul><li>Exchange information </li></ul><ul><li>Maximise actual density through time-space use intensification </li></ul><ul><li>Maximise value of common areas </li></ul><ul><li>to occupiers </li></ul><ul><li>Accommodate complex and changing </li></ul><ul><li>patterns of use </li></ul><ul><li>Wide variety of spaces </li></ul><ul><li>Greater planning freedom </li></ul><ul><li>(more complex patterns of use) </li></ul>
  68. 76. More Mobility Simpler Buildings More Complex Cities <ul><li>Flexibility and diversity of accommodation </li></ul><ul><li>Speculative built rather than owner occupied </li></ul><ul><li>Management systems supporting distributed work </li></ul><ul><li>Flexible and easily re-configured </li></ul><ul><li>Brand in fit-out rather than building shell </li></ul><ul><li>Greater ‘environmental’ performance </li></ul><ul><li>Multi-modal access </li></ul><ul><li>Highly serviced and managed environments </li></ul><ul><li>All about infrastructure & amenities </li></ul>The Future of Places