For occupiers, investors, developers and owners alike, the world of commercial property is being transformed by technology, sustainability, and the diversity agenda
As CEO of JLL UK, one of the global giants of the real estate business, Chris Ireland has a perspective as commanding as any of the buildings that it manages. And the future he sees for real estate is smart: high-tech, connected and sustainable.
The NYSE-quoted firm, operating in 80 countries and employing 60,000 people - roughly the same as investment bank Morgan Stanley - was forged out of a merger of venerable British firm Jones Lang Wootton and the American LaSalle.
It leases and manages buildings, advises buyers, sellers, developers and investors. In the UK alone, the firm manages 4,000 properties. It is in a true leadership position - and that means changing the firm itself as much as setting an example to the industry. Which means responding to several mega-trends.
Technology meets real estate
Bricks and mortar are going digital. “The real estate industry has been slow to adapt and put technology at the forefront,” says Ireland. “But it is absolutely happening now.”
The way in which people work together in offices is one of the biggest changes to come out of the technological revolution, he explains. People are going into an office not to just sit at a designated workstation but primarily to engage, collaborate and co-operate with others.
Exhibit A is JLL’s own London HQ in Soho, where Ireland himself occupies a standard workspace in the corner of an open-plan office, and where the fifth floor hums with coffee bars and kicked-back communal areas.
Buildings, connected by apps, sensors and a slew of facilities-management technologies, will become genuinely smart, he forecasts, learning user preferences and anticipating user needs. Enter an office as a visitor and your smartphone will connect you to the receptionist before you reach their desk.
This is not just about providing gee-whizz convenience for the millennial generation. Smart building systems will be capable of sending you messages about the environment, such as interior humidity levels and outside air quality.
“Occupiers will demand much higher degrees of overall quality relating to the health of buildings,” says Ireland. “We talk about ‘well’ buildings, which demonstrably improve productivity and employee performance.”
The quality of building, he adds, is another tool in the battle for talent. “If occupiers want to recruit and retain the very best talent, the buildings are going to have to be absolutely what people want.”
And what people want is sustainability. It’s already “moving up the list of priorities both for major occupiers and owners of buildings.”
Currently property accounts for about 35 per cent of all global emissions and uses 40 per cent of all raw materials produced annually, Ireland says. Aviation, by comparison, accounts for two per cent. “Reducing the use of carbon and energy, and re-using raw materials, have to be the biggest opportunities for long-term sustainability.”
It’s not pure altruism. There’s good business to be done in this area: JLL’s sustainability practice Upstream is a rapidly growing part of the practice.
“But,” he adds emphatically, “we are doing this because it is the right thing to do. Our two biggest shareholders have got sustainability agendas. Our clients demand it. And in order for us to recruit and retain high-quality people, we have to demonstrate that we are a force for good.”
JLL is practicing what it preaches: over the past five years, the firm has reduced its energy consumption per person in the UK by 38 per cent. Its UK office devised a sustainability initiative called Building a Better Tomorrow which has been adopted globally by the firm.
External benchmarks such as GRESB (Global Real Estate Sustainability Benchmarking), which assesses the environmental, social and governance performance of real assets globally, are influencing investor decisions. “If you can demonstrate your buildings are sustainably built, run and managed, that is now quite a differentiator,” says Ireland. “Anyone looking to secure investor capital can’t afford to ignore sustainability.”
Smart, sustainable buildings need champions, and Ireland is a strong advocate of devolution of powers to city regions. Strong local leadership and autonomy allows cities to put in place the right kind of education and training, built environment, infrastructure and financial setting to allow businesses to thrive, he argues. He points to Manchester and Edinburgh as examples; both cities featured in JLL’s City Momentum Index in 2016 on the strength of their education but also because of their autonomy and control over future development.
“Manchester has had a strong city leadership who have led the charge and boosted inward investment,” he notes. “It really does make a difference. This needs to be replicated in other cities in their own way.”
However, he adds, the UK has further to travel in this respect. “Our cities are laggards when it comes to fiscal autonomy,” he says. “Local or regional government taxation accounts for 1.7 per cent of GDP in the UK. Compare that to ten per cent in Germany and 15 per cent in Canada.”
London is an exception - the city retains five per cent of its tax take - and Ireland says he is “very positive” about Mayor Sadiq Khan’s objectives. “There’s a lot of interaction and listening,” he says. “At a local level it is much easier for politicians to engage with businesses on the ground.”
He adds that local decision-making drives innovation and the adoption of new technologies, which in turn has a positive impact on the efficiency and quality of the built environment - and on the lives of people living and working there. He cites the industrial ecosystem at Kalundborg in Denmark and the use of contactless payments on London’s transport network as two examples.
In this context, effective partnerships between public and private players are vital. He points to business-leadership groups such as London First, NY City Partnerships, Barcelona Global and Pro Bogota as being important facilitators of these.
As a global advisory firm, JLL can bring its experience, lessons and innovations from other jurisdictions. In many cities the lack of affordable housing is high on the agenda. “We have seen examples of universities working with cities to provide micro-housing in high-cost, land-scarce cities.” He gives the example of the movement in Boston to develop “millennial villages,” where micro-apartments for young professionals and students are built around common spaces and ground-floor amenities.
The capacity for cities to provide for young professionals and students is central to successful urban regeneration, he argues. Historically, the redevelopment of a district might have relied on building offices.
But look at London’s Kings Cross, Ireland says, where the University of the Arts is “a major occupier and major draw.” The same applies to Imperial College’s western London development in White City and UCL’s new campus in East London.
“The universities are catalysts for regeneration in its widest sense,” he says. “One of the exciting things today is how the UK’s universities and research base are linking much more closely with entrepreneurs to come together in a creative environment. It makes regeneration much more sustainable and interesting.”
There’s a similar theory and practice at work within JLL itself. One of Ireland’s big goals is to be “leading the charge in getting diversity and inclusion right up at the forefront of the property industry.”
The UK property sector has not, to put it kindly, been at the cutting edge of diversity.
It will take time to make the structural changes needed, but JLL is pushing on all fronts. The firm was a co-founder and sponsor of an initiative called Changing the Face of Property, an industry-wide programme to broaden the awareness and appeal of the industry.
For the past few years, JLL has also been running apprentice programmes. In graduate recruitment, more than half of the firm’s intake will not have a property degree, or will have only acquired one as a post-graduate.
“For some years now,” Ireland says, “we have been close to 50:50 on recruitment by gender and we have many more recruits from ethnic minorities. We have a big European business so we can move our people around into different cities. All this brings in new blood and ideas and, lo and behold, you get an uptick in productivity and innovation.” He’s the first to admit that the firm is “not there yet but it’s a big improvement.”
Ireland wants the Government “to start speaking in a consistent, constructive way that makes it clear that this country is a welcoming place for fresh talent.
“The biggest issue for us at moment is just the uncertainty in how Brexit is going to look,” he says. “So the sooner we can get clarity and know what we are dealing with, the better. My concern is that some businesses will defer big investment decisions until they have that greater clarity.”
He is also keen to see long-term certainty for university and research funding. “We have a world-leading university sector and the benefits that flow from that - in innovation, research and entrepreneurship - are huge.”
With many working for JLL in the UK, he hopes for rapid confirmation that all EU nationals currently living and working here can stay. “That would be the right thing to do and I can’t see us losing out from that. We need these people.”