According to Colliers International’s white paper “A view from the Top 2016: is there life in the property bull market?”, disruptive forces influencing consumer behaviour are being embraced, and driven, not only by technology behemoths but also financial and professional services companies wanting to attract young talent. ‘Doing more with less’ is becoming an increasing trend, where technology innovations, coupled with a stronger desire for open collaboration, is rendering the current office-based workspace obsolete. More emphasis is being placed on connecting to anywhere, from anywhere, at any time. This is having a knock-on effect on the occupation and use of commercial properties, significantly influencing real estate investor strategies and allocations.
The continued evolution of new technology has played a significant role in re-shaping global office markets over the last 25 years. Within the last 10 years alone, the influence of technology has been amplified, driving a wider distribution of office-based jobs across Europe and, as a result, creating 500,000 jobs in Central and Eastern Europe. Concurrently, around 1.5 million jobs have been made obsolete by the same new technology, yet the Tech Media and Telecoms (TMT) sector has grown significantly, and has been setting trends and driving demand for new office space across most of the developed world, and increasingly the developing world.
Guy Douetil, Director, Colliers International commented: “Across a range of sectors and geographies, from America, through Europe and far reaching Asia, human economies are being powered by technology. Global companies are demonstrating a wide use of technology and high potential for introducing new generation IT to their everyday business. Thereby transforming ‘old industries’ which are now relying on innovative solutions to fuel their development.”
“Whether, it is new technology applied to ‘analogue sectors’, or new business models, global companies are transforming their business and seizing opportunities in today’s world. With the rise of telecommuting, co-working spaces, and new technology tools workers are increasingly shifting towards flexibility. Collaborative technologies, generational preferences and work-life balance influence the way an office looks and works.
“The workplace is becoming decentralized and, paradoxically, while the number of office based jobs is increasing, the volume of space required is fragmenting and actually decreasing.” He continues, “Furthermore, the European job market is no longer dominated by full-time workers; part-time, temporary and contractual employment have become far more significant over the last 10 years. As Europe continues to go down this path, this is adding more fuel to the flexibility fire.”
Colliers report shows that technology is also re-shaping the retail and logistics sectors causing a period of intense change, with the proliferation of on-line retailing. Technological disrupters such as Amazon, Alibaba, Ocado and Zalando have been at the forefront of these changes, with the demand for same day delivery, driven by consumer expectations and the growth of a new technologically-savvy class of urban consumers. The logistics and retail sectors have both had to accelerate their response at every point of the supply chain.
Damian Harrington, Director, Colliers International, added: “The European retail and logistics markets are undergoing dramatic changes, creating both opportunities and challenges for operators in these merging sectors. Our forecast requirement for new, modern warehousing and logistics facilities across Europe highlights the significant opportunity for developers and investors to engage in this sector all along the supply chain, from first mile to last mile.
“Growth in consumer demand, coupled with rising e-retailing penetration rates could drive demand by up to 5 million sq m a year, by 2020, across Europe. That is in addition to the large-scale modernisation of existing warehousing and distribution facilities, which will be required to meet changing consumer demand. So, the scope for a variety of new facilities, from mega-distribution centres to cross-docking and urban facilities, is immense.”
Harrington goes on, “The flip-side of this change is the need for retail property assets to shift away from traditional shops to ‘showrooms’ which emphasises branding and merchandising as supreme functions. This is driving retailers to become more focused on increasing their footprint in locations which provide them with the greatest visibility and critical mass. Concurrently, major retailers are decreasing their footprint in smaller towns, cities and urban markets which do not have these fundamentals, but can be served by a growing multi-channel/omni-channel operation.”
The report warns that there is, of course, a potential down-side to all of this growth. Political and economic volatility and uncertainty are back on the table across the EU, which threaten to limit these growth opportunities and worry investors. The most significant threat as it stands, is if the introduction of the Schengen Agreement fails. This would negatively impact the cost of imports and goods overnight as border controls are put back in place, creating significant disruption to manufacturers, retailers and logistics providers along the supply chain. Not only would it lead to a complete re-think of how best to handle pan-European production and distribution, it would also dent the prospect of creating a far more efficient, pan-European inter-modal distribution system. As a result, this would thwart numerous and substantial, pan-European investment opportunities.