It’s all about people

Office & mixed-use development
You are heading a company that provides advisory services to tenants in over 80 offices worldwide. How has your business changed over time?

Jim Underhill, CEO, Cresa: After 30 years in the business, I genuinely think that this is certainly the most interesting period I can remember. And as you go through different segments of the marketplace, they are all in transformational phases right now. The office market has clearly gone from being purely about traditional offices – heavy on closed offices, where most companies were looking for a location that gave them a visible sign on the building and a good rental rate – to a stage where it’s all about their people. It’s now about having a location where people can be recruited and retained – in space where productivity is so much higher. Seven to ten years ago that was not the discussion. What we are now seeing everywhere across the world is that buildings that are not that old have become functionally obsolete, because they don’t have enough windows and daylight for the type of floor plan that is now required. Selecting the right space now involves more behavioural science and so we have become behavioural scientists. It’s important to understand what the key features of an office are for employees. We have to carry out a significant location analysis for each company. If you are in this place instead of ten blocks in another direction, what’s the likelihood of you being able to fill in the 50 positions that you have open? It’s about what you can do within this space. These are the most important criteria for our clients.

Warehousing, on the other hand, is obviously being transformed by e-commerce...

Not just because of e-commerce, but also due to urbanisation. Because people are migrating back into the cities – we have been seeing an acceleration of the pace of migration – and so the entire distribution network needs to change. It’s a very significant and dynamic market. And then there is the final piece: retail – which is clearly in a transformational phase as well. It will be very interesting. I think the pendulum, as with most things, had swung a little too far when it was said that the local retailer had been killed by the rise of e-commerce and Amazon putting them out of business. I still think human beings like going shopping. So securing the right locations remains a significant part of our business. It’s about representing retailers in multiple locations, finding the right locations and, again, anticipating where populations are moving to, the buying behaviours of consumer groups and the different demographics associated with each group. So in each of the sectors there are just tremendous numbers of moving parts that have to be fitted into the equation when solving the problems of our clients. It’s a fascinating time for real estate and everyone in those sectors.

How important is the trend for urbanisation? We still have some nice business parks doing quite well in locations distant from city centres. Are they at risk?

Some of them will be. In the United States many have become virtually unleasable. As pretty as they are to drive into, with their fountains and gardens and everything else... There are, however, two issues: there is generally very little retail there, since you just don’t have the population concentrations around them. And the other is that if younger employees want to live downtown, they don’t want to either drive or take public transport to go that much further out. They would rather be able to walk ten blocks to their office. So I think it’s the workforce that is the dilemma here. When we look at the demographic analysis of this latest baby boom going on in certain countries, I do believe that at some point, when those young couples have children, a one bedroom apartment will start to feel very small and in time there will be migration back out to suburban areas. But at the moment, in many markets you can’t find tenants to fill these properties. It’s very hard to find buyers willing to pay for them, because they just can’t see in the near term the prospect of these properties filling up. On the retail side, suburban shopping centres – not all of them, but certainly some of them – are clearly also going to struggle.

Would you say that the age of huge suburban shopping centres is over or that the end is nigh for them?

I never like generalising, but many of them will have to be repurposed. And that’s one of the challenges we now have – determining what they could be if not a shopping centre.

What do you think your business will be like in ten years’ time?

It is probably going to be very different. Don’t expect everyone else’s business to change and not ours. As with most things, where there is a change there is an opportunity. There are tremendous growth opportunities in all three sectors. We are trying to understand where our clients, CEOs and strategic planners want to take their businesses to, not in terms of location but what their growth plan is, what their challenges are. For almost any company employment expenses are by far the largest. And real estate is behind it. The real estate strategy needs to support the working environment as well as effective human resources management. That’s why we are oriented towards consulting.