_How the corporate real estate portfolio must reflect changing corporate structures and cultures

Business Structures

Teams of Teams

Retired General Stanley McChrystal, former commander of US and International forces in Afghanistan, coined the phrase ‘team of teams’ in a recent book. The principle is about combining the agility, adaptability and cohesion of a small team with the power and resources of a giant organisation.

It is about transitioning business from a traditional command and control set-up, to a distributed and collaborative operational process.

Real Estate Implications

• A more dispersed corporate real estate portfolio

• Increased short-term, project specific teams and greater appetite for co-working or flexible space

• Formation of corporate sharedservice hubs to service the dispersed teams

• Increased flexibility required across the entire portfolio

Elephants & Fleas

Charles Handy’s 2001 book of the same name foresaw the emergence of symbiotic relationships between large (but hollowedout) corporates and small and medium sized suppliers who provide tasks and services to the elephants.

In this prescient vision, corporate supply chains become deeper and broader as corporates seek to access technical and creative skills on a ‘call-down’ basis while putting necessary but non-core functions under the management of others.

Real Estate Implications

• Reduced portfolio size for corporate occupiers as they become smaller in headcount terms

• Increased need for ‘touch- down’ space for suppliers coming into the business temporarily

• Mobility of corporates or suppliers towards one another to create proximity and synergy

Business Process Outsourcing (BPO)

Disaggregation is the process of dividing or breaking-up businesses or processes into their constituent parts. It has fuelled the rise of business process outsourcing – or the contracting of non-primary business activities and functions to a third party provider. BPO services include payroll management, human resources, accounting and customer/call centre relations. There will be a new wave of BPO operators as robotic process automation takes hold.

Real Estate Implications

• Dispersal of business functions globally to locations meeting required skills or cost profile

• Significant occupational demand from BPO companies

• Continued strengthening of global BPO hubs off-shore or near-shore

• Increased mobility of BPO operators towards markets that have the labour to support increased value-add functions

Business Cultures

Learning Organisation

There is no doubt that the attraction and retention of talent – which is in short supply across the globe – has become a crucial management challenge.

There will be two new dynamics. First, mitigation will become less about trying to bring expensive external talent into the organisation and instead about being able to identify and have access to that talent as and when it is required.

Second, companies will seek to nurture and develop their own talent. They will increasingly commit to life-learning programmes for their staff, recognising the skills of today will not be appropriate for the business of tomorrow.

Real Estate Implications

• Education facilities to become a core part of the amenity mix within core office markets

• Provision of learning facilities within the corporate real estate portfolio

• Spaces to support events programmes and town-hall style meetings aimed at developing the workforce will be in demand

• Increased flexibility within the workforce - as staff increasingly combine work with learning – will enable advancement of hotdesking arrangements

• Increased utilisation of real estate assets as the workplace becomes an educational facility outside of core working hours

The Innovation imperative

There is an innovation imperative facing modern business. In a world where ideas can be developed and perpetuated quickly through technology, competitive advantage is often short-lived. As a result, businesses are on a continual mission to find the next big idea – be it a new service offering, a new product or a better working process.

These ideas are not typically generated through narrow corporate silos. They must be crowd-sourced.

Real Estate Implications

• The further rise of corporate innovation labs as part of the real estate portfolio

• Creation and corporate operation of incubator and accelerator space as a means of harnessing innovation from outside the organisation

• Creation of R&D centres that are financed or supported by a coalition of companies

• Activity based workplaces that encourage collaboration within and between business functions

• Increased use of stairs to join previously disparate floors within a company building to encourage the free-flow of staff and ideas

Business Constituents

Diversity

A further dynamic, rightfully challenging the corporate constitution, is the need to broaden diversity. Teams of mixed gender, ethnicity, physical ability, age and sexual orientation are more representative of customers.

They offer a range of viewpoints and broad-based experience that supports innovation, problem-solving and decision-making. Diversity policies make absolute sense commercially.

One aspect of diversity frequently overlooked is that of generational diversity. Generational diversity will become a particularly hot-topic over the medium term and workspaces will need to have wide generational appeal.

Real Estate Implications

• Spaces that provide amenities for all rather than for the few

• Greater variety of worksettings more in keeping with working preferences of the various generations at work

• Increased communal space to bring a diverse workforce together

The Freelance/Gig Economy

Charles Handy also raised the idea of the portfolio worker – someone whose employment is spread across a range of organisations and is often combined with other non-commercial activities.

This again seems prescient, as freelancing has become a rising and now significant component of the labour market. In the USA, freelancers are forecast to represent 40% of the labour market – or 60 million people – by 2020.

Linked to the rise of freelancing, the gig economy is a term which describes an environment in which temporary positions are common and organisations contract with independent workers for short-term engagements. It is estimated that the London gig economy has grown by 70% since 2010.

It is, however, a labour market model that is coming under increased political scrutiny.

Real Estate Implications

• Increased need for ‘touch-down’ space for suppliers coming into the business temporarily

• Provision of flexible space within the corporate real estate envelope to accommodate transient workforce

• Strong technology platform to allow connection of workers across sites

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