matt astrachan: jll's perspective on top ten cre global trends for 2016

Top 10 Global CRE Trends for 2016

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CORPORATE SOLUTIONS RESEARCH

Threats

Ownership

Convergence

M&A

Experience

Coworking

Digital Drive

Data Intelligence

Sustainability

Cities of the Future

Copyright © JLL 2016 - Corporate Solutions2

Greatest risks to business over the next 6-12 months

Impact of cyber attacks increased(Oct 2014 - Oct 2015)

110010100110101010100011DoS

18% increase in average impact of cyber attacks

56% increase in politically motivated cyber attacks

100% increase in criminal targeted attacks

Source: Control Risks, RiskMap 2015

Balancing risk and transparency

29% increased global and regional political instability

24% increased volatility in commodities and curencies

23% economic and political situation in the Eurozone

18% slowing growth in key emerging markets

6% timing and pace of interest rate rises in the US

Source: Capital Confiedence Barometer, EY October 2015

Source: JLL Global Real Estate Transparency Index 2014

Transparency improved in over 80% of markets since 2012, however

41 countries (out of 102) have low transparency or are opaque

Threats:

Security, risk and transparency

Elevated geopolitical risk, security concerns and volatility will impact CRE policies and strategies

Copyright © JLL 2016 - Corporate Solutions3Source: JLL Global Corporate Real Estate Trends 2015 Source: Gallup, How Employee Engagement Drives Growth 2013

High expectation from C-suite to improve worker productivity

Improve PEOPLE productivity

Improve BUSINESS productivity

Improve WORKPLACE productivity

Improve ASSET productivity

4%

8%

8%

8%

20%

No expectation

31%

32%

32%

76%

61%

60%

60%

Moderate expectation High expectation

Base: 277 respondents

Source: JLL Global Corporate Real Estate Trends 2015

Impacts of high level of employee engagement

HR and CRE integration is increasing

Current In 3 years

34%

6%

36%Ad-hoc/project basis

Frequent interaction but separate divisions

Shared services integration

40%

19%

25%

HR

22% increase in profitability

21% increase in productivity

Convergence:

HR, IT (digital solutions) and CRE strategies converge

Closer integration between Human Resources and Real Estate as CEOs demand performance

Copyright © JLL 2016 - Corporate Solutions4Source: JLL, WGBC Health, Wellbeing & Productivity in Offices: The next chapter for green building 2014

*design based on the concept there is an instinctive bond between human beings and other living systems and the wider natural environment

Experience:

Its all about User Experience (UX)

CRE & FM will continue to enhance user experience

76% of respondents from JLL’s Global Corporate Real Estate Survey, report high expectations from leadership to enhance workplace experience over the next three years

10-25% 23% 11% 3% 18%Better mental functionand memory

Productivity increasesfrom better lighting

Productivity increasesfrom better ventilation

Productivity increasesfrom individualtemperature control

More productiveworkers in daylight

Happy employees have, on average, 31% higher productivity; their sales are 37% higher - their creativity is three times higher Source: https://hbr.org/2012/01/positive-intelligence

Look and feel, sensory triggers

Quality views and Biophilia,*noise and acoustics

Interior layout and active design, access to amenities

Indoor air quality, day lighting and lighting, thermal comfort

Building design features that are known to have positive impact on the health, wellbeing and productivity of office building occupants

Wellness and Well-being

Source: WGBC, The Business Case for Green Building Note: Operational cost and productivity benefits of LEED certified buildings


Digital Drive:

Technology transforms organisations, Real Estate and PEOPLE

The ubiquity of digital and third platform technology will have a profound impact on real estate and its users

By 2020, total mobile subscription is expected to reach 9.2 billion Source: Ericsson Mobility Report

“From the dawn of civilization until 2003, humankind generated five exabytes of data. Now we produce five exabytes every two days…and the pace is accelerating.”

Google Executive Chairman Eric Schmidt

Number of devices in use (in billions) by 2018

The Internet of Things

Tablets

Smartphones

Personal Computers2004 2018

Wearables

Smart TVs

Source: HBR – “Digital Ubiquity How Connections, Sensors and Data Are Revolutionizing Business”

Organisation Building Workplace

Human cloud, dispersed,mobile, embedded culture of outsourcing

Smart, cost effective, efficient, attract smart talent

Productive, flexible, virtual collaboration, coworking, on demand workplace

Implications


Sustainability:

Building a sustainable future for CRE With COP21 setting ambitious goals for sustainable real estate, our industry will need to respond with aggressive operational and strategic plans

Source: http://climateaction.unfccc.int/cooperative-initiatives

COP21 LIMITING GLOBAL WARMING TO BELOW 2˚C THIS CENTURY

ENERGY ACTION AND EFFICIENCY

RENEWABLE ENERGY

CARBON PRICE INNOVATION EMISSION REDUCTION

Commitments To Action

51%

CRE Response:

51% of respondents from the JLL Global Corporate Real Estate Trends

2015 cited growing pressure fromthe C-suite to drive the corporate

sustainability/CSR agenda

Source: JLL Global Corporate Real Estate Trends 2015

Coworking

Retro

fitex

istin

gas

sets

Inte

lligen

t bui

ldin

g sy

stem

sZero energy buildingsVirtual work model

Improve operationalperformanceFlexible building

design

Harness big data

Collaborativeworking

Renewableenergy use

Live work campuses


Ownership:

Own vs lease in 2016? Corporate disposals are at record highs, but lease accounting will alter portfolio strategies and decision making at the board level

The criteria for deciding whether to lease or own real estate will be re-examined by large corporations

Source: JLL,Global CRE Trends 2015

Source: JLL, Raising Capital From Real Estate, 2015

Lease accounting standard

All leases will come on to company balance sheets

potentially shifting the balance toward

ownership

40% of CRE leaders reported

increasing demands to

raise capital through the real estate portfolio

Corporate disposals

reach highest point in

8 years

OWN vs LEASE


M&A M&A is business as usual for CRE With M&A volumes at record levels it is a crucial area of value of CRE

Source: JLL Successful M&A: capturing value through real estate 2015, Intralinks Deal Flow Predictor 2015

How?

Turning your real estate into a factor of success:

1 2 3 4 5Start thinking about RE at the earliest opportunity

Manage confidentiality requirements

Speed is crucial to maximise value

Build a RE solution fully aligned with the acquisition strategy and objectives

Adopt an integrated approach and resource appropriately

MITIGATERisks

OPTIMISECosts

ACCELERATEOperationalStrategy

ENSURESuccessfulIntegration

59% of global senior executives expect to pursue acquisitions in the next 12 months The global number of announced M&A deals in Q1 2016 will be approx. 7% higher y-o-y CRE can help create value for companies throughout the M&A lifecycle

Copyright © JLL 2016 - Corporate Solutions

Coworking for corporates Corporate clients are embracing coworking to drive innovation and growth and meet CRE strategic plans (reducing footprint + increasing employees satisfaction and growth)

9

Source: JLL

The number of coworking spaces worldwide grew to 7,800 in 2015 compared to3,400 in 2013 The number of members using coworking space is predicted to reach 1 million by 2018 Key expectations from coworking members: Sharing Knowledge (68%), Brainstorming or sharing new ideas (60%), Sharing opportunities for new jobs or projects (55%)

Source: DeskMag,The Global Coworking Survey 2015

Internal CollaborationInternal coworking for employees only

CoworkingMembershipExternal coworking membership for employees only

ExternalCoworking SpaceCollaboration space for employees shared with external organisations/individuals in an external coworking environment

Internal Coworking SpaceInternal coworking space open to organisations/individuals


Data Intelligence: Data & Analytics are transforming decision making Integrated business intelligence will optimise CRE performance

Source: Mind the data gap: Aspiration vs. reality in corporate real estate, Forrester Consulting on behalf of JLL, 2014, JLL Global Corporate Real Estate Trends 2015

52%

56% 2017

57% of respondents surveyed globally will enhance their company's data gathering capabilities (over the next 1-3 years)

Use of data and analytics Aspiration vs Reality

Lack of effective data and analytics tomeasure insights Top constraint hindering CREfrom enhancing itself as a strategic value-add

Aspirations could be curtailed by current capabilities

Addressing gaps in people and process is critical Having the right people, process and technology in place fundamentally drives data and analytics

PEOPTE

CHNO

PR OC

33% need training to understand proper usage and application of data and analytics

31% have trouble accessing data necessary to make decisions

28% Today


Cities of the Future: New urban hubs are boosting CRE opportunities 26% of firms with revenue above US$1 billion, based in ‘Emerging World Cities’, potentially reaching 50% by 2025

Source: JLL Globalisation and Competition: The New World of Cities 2015

Emerging world cities will transform CRE portfolio strategy

Established World Cities – ‘The Big Six’ New York • London • Paris

Tokyo • Hong Kong • SingaporeEmerging World Cities

New World Cities Munich • Oslo • Vancouver

Barcelona • Denver • Brisbane

Future Challengers

Seoul Sydney Toronto

Nearly Emerged Shanghai

Beijing

Competitive Megacities

Istanbul Kuala Lumpur

Taipei Mexico City

Agile Higher- Quality Emerging

Shenzhen Guangzhou

Dubai Bangalore

High Potential/ Weakly Governed

Mumbai Manila Jakarta

Lagging Megacities

Dhaka Lagos

Karachi

Copyright © JLL 2016 - Corporate Solutions

Implications and Key Recommendations for CRE

Portfolio:

IMPLICATIONS KEY RECOMMENDATIONS

Workplace:HR and CRE convergence means User Experience is becoming preeminent

Strategy:Digital transformation is changing corporate strategy AND the form and function of Real Estate

Platform:CRE processes and skills need to evolve to meet emerging challenges

Reevaluate...your footprint and increase its flexibility to manage volatility and change

Redesign...your workplace to improve user experience and productivity

Digitize...your processes and platform to meet the expectations of tomorrow

your CRE strategy to align with new operational realities and enhance sustainable growth

Increasingly fluid portfolios are calling for dispersed, diverse Real Estate

Redefine...

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Contact us

Tom Carroll Head of EMEA Corporate Research [email protected] +44 (0)20 3147 1207

Marie Puybaraud Global Head of Corporate Research [email protected] +33 (0)632 879 748

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IF YOU WOULD LIKE TO DISCUSS FURTHER, PLEASE CONTACT US

Karen Williamson Associate Director – EMEA Research [email protected] +44 (0)20 3147 1197

Richa Walia Senior Analyst – EMEA Research [email protected] +44 (0)20 3147 1861