Four key technologies set to change property
We examine four areas of technological advancement and their potential impact on retail, offices, student accommodation and logistics. For retail, we see driverless cars unlocking the car parks of super regional shopping centres, for mixed use expansion. Offices could see fewer jobs as machine learning and AI automates even complex tasks, but those remaining jobs will require a very different office product. Longer term, students could be increasingly less reliant on campus location, due to MOOCs and distributed learning. Finally, distributed manufacturing and last mile distribution will likely continue to disrupt logistics and high street retailing. Overall, we believe technology will result in increasing rates of obsolescence, increasing landlord/tenant interaction and more active management.
* Machine Learning and AI reduce OFFICE JOBS, but space per worker increases:
Up to 35% of all jobs in the UK are at high risk of being automated within 20 years, according to Deloitte. This could create a drag of 143,000-287,000 sq ft pa in take up. The remaining workers are more likely to be in creative roles and demand a more flexible office environment. Shorter lease lengths, more communal and break out areas, a focus on wellbeing and digital connectivity are all core requirements for the offices of the future. Buildings must be more modular, providing ‘shell and core’ style spaces that tenants will fit out themselves to meet their needs. We expect value divergence between these buildings and more traditional spaces to emerge, implying ‘younger’ portfolios should outperform.
* Driverless cars could end “the tax on land” around regional SHOPPING CENTRES:
There are approximately 4 cars for every 5 licensed drivers in the UK, and the average car in the UK spends about 96% of the time parked. As Google’s Sergey Brin points out, “It’s a huge tax on the land”. British Land’s Meadowhall has 12,000 free car parks, which we estimate cover 1.5m sq ft. Driverless cars would free up this land for new development, which could ‘drive’ c£185m of development profit.
* In the long term, distributed education would reduce on-campus demand for STUDENT ACCOMMODATION:
Although we see no immediate impact, education is thus far a holdout industry from technological change. Driven by expense, student debt burdens, competition and changing role of universities, we see ‘distributed education’ emerging as a disruptive trend in demand for on-campus education, potentially reducing the demand for ‘year long’ student accommodation.
* Drones, distributed manufacturing, digital consumption will likely continue to disrupt LOGISTIC AND RETAIL models: Build to order vs build to stock would drive retail patterns, with mass produced but individually tailored products and services increasingly on demand and requiring distributed manufacturing and advanced logistics platforms. This
could see a resurgence in the high street.
