Accommodating change — Emerging real

8/14/2019 Accommodating change Emerging real

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flexible space on short-term leases to absorb the

demands of individual projects, and outsourced

space on a just in time arrnagement for

support functions.

The paper concludes that the property in-

dustry today is changing from traders in real

estate to an emerging role as value stream

integrators and total service providers over the

life of the tenant organisation.

Keywords: new economy, flexible working,

experience economy, property offer, management

of clusters, flexible space provision, outsourced

services and amenities, managing change, life

cycle of design decisions, flexibility, adapt-ability, value strain integrator, total service

provider

A WORLD IN FLUX

Look back 20 years and it is not dif-

ficult to recognise the speed and impact

of change.1 Digital Equipment Corpora-

tion (DEC), today no longer with us,

were halfway through their life span. The

IBM Personal Computer (PC) had just

been introduced, with all its incumbent

wires, heat gain and clutter. Today there

are wire free lap and palm-top devices,

and computing is ubiquitous. Twenty-

five-year full repairing leases were the

norm, and shell and core, with flexibility

of fit-out, was only a gleam in the eyes of

the most innovative of developers.2 Plan-

John Worthington is Deputy Chairman of

DEGW, of which he was a founder. He is also

Visiting Professor of Briefing and Building

Performance at the University of Sheffield.

ABSTRACT

The pervasive impact of information technol-

ogy, and the shift to a new economic paradigm

has resulted in new ways of working. Successful

organisations today are looking for work en-

vironments that unlock creativity, support col-

laboration, and ensure that the ideas of staff

and collaborators are absorbed back into the

intellectual capital of the organisation. Or- ganisations have changed dramatically, but the

physical settings have been slow to respond.

The challenge for the real estate market and

facilities professionals is to respond to a business

model that supports both individual and col-

laborative working; provides for flexibility of

tenure; and affords adaptability of both space

use and function. A new real estate offer is

emerging that provides both space, services and

amenities, to support the tenants business over

the life of a customers needs. Leading edge

developers are now more concerned with creating

a diversity of users, by providing space for a

symbiotic clusering of firms in specific market

sectors with their supporting supplier services

and customers. Tenants to respond to con-

tinuous change are increasingly looking to

reduce the amount of core space they own, with

the majority of their portfolio consisting of

Accommodating change Emerging real

estate strategies

John Worthington

Received (in revised form): 13th September, 2000

Deputy Chairman, DEGW Ltd, Porters North, 8 Crinan Street, London N1 9SQ, UK;Tel: 44 (0)207 239 7702; Fax: 44 (0)207 278 4125;e-mail: [email protected]

Journal of Corporate Real Estate Volume 3 Num

Pa

Journal of Corporate Real Estat

Vol. 3 No. 1, 2001, pp. 8195.

Henry Stewart Publications,

1463001X


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ners and developers were fixed in a battle

over the distinction of office rather than

industrial uses, and the political agenda

was concerned with defending manufac-

turing employment against the onslaughtof the service economy.3

Today, we have already passed through

the service economy to embrace the

knowledge economy. Information and

communications technology have con-

verged, providing through the Web a

seamless global network. Change has

accelerated. Product life cycles have

shrunk. The e-commerce year is com-

monly described as three months. Kevin

Kelly, in his New Rules for the New

Economy,4 describes an economy that isfounded on a set of rules that confound

traditional expectations. The new tech-

nology has spawned an economy where:

There is the minimum of hierarchy and

decentralisation of control; power is

with the swarm.

Value is created by abundance not scar-

city. One phone has very little value,

while one million provide a rich range

of contacts. Generosity begets wealth. Hardware is

frequently given away to open up the

market for valuable add-on services.

Firms thrive on concentrating on the

success of the network before that of

the individual company.

Corporations, to succeed, are prepared

to change at the height of their suc-

cess.

Organisations are in continuous flux

and change is the norm.

Processes dominate the product; the

experience adds value, many times

greater than the base materials.

Success is measured not by increased

efficiency, but by the opening up of

opportunity.

The traditions of the construction and

property industries have been founded

on reducing change to minimise risk to

the supplier. Todays successful businesses

reflect an ability to adapt to the changes

in markets, technologies and political ex-pectations around them. The challenge is

to create a new real estate model and a

procurement process that responds to and

works in partnership with the needs of

business.

EMERGING WAYS OF WORKING

Traditional business thrived on the quality

of its physical product, which in turn

was made more successfully by reducing

manufacturing costs, fine-tuning design,and through excellent engineering and

quality control improving reliability. Suc-

cess was a result of driving down costs

through repetition and volume produc-

tion.

Today, with computers controlling

many of the functions of manufacturing,

and the information process of ad-

ministration, employment is shifting

to a workforce composed of sym-

bolic analysts, who perform the rolesof problem solving, identification and

strategic brokering.5 In his study The

Turn to a Horizontal Division of

Labour6 Stephen Barking shows that

information management and knowledge

workers account for over 60 per cent of

the total North American workforce.

These knowledge workers are educated,

professional, self-managing, independent

and increasingly mobile, moving upwards

between jobs, with little concern for the

old security of the job for life. The new

business relies for its success on con-

tinuous and ever more rapid innovation

(doing the right thing better), creativity

(initiation of new products) and speed

to market. Successful organisations are

aiming to retain customers through

adding value through the total ex-

Accommodating change Emerging real estate strategies

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Hierarchy over functionality, with largecorner offices for the senior executives

and corridors of closed-off cubicles;

Individuality over collaboration, by

erecting walls and providing few

stimulating meeting settings;

Past attitudes and silo thinking;

Barriers to external partners and clients,

by erecting impenetrable barriers and

client-only areas;

Wastage of investment capital, through

reinforcing a space use policy of single

usage, personal ownership, and limited

access over the 24-hour, seven-days-a-

week timescale.

Meanwhile, emerging environments for

flexible working aim to provide for:

Openness, flexibility and adaptability;

perience. Pile and Gilmore in TheExperience Economy show a powerful

example of the added value of service

and style, by pointing out that the $10

coffee in St Marks Square originates

from the 50-cent material value of a

packet of coffee beans. The added value

is the ambience of the square, the

orchestra, the bow-tied waiter and

the feeling of well-being. Organisations

today are looking to find a work

environment that will unlock creativity,

support collaboration and ensure that the

ideas of staff and collaborators are

absorbed back into the intellectual capital

of the organisation.7 Organisations have

changed dramatically, but the physical

settings have been slow to respond.

The large majority of current office

layouts support:

Figure 1

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Functionality, supporting service and

revenue generation.

COLLABORATION, COMMUNICATION

AND SOCIALISATION

Figure 1 summarises the characteristics of

the conventional office, compared with

new ways of working, and sets out thebuilding and real estate implications.

In the 1980s, business was primarily

focused on efficiency, the driving down of

costs by increasing utilisation. The focus

of real estate was on building perfor-

mance. Smart firms today have recognised

that business success is a balance between

driving down costs (efficiency) and im-

proving people performance (effective-

ness) through managing space, time and

staff expectations (Figure 2). The focus

has shifted from property to processes, and

the application of technology to support

staff in achieving business objectives. To

ensure a greater sense of collaboration and

creativity, three trends are recognisable:

Opening up with the linking of

space to function rather than status

Sharing by increasing the amount of

shared space, that can be used by dif-

ferent staff over time

Variety providing a wider and richer

range of work settings that can support

creative and collaborative work.

Organisations that have embraced the op-

portunities arising from increased innova-tion and collaboration, are focusing on:

Greater use of teamwork reflect-

ing interdisciplinary and non-hierarchi-

cal work. Several minds are better than

one in generating ideas, and interac-

tive discussion can solve bottlenecks

more rapidly than individuals in separate

rooms. Teamwork, it is recognised, re-

quires a combination of environments

for stimulating face-to-face meetings,

combined with the immediacy of intra-

net and extranet connections between

team members, who may be dispersed

geographically. Teams will need to be

assembled rapidly for specific projects,

often coming together in one location

for intense short periods of time and

then dispersing. The real estate implica-

Figure 2


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Value for Money is a

balance betweendriving down costs

(efficiency) and

improving business

productivity

(effectiveness)

Time and Process

Function and Need

Grade and Status

Managing Efficiency and Effectiveness

Maximising

performance

Adding Value and Increasing Productivity


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ing long-term partnerships and alliances.

The firm relies, like the modern family,

(Figure 3) on building a network of

relationships with ongoing customers,

service providers, co-professionals and

component suppliers. Dell Computers,

through the intelligent use of telephone

and Internet, has created a sophisticated

logistical web that tailors customer

requirements and organises component

subcontractors on a just in time basis

to respond to market demands in the

minimum of time, and with limited

stock holdings.

The challenge for the real estate market,

and facilities management professionals, is

to respond to:

An organisational model that aims

to support both individuality and

team collaboration. Firms are moving

Figure 4

Figure 5


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Changing patterns of

tenure and functionFixed Flexi On demand

Long lease

Corporate brand

High quality

Predominantly office

Representational space

Outsourced FM

30%

Short lease

Provider brand

Flexible

Office

Support

Outsourced FM

50%

Licensed

Service brand

Ready to use

Office

Support

Service company

20%


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formation of quarters, where similar

sectors would cluster to undertake their

business: Harley Street for the medical

profession, the jewellery quarter in

Birmingham, or the barristers at the

Inns of Court. These areas often had a

dominant landlord, who worked in

partnership with the association of

professionals or craftsmen. Healthy local

economies relied on a network ofprimary firms and suppliers, co-located

and supportive of each other, with a

mix of space and tenure that allowed

both starter and established firms to

prosper (Figure 6). Few of todays

business parks allow for this rich mix.

The challenge and significant real estate

opportunity for development companies

in the future is to create mixed function

and tenure environments that reflect the

traditional city centre business quarters.

The trend to science, technology or

media parks etc aims to create just

such synergetic clusters, but is still

predominantly real estate focused. The

richness will be achieved by attracting

small and large firms, a wide range of

support, suppliers to the prime functions

and an ambience that attracts good staff

and customers. Real estate developers

and investors within this model may be

in long-term partnership with inter-

mediaries large firms, associations

and service providers such as Regus

who in turn will attract and service

tenants.

Flexible Space Provision. Analysis by

DEGW13 of the use of time and space

across a wide range of companiessuggests the need for a spectrum of

accommodation, from fixed symbolic

space to space which may be available

on demand. The fixed, symbolic space

reflects the core values of the organisa-

tion and is either on a long lease

or property owned by the organisa-

tion. Such space may be the cor-

porate headquarters (eg British Airways,

Waterside, Heathrow), a training centre

or a research and development campus.

Such space today may be 30 per cent or

less of the total real estate portfolio. A

large portion of the space demand is

accounted for by flexi space, where

project groups can grow and change

depending on the demands of the

business. Such space, provided on a

three to five-year lease and fitted out for

Figure 6


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A thriving local

Economy allows for all

the rungs on the

premises ladder with amix of functions to co-

locate in an area with

a variety of tenure and

mix of accommodation

types

Entrepreneurial/

High Tech

Craft/

Low Tech

ESTABLISHED Own building

Single function

MATURE Own building

Mixed function

Own building

YOUTHFUL Multi-tenanted

Shared service

Design centre

INFANT Business centre Incubator units

EMBRY Innovation centre Homework


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ness, provides serviced space for In-

ternet providers, which is rapidly being

rolled out on a global basis. The World

Trade Centres at South Amsterdam andSchiphol Airport are similarly showing

the return that can be made by focusing

on supply on demand and managing

high-quality services and amenities for

a community of tenants.

As property moves from supplying a

product, where the investment is the land

and building, to offering a comprehensive

service, where the added value reflects the

total experience, a new model is emerging

(Figure 8) where the:

Time horizon is the life of the cus-

tomers needs;

Buyers expectations are the total ex-

perience of the reliable provision of

business support;

Investment and return to the supplier

flexible working, may account for

4060 per cent of the space require-

ments. The remainder of the space can

be provided for on demand in periodsof one hour to one year. This market

for workspace has been well catered for

by the serviced office providers such as

Regus and HQ Global Workplaces.

Opportunities still exist for the on-

demand provision of support amenities

such as computing, education, libraries,

health etc. Figure 7 is an analysis of the

range of support services provided

within major corporates, often account-

ing for up to 25 per cent of floor space.

Many of these functions could be

shared with partnering suppliers and

provided as an on demand service.

Outsourced Service and Amenity. Innova-

tive real estate investors and providers

have recognised the demand for and

financial returns from support services.

Global Switch, the Internet hotel busi-

Figure 7

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Business andstaff amenitiescould be providedby externalsuppliers to beshared by acluster ofinterrelatedbusinesses


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are the initial design and development

costs and revenue streams; Source of value is the establishment of

the brand and the reliability of the

experience;

Design is a repetitive programme,

which can learn from past experience;

Revenue model is reliant on a com-

bination of annual subscription and user

fee on a pay-as-you-use basis.

The emerging model for real estate

delivery is moving towards a combinationof flexible tenure, value-added services,

rapid response and a mix of semi-public,

shared and private space. The providers,

unless traditional developers are quick to

adapt, may well in future be a consortium

of financiers, contractors and service

providers, who are already emerging

for the public sector private finance

initiatives.14

BUILDING FOR AN UNPREDICTABLE

FUTURE

Organisations are flexible and dynamic,

while buildings are long term, fixed and

may be supportive (Figure 9). The ex-

perience of IBM and Microsoft shows that

buildings can be viewed as a millstone:

very expensive to build, costly to main-

tain, often under-utilised, and slow to

procure and dispose of. However, build-ings carefully chosen and well managed

can be a valuable source of income; a

focus for expressing corporate culture; a

stimulant to collaboration and innovation;

and a symbol to the public, staff and

customers of the companys values. Key

buildings, whether custom-built or leased,

can be a major asset to the company, to

provide a sense of place in an ever

changing world. By recognising the life

cycle of design decisions (Figure 10),long-term decisions can be made about

the site, skin and structure while still

allowing changes to be made to the

services, fit-out and interior planning to

adjust to specific activities and changing

organisational needs.15

When designing or selecting a building,

the emphasis is on ensuring adaptability.

Making a building adaptable involves

overcoming the tendency to over-specify

design. A strategy for an adaptable

building involves anticipating the quality

of space that will be required. Can the

building accept both cellular and open-

plan office space and absorb restaurant or

conference facilities by changing the

fit-out and services within a standard

shell? Facility managers are continuously

matching demand and supply so that

Figure 8


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A new paradigm of

real estate delivery is

emerging which is

focused on

supporting the tenantin maximising their

business

performance, over

time

Characteristics Product Service Proposed Offer

Time Horizon Time of sale Period of contract Life of customer need

Buyer expectations Price, delivery,convenience

Ongoing support

Dominant cost focusDirect costswindfall profits

Period costs

Reflecting service

required

Initial design anddevelopment costs

Source of Value Product ion Maintenance Brand - evolving experience

Design Fixed and unique Customised LearningBuild on past experience

Revenue model Sale price Annual fee subscriptionSubscription and user fee

Tota experience


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to organisational and technical change.

These are long-term decisions, which are

difficult to change during the life of the

building and will have a major impact on

its future adaptability.

Building services

These include heating, ventilation, light-

ing and cable distribution and may last

15 or 20 years. The challenge here is

to provide adequate cooling, cabling and

power capacity for accommodating in-

short-term user needs are reconciled with

building capacity.

To achieve this involves recognising the

different life cycles inherent within the

building shell, services, scenery and set-

tings.

Building shell

The skin and structure will last for the

lifetime of the building: 50 years or more.

The key design decisions concern its

shape, size and the ability to adapt

Figure 9

Figure 10

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Impact of

organisationalissue son building

decisions

Design decisions can

be layered to reflect

the degree of

permenance and life

cycle of each of the

buildings elements

Shell

Services

Scenery

Settings

Site Timeless

Skin

Systems

25 years

3 years

50-75 yrs

10-15 yrs

5-7 yrs

Day t

o

day


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creasing levels of technology. The capacity

of the building shell should be sufficient toallow for changes in the provision and

technology of services over time.

Scenery

This is the fitting-out of the internal

elements, such as ceilings, partitions and

finishes, and normally has a shorter

life cycle than services (seven to ten

years). The scenery some services provide

matches the detailed user requirements,

addressing issues of organisational change,personal identity and corporate identity.

The brief for the fit-out can be assembled

independently of the building shell.

Settings

The day-to-day management of the furni-

ture and equipment within the building

shell. The partitions and furniture layout

can be reconfigured to meet the changing

needs of the organisation.

Site, skin and systems

Added to these have been: the Site, which

is timeless and provides context; the Skin,

with a 25-year life cycle, which provides

the ability to upgrade the image and

adjust to surrounding changes; and the

Systems for information and communica-

tion technology (ICT), with a three-year

life cycle, an increasingly costly com-

ponent of the fit-out. Louis Kahn, theeminent American architect, talked of

architecture as the meaningful making of

spaces in their light. To him the ultimate

adaptability was a set of spaces with no

name that stimulated the user to propose

a use. His Unitarian church in Rochester,

New York State (Figure 11) provides a set

of varying dimensioned spaces which are

exquisite in their ambience and cry out to

be used.

MANAGING CHANGE

Understanding goals and objectives and

transferring these expectations to those

who are to supply the space, as well as to

those who are to be accommodated, are

at the heart of procurement success. The

brief has traditionally been seen as the

instrument for communicating expecta-

tions: a document prepared by the client

and passed to the design and construction

team as a document to be referred to in

time of crisis. In a world of change the

continuous process of briefing is more

important than a fixed and single brief.

Effective briefing is a continuous, itera-

tive process with a number of brief-

ing gateways, each layered to reflect the

difference of shell, services, fit-out and

Figure 11


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Louis Kahn, Unitarian

Church, Rochester,

New York State. A

bunch of space that

allow for a wide range

of functions

Source: Loui

s

Kahn


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providing flexibility for the client to

undertake its business most effectively

over many sites, with space and service

being provided on a just in time basis.

Business service companies (such asRegus or HQ) are a pointer to the

future. Focused more on service than on

property, and with a global span, they

could, with the outsource facility manage-

ment organisations (such as Johnson

Controls, Serco), be the integrators of the

future.

Organisations that have embraced the

new technology have been prepared to

totally reinvent the way they work. The

challenge for the design, construction and

real estate professions will be to create

equally radical solutions to support these

new organisational structures. Education

may need to respond by a greater willing-

ness to provide cross-disciplinary courses

that allow new disciplines to flourish

between the established professions. Four

areas of knowledge design, main-

tenance, measurement and production,

held together by process management

are central to an integrated approach. The

professionals challenge is to turn away

from professional turf war to providing anoffering to meet the clients objectives.

REFERENCES

(1) Worthington, J. (1997) Reinventing the

Workplace, Architectural Press,

Butterworth Heinemann, Oxford.

(2) In 1980 Sir Stuart Lyton, then a

Director of Greycoat Estates, provided

an early version of shell and core at

Cutlers Gardens in the City of London,

where DEGW prepared the tenantfit-out manual.

(3) DEGW (1985) Stockley Park: Meeting

the Needs of Modern Industry,

Stanhope Properties, London.

(4) Kelly, K. (1999) New Rules for the

New Economy: The Way the Network

Economy is Changing Everything,

Fourth Estate, London.

Figure 13


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The design brief

manager manages

the users

expectations, and

supports the design

and construction

team in delivering

the building project

TheCorporate

Board

ProjectSponsor

Interests:

Deliver at Cost onTime

Establish SeparateProject-Clear Beginning andEnd

Freeze requirementat earliest possiblemoment

Interests:

Minimise Cost(efficiency)IncreaseProductivity(effectiveness)

ReflectContinuousBusiness Change

Keep option opento lastresponsiblemoment

DesignBrief

Management

USER TEAMBUILDING TEAM


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