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The New Real: Unlocking new gains through smart buildings

There is a new reality facing the world of commercial real estate, driven by digital advances and the need to stay ‘smart’, and set to disrupt the economics of the sector. These forces of change are strong, the opportunities they present are real, and they will give rise to a range of new legal, regulatory and business issues to be considered.

We have explored these through research by drawing from the minds of leaders across the relevant groups of owners, occupiers, service providers, developers, contractors, investors and funders – as well as our lawyers - to identify the impacts they consider we are likely to face in this new reality. We will be sharing our legal insight on how best these impacts can be managed.

Our thanks go to our collaborators at Henley Business School, CBRE, Digital Policy Alliance, Energydeck, Aberdeen Asset Management, Savills, Westfield, JLL, IFDS and many others for their time, innovation and insights, to ensure we future-proof our interests within The New Real and maximise the gains to be made.

We share here the initial findings of our research as an introduction to the full report to be published in September.

View executive summary here or sign up to receive the full report

What is The New Real?

This is a research-based call-to-action to embrace the new reality and changing economics of the commercial real estate industry. It is relevant to anyone with interests in commercial real estate and intended to ensure those interests are future-proofed within The New Real and that potential gains to be made are maximised.

A glance at how it might affect you

It means different things depending on what your interests in real estate are. Here are a few examples for those stakeholders we have considered:

  • as an owner, it will require a more flexible approach to leases; greater data capture will ensure energy efficiencies and ability to understand future needs of tenants; a need to upgrade existing infrastructure and a battle against obsolescence; changes to asset and rental valuations
  • as an occupier, flexible working will lead to different space requirements/more agile workforce; a changed approach to how space is valued based on suitability; evaluation of workforce productivity will be important; greater scope for collaborations within a building
  • as a tech/ service provider, the merging of ‘old world’ disciplines to add value for occupiers; energy systems integration; new partnerships and collaborations will be required and will bring new revenue streams
  • as a funder/ investor, changing valuations will lead to financial product remodelling; and the value of digitally enabled buildings will need to be integrated in to yield models for rental growth projections
  • as a developer/ contractor, design flexibilities must be embraced; business models will need to change due to payment timing modifications; building design may need to be more ‘loose-fit’ and modular; retro-fitting will become important; opportunities to develop new income streams.

Review the legal pressure points in our executive summary 

What are the new trends for growth in the smart era?

We have identified 10 trends:

  1. Future-proofing your building means in-built flexibility
  2. Smart buildings are driving gains stretching far beyond sustainability
  3. Plugging into connected ecosystems opens new revenue streams
  4. Occupiers will push owners to rethink commercial lease terms for the future of work
  5. The construction industry will need to achieve hyper-efficiency, not necessarily hyper-speed to secure returns
  6. The largest occupiers will rebalance the mix of core and flexible space
  7. Forward-thinking investors, owners and occupiers will change how they value commercial property to seize smart gains
  8. Smart gains will need to be realised through new partnerships and new networks
  9. The move towards smart buildings and IoT is opening a Pandora’s box of legal risks around cyber security and data protection that must be addressed
  10. Winning the battle against obsolescence of buildings will be pivotal in securing returns.