One-stop shop eludes real estate industry

Copyright: David Lawson - June 2001

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It was apt that the main talking point at this year’s British Council for Offices conference was how to deal with Johnny Foreigner. After all, the venue was in Berlin,  illustrating the importance of international business nowadays. They don’t think like us, warned one of the lead speakers. They don’t get our jokes and  they don’t appreciate our famous diplomacy. So watch out, or you will not make the deals.    The buzz of excitement [and crude jokes] seemed to miss one vital point, however. You don’t have to go abroad to find a chronic breakdown of communications. Two of the world’s biggest occupiers also pontificated from the rostrum that tenants and landlords were still talking entirely different languages. We don’t like facilities management, cried tenants. Why can’t you do it? No-one on the development side seemed ready with an answer.

  Simon Ward of Cisco called for a one-stop property shop offering everything from bricks and mortar to management services. After all, ‘landlords should know the building better than we do,’ he said.   Nigel Waring of HSBC was just as adamant, pausing only to also take a sideswipe at huge delays between taking space and moving in after fit-out.  Why can’t buildings be designed from the inside out rather than the other way around, he complained. All very logical, and no doubt big names like Trillium will say this is just what they target. But these giant occupiers obviously feel this is the exception that proves the rule. Most of the industry remains locked in a rigid pattern where builders build, funders fund and occupiers are left to make the best of the rest. The problem with the property sector is that occupiers are not seen as customers. Landlords look instead to shareholders, who delight in the idea of rent flows undiluted by irritating and costly problems like building services.

  Waring warned that occupiers would go abroad if they could not find the building specifications, flexible leases and services they need in this country.  But that might not solve the problems. Ward was so disgusted with the inability of finding anyone to take a long-term partnering  role that it self-built three giant campus schemes in Munich, Amsterdam and Paris.  Builders may not care, as they still get the work: but he pointed out that this denied the industry development profits on a cool 2.5m sq ft of space.

   Cisco might be dismissed as a spent force but that is ludicrous. It may  be trimming space but will return to lead the race for expansion before long. And its insistence on flexible ‘green’ buildings, its cry for all-in packages including facilities management and a closer partnership with landlords will gradually be taken up by other occupiers.

   Some are already voting with their feet. Chris Davies, property head at another major bank, Barclays,  said outsourcing property and facilities management has already paid for itself. Some 700 Woolwich properties were absorbed in three months during the two banks’ merger – an impossible target if they had to combine two corporate  teams. The next step will be outsourcing bricks and mortar. With lessons like this, the day of the large in-house property team is dead, the conference heard.

  But what about the next time Barclays wants a new building? In central London it will probably succumb to deadening convention. But elsewhere, like Cisco, it will be driven by staff demands to find greener, efficiently-managed buildings. Who will come up with the goods?   Is any other sector so out of touch with its customers?  Perhaps the rail carriers, worshipping investors rather than travellers. Perhaps retailers who lost touch with reality. The speed with which Railtrack and Marks & Spencer fell from grace may hold a telling message the property industry seems to smug to realise.