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: jworthington@degw.co.uk
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
Accommodating change Emerging real estate strategies
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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
Accommodating change Emerging real estate strategies
Page 86
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
Accommodating change Emerging real estate strategies
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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
Worth
Pa
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
Accommodating change Emerging real estate strategies
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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
Worth
Pa
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
Accommodating change Emerging real estate strategies
Page 92
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
Accommodating change Emerging real estate strategies
Page 94
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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