Why Office Investors Must Act With Conviction In The Current Market

Exploring research by Cromwell Property Group

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"We think what's happened in 2020 is the dawn of the age of Space-as-a-Service." -Tom Duncan

Tom Duncan, Head of Research and Investment Strategy for Cromwell Property Group, joins Bold Founder Caleb Parker for the seventh episode of Season 6 to discuss Tom’s recent publication in Insight Magazine, titled ‘Office 2025: The Next Evolutionary Cycle’.

The two discuss how office demand is changing, thus creating a gap between supply & demand, and an abundance of misaligned stock, and what this means for commercial real estate investors.

Tom shares how this moment in the market can seem scary, but that office evolution is nothing new, and we’re now entering the age of Space-as-a-Service. 

Connect with Tom on LinkedIn

Connect with Caleb on LinkedIn 

If you have any questions or feedback on this episode, email podcast@workbold.co

---> Shout out to Samantha McClary for her article on Bold in EG. <---

Value Bombs:

• When I read research papers from the real estate community it tends to be from a traditional mindset, but you've come across, dare I say ‘woke’ in this. - Caleb
• I think up-close that the change we're having at the moment in the market is quite scary for landlords and for investors... but if we zoom out onto a much longer time horizon, I think that gives us more balance that this is just the latest iteration of a constant process of invention and reinvention. - Tom
• We think what's happened in 2020 is the dawn of the age of Space-as-a-Service. - Tom
• In order to attract employees, I think offices must work harder and they must give them a better proposition. - Tom
• I think that we in commercial real estate have to stand up and be champions of really good company culture and lead by example. - Caleb
• I think we in commercial real estate have the opportunity to make such a positive impact on all the communities we go into. - Caleb

Listen to the full episode: (press play)

Timestamps

[05:00] Tom gives a brief overview of Cromwell and the portfolio.

• Cromwell Property Group is an international investment manager with $8bn of assets split 50/50 between Europe and APAC.

[06:00] What is the background on the research that led to the outcomes in the article ‘Office 2025: The Next Evolutionary Cycle’?

• The feature of the office was subject to such fierce debate in the industry and in the media more generally, they felt much of that debate was misinformed and subject to overly negative sentiment.
• Survey data shows that there are benefits for both employee and employer to utilising the office as a working environment. 
• Working patterns will change to accommodate office and home working, and where people end up working will be based on the tasks they need to complete. 
• There will be more incentivisation to get people back into the office.

[11:00] Can you provide some context on the gap between supply and demand and where does Space-as-a-Service fit in?

• Employees and building occupiers now hold the power. Landlords should be viewing themselves as service providers to their customers, the occupiers, and this should lead to a physical evolution of the type of space that’s provided. 

[16:20] Your article quotes “[investors in real estate should] act with conviction to dispose of misalign stock and acquire product, which is, or can be aligned to future occupier demand”. Do Real Estate Investors not usually act with conviction?

• Real estate can be guilty of ‘herd mentality’, meaning they follow the same patterns. 
• Acting with conviction might mean going against the grain or put themselves in an uncomfortable position based on the narrative at the time. 

[18:40] What’s your view on building from the ground up versus buying and repurpose?

• Much of the existing stock will need to be repositioned to make sure that it aligns with what occupiers of today want and occupies as tomorrow as well.
• Environmental factors mean it will be increasingly difficult to create new buildings from scratch, so repurposing an existing building will be much more environmentally friendly. 

[23:30] How does Cromwell look at rolling out Space-as-a-Service across the portfolio?

• A tailored approach depending on offices, locations and market need.   

[24:50] Quickfire round questions.

• Tom’s go to for workplace insight are Antony Slumbers, Dror Poleg, The Economist Magazine and Podcast
• Tom would like to use a magic wand to see us valuing environmental factors far more highly in real estate.
• Tom’s favourite holiday destination is Brisbane, Australia. 

Resources:

• Insight Magazine ‘Offices 2025: The Next Evolutionary Cycle’ Article
• TSK Documentary
• Cromwell Property Group
• The Economist Magazine 
• The Economist Podcast
• MIPIM 2022, Cannes

Shout Outs:

1. James Goldsmith
2. Antony Slumbers
3. Dror Poleg 
4. Samantha McClary

About Tom Duncan

Follow Tom on Twitter

Tom Duncan is the Head of Research and Investment Strategy for Cromwell Property Group.

In his role, Tom is responsible for setting the research strategy for Cromwell’s international platform. His team analyses market economic and thematic change to provide research and advice to the business, its clients and investors on investment opportunities. His advice supports the investment decision making process informs new fund launches and the allocation of capital expenditure with an existing mandate.

Tom joined Cromwell in 2021, not long ago from Swiss Life Asset Managers, Europe's largest institutional owner of real estate, where he spent four years and was laterally director of strategy and innovation with research responsibility. Prior to that he spent two years at JLL in the UK as an Associate Director in the Corporate Research Team.

Previously, he spent five years working in Australia at Hill PDA, an Economic Consultancy, and Colliers international as head of New South Wales and ACT research. Tom holds Master's degrees in property development from the UTS Sydney and Town and Country Planning from the University of Sheffield.

Sponsors

Headline Sponsor: TSK

TSK creates inspiring workplaces for some of the world’s biggest brands across the UK and Ireland, They’ve been working for 25 years to deliver the best employee experiences and the vision of their clients. Not only do they create great places to work, TSK share workplace content every week from the latest data to inspiring spaces they’ve designed and built. You can read their latest insights at www.tskgroup.co.uk or check out their LinkedIn and Instagram pages to become a follower, fan and friend.

Fortune Favours the Bold

Bold merges property management & Space-as-a-Service to help office customers grow faster and drive asset value. Bold is a real estate brand owned and operated by NewFlex (www.workbold.co) 

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