New Economics for High-Performance Property
Economics of High-Performance Property
Outside of London, the business case for investment in new build real estate is still difficult. Ollio was formed to bring fundamental change to the high-performance property sector, how it can increase yields, how it improves the design, how it relates to its customers.
To unlock a new economic paradigm, one that allows tenants as occupiers to commit to revolutionary new property solutions for potentially significant business improvement outcomes requires a fresh approach.
A different economics
To change the status quo, the value proposition must link desirability at the level of users to the value of the building as an asset at investment level.
Can we arrive at a situation where users are prepared to pay more in rent for a building because it is a more desirable asset? Could greater desirability also improve the certainty of its yield to the investor? And if so could we prove a viable link?
To construct a stronger economic argument requires more holistic thinking. The first thing to keep in mind is that buildings as workplaces are provided to assist businesses to do what they do on a day to day basis. If they can do that in a better more visibly effective way they begin to become more desirable to the tenant at a business level.
People are more valuable than buildings
We know that people are far more valuable resources than buildings. What people do and how effectively they do it is an important metric for business management to monitor. To illustrate this, we have undertaken a simple calculation to compare the investment a typical UK office based professional services business outside the London metropolitan area will make in its people and its buildings on a day to day basis.
If can be seen that staff overheads and production costs outstrip building procurement costs by a long way.
Staff costs swallow property costs whole
It stands to reason, therefore, that if the move to a new building could be configured to increase staff engagement or productivity by even ten percent that it would more than offset all costs associated with the move and the additional rent that might be involved. Developers and clients willing to work together to embraced this as an objective could agree higher rents and longer leases, so increasing investment yield.
Gallop Poll of 2000+ businesses showing effects of 10% increase over average in measured staff engagement
Designing for Engagement and Productivity
But, engagement, and by default productivity on its own is a difficult concept to pin on the building alone. There are many factors other than employee environment that governs engagement and productivity. However, what we do know is that buildings form part of corporate branding. Buildings tell staff and customers what type of organisation resides there. They position businesses in relation to their competition. So it's clear that while a building is not the complete story, it is a sizable component of it, and the corporate metrics would only need to move a relatively small amount to get the return on investment required.
We know the environment people work in has a profound effect on how productive they are in it. Too noisy, too hot, too much distraction, poor air quality, lack of opportunities to socialise, closeness to nature, all have proven and well-documented impacts on productivity, stress, even sickness and absenteeism.
Then there are the things that new research and new design around biophilia, health and well-being are bringing greater productivity to humans. In the workplace we rely on staff to take on board new information, add new ideas to it, to create value for clients. The efficiency of this cerebral process is reliant on human physical and neurological health. It is in employer's interest to make sure that employees are in good health, taking adequate exercise, have access nutritious food, and are taking the time to regenerate away from the workplace. New workplaces can be designed to assist this process.
Design for business performance and profit
The financial incentives to pay more attention to building design, and the opportunities it offers to improve the performance of people, accentuate brand, communicate culture and improve bottom line profitability are obvious.
It's not unreasonable to suggest that a corporate business strategy to move to a new building as a means to improve the workplace environment for the better, can eat whole any costs involved and add at least five percent to the bottom line of the business profit and loss account. It is within a client's gift to demand more, to drive up the importance of buildings, and with it the value of the buildings designed to deliver these levels of performance. Only then will clients get the buildings they need, not the ones they get given.
At Ollio we have the skills and the expertise to help businesses, developers and architects exploit buildings for better business. We are setting out to prove that buildings can improve business and vice versa.
If you would like us to help you, get in touch.
"66% of Edinburgh office workers believe that the interior layout and design of their workplace is important, but 60% think that if it were improved to match their ‘ideal’ layout and design, it would significantly increase their productivity."
What Office Workers Want - Saville BCO survey