‘Corporate Real Estate Portfolios 2040 according to ICT trends’ Global Workplaces, Global Offices, Global Companies/Corporations Master thesis P4 report 03-10-2013 Faculty of Architecture, Delft University of Technology Coordinator: Dr. ir. D.J.M. (Theo) van der Voordt First mentor: ir. M.H. (Monique) Arkesteijn dr. ir. A.(Alexander) Koutamanis ir. P.U. (Patrick) Virginia Student: R.P.C. (Robert) Rosa BSc (1211854) TU Delft, Real Estate & Housing Graduation Thesis (P4 report) October 3, 2013 COLOPHON Author R.P.C. (Robert) Rosa BSc Student number 1211854 Address Korvezeestraat 557 2628 CZ Delft E-mail [email protected] Telephone +31 (0)6-45 2929 35 University: Delft University of Technology Department Real Estate & Housing MSc Laboratory Corporate Real Estate Management Lab. coordinators Dr. ir. D.J.M. (Theo) van der Voordt (TU Delft) Research guidance team: Ir. M.H. (Monique) Arkesteijn (TU Delft) dr. ir. A.(Alexander) Koutamanis (TU Delft) ir. P.U. (Patrick) Virginia (Heren2 B.V.) External examiner: dr. ir. I. (Ivan) Nevzgodin Graduation company: Heren2 B.V. Version P4 October 3, 2013 R.P.C. (Robert) Rosa 1211854 2 TU Delft, Real Estate & Housing Graduation Thesis (P4 report) October 3, 2013 Preface This report contains the interim research results for my graduation thesis at the faculty of Architecture of Delft University of Technology within the Real Estate & Housing department and the laboratory Corporate Real Estate Management. Within the faculty this report is also stated as the P3 report, it is the third progress checking moment of the five (P1, P2, P3, P4 and P5) in total. The interim research results as described in this report will focus on the developments in information and communication technology in relation with (future)real estate portfolios of corporations in the Netherlands. This research aims at better understanding the future demand for office space and location by looking at the demand influenced by ICT its extreme. With this future demand real estate developers and real estate owners can align current and future real estate portfolios to the future demand for the next three decennia. This all in order to obtain and retain user satisfaction, efficiency, sustainability and cost reduction, or let us say: a better future. I would like to thank my coordinator Dr. ir. D.J.M. (Theo) van der Voordt and my mentors ir. M.H. (Monique) Arkesteijn, dr. ir. A.(Alexander) Koutamanis, at Heren2 ir. P.U. (Patrick) Virginia and dr. ir. i. (Ivan) Nevzgodin for guiding me and my research to this proposal and further. Robert Rosa Delft, October 3, 2013. R.P.C. (Robert) Rosa 1211854 3 TU Delft, Real Estate & Housing Graduation Thesis (P4 report) October 3, 2013 Contents Preface .............................................................................................................................................. 3 Management Summary................................................................................................................... 11 Introducing the world of office work .............................................................................................. 12 Theoretical research ....................................................................................................................... 13 Empirical research ........................................................................................................................... 14 Future demand 2040: Choice in place & Freedom in Technology ................................................... 16 Different users ......................................................................................................................... 16 Matching: future demand with corporate real estate portfolios 2013-2040. ................................ 18 Preparing for the future: Retain by Releasing ................................................................................ 18 Weighing and selecting alternative solutions for a future match ............................................... 19 Step by step plan: First, second welcome third ........................................................................... 21 Future supply: Bits, Bricks & Brains ................................................................................................ 22 Conclusion ....................................................................................................................................... 23 Readers guide .................................................................................................................................. 25 I. Research setup ...................................................................................................................... 26 1. Introducing topic ................................................................................................................... 27 1.1 Changes in demand and increasing office vacancy ........................................................... 27 1.2 Problem description .......................................................................................................... 29 Problem statement .................................................................................................................. 30 Vision & Expectations .............................................................................................................. 30 1.3 Research questions ............................................................................................................ 32 Main research question ........................................................................................................... 32 Sub questions ........................................................................................................................... 32 1.1 Research Aim ..................................................................................................................... 32 1.2 Research focus ................................................................................................................... 33 1.3 Research Delineation ......................................................................................................... 33 1.4 Research relevance ............................................................................................................ 34 Scientific Relevance ................................................................................................................. 34 Practical Relevance .................................................................................................................. 34 Target group & utilisation potential: ....................................................................................... 34 Motivation on subject .............................................................................................................. 35 Learning Objectives .................................................................................................................. 36 2. Research Methodology ......................................................................................................... 37 2.1 Introduction ....................................................................................................................... 37 2.2 Qualitative Research ......................................................................................................... 37 2.3 Research Phases & Techniques ......................................................................................... 38 2.4 Respondents selection ...................................................................................................... 41 2.5 Answering research questions .......................................................................................... 42 Qualitative Analysis .................................................................................................................. 42 2.6 Research instruments: ....................................................................................................... 42 2.7 Conceptual Framework ..................................................................................................... 43 2.8 Research organisation ....................................................................................................... 43 II. Setting the basis .................................................................................................................... 45 3. Introducing the world of office work .................................................................................... 46 R.P.C. (Robert) Rosa 1211854 4 TU Delft, Real Estate & Housing Graduation Thesis (P4 report) October 3, 2013 3.1 Introduction ....................................................................................................................... 46 3.2 Defining the organisation, the office worker and the office ............................................. 46 Office work activities done by knowledge workers ................................................................. 46 Office activities done via ICT .................................................................................................... 48 Different workforce characteristics ......................................................................................... 49 Organisation ............................................................................................................................. 51 Three types of work places and locations ............................................................................... 52 The office ................................................................................................................................. 53 3.3 The emergence of the office ............................................................................................. 54 The first office .......................................................................................................................... 54 The industrial revolution .......................................................................................................... 56 Taylorism: Scientific Management .......................................................................................... 56 3.4 Conclusion ......................................................................................................................... 57 4. 27% office vacancy: mismatch by ICT innovations and endless construction ...................... 60 4.1 Introduction ....................................................................................................................... 60 4.2 Current office situation: 14% vacancy towards to 27% .................................................... 61 Mismatch current demand and supply results in 27% office vacancy .................................... 62 4.3 ICT innovation changed the demand for office use .......................................................... 63 Mobile devices ......................................................................................................................... 65 Telecommuting and telework .................................................................................................. 66 Virtual communication ............................................................................................................ 67 4.4 New ways of working (Bits, Bytes and Behaviour) ............................................................ 68 The impact of ICT and working needs on workplace design ................................................... 69 Change of place, space and use ............................................................................................... 70 Real estate concepts: office and business units ...................................................................... 74 The current demand for alternative workplaces strategies .................................................... 75 4.5 Conclusion ......................................................................................................................... 77 III. The Future of work ................................................................................................................ 80 5. Trends towards 2040 ............................................................................................................. 81 5.1 Introduction ....................................................................................................................... 81 5.2 Trend watching and adoption rates .................................................................................. 82 Understanding Gartner's Hype Cycles ..................................................................................... 83 Implementation of ICT innovations ......................................................................................... 85 5.3 Theoretical research: current ICT trends ........................................................................... 87 12 hypes on the 2012’s Hype Cycle ......................................................................................... 87 Control and Input: .................................................................................................................... 88 Mobilisation ............................................................................................................................. 90 5.4 Empirical Research: current ICT trends ............................................................................. 94 Current ICT trends .................................................................................................................... 95 The future of Corporate Real Estate ...................................................................................... 100 Current supply versus the future demand. ............................................................................ 103 5.5 Impacts of advances in ICT on Business and Society ....................................................... 108 5.6 Conclusion ....................................................................................................................... 109 Trend watching ...................................................................................................................... 110 R.P.C. (Robert) Rosa 1211854 5 TU Delft, Real Estate & Housing Graduation Thesis (P4 report) October 3, 2013 Theoretical research: current ICT trends ............................................................................... 110 Empirical Research: current ICT trends ..................................................................................... 112 6. Future demand 2040: Choice in Place & Freedom in Technology ....................................... 114 6.1 Introduction ..................................................................................................................... 114 6.2 The next generation workforce ....................................................................................... 115 6.3 Demographics and the Future of Work ........................................................................... 118 Slower Workforce Growth Ahead 2010-2040 ....................................................................... 118 Solutions to problems caused by slower workforce growth ................................................. 120 The Future of Work ................................................................................................................ 121 6.4 Organisations future demand: From ownership to access ............................................. 123 Digital Taylorism .................................................................................................................... 123 War for talent ........................................................................................................................ 124 6.5 Meeting the employee retention challenge .................................................................... 124 What do knowledge workers want? ...................................................................................... 124 The modern re-creation of the village ................................................................................... 125 6.6 Anytime/anyplace computing by knowledge workers (Smart working) ......................... 126 Productivity in Knowledge Work. .......................................................................................... 126 6.7 Conclusion ....................................................................................................................... 128 The Next Generation Workforce ............................................................................................... 128 Different workforce characteristics ....................................................................................... 128 Demographics and the Future of Work ..................................................................................... 130 The Future of Work ................................................................................................................ 130 Organisations future demand: From ownership to access ....................................................... 131 Meeting the employee retention challenge .............................................................................. 131 Anytime/anyplace computing by knowledge workers (Smart working) ................................... 132 IV. 2040 From dichotomy to harmony ..................................................................................... 133 7. Matching: future demand with corporate real estate portfolios 2013-2040. .................... 134 7.1 Introduction ..................................................................................................................... 134 7.2 Current ‘Assigned’ supply mismatches Future ‘Freedom & Choice’ demand ................. 134 Suitable current supply for future demand ........................................................................... 135 7.3 Preparing for the future: Retain by Releasing ................................................................. 139 The future office portfolio: the most convenient environment at the most convenient time and place ...................................................................................................................................... 139 The future first, second and third office place ...................................................................... 141 7.4 Weighing and selecting alternative solutions for a future match ................................... 144 Alternative 1: Owning, leasing or renting the first place office ............................................. 145 Alternative 2: Owning, leasing or renting the first and third place office ............................. 145 Alternative 3: Owning, leasing or renting the first place office + access to third place office ...................................................................................................................................................... 145 Alternative 4: Access to third place office ............................................................................. 145 7.5 Consequences in four scenarios of the Netherlands ....................................................... 146 Four scenarios of the Netherlands 2040................................................................................ 146 Scenario 1: Talent Towns ..................................................................................................... 147 R.P.C. (Robert) Rosa 1211854 6 TU Delft, Real Estate & Housing Graduation Thesis (P4 report) October 3, 2013 Scenario 2: Cosmopolitan Centers ......................................................................................... 148 Scenario 3: Egalitarian Ecologies ........................................................................................... 149 Scenario 4: Metropolitan Markets ......................................................................................... 149 7.6 Conclusion ....................................................................................................................... 150 Suitable current supply for future demand ........................................................................... 151 Preparing for the future: Retain by Releasing ....................................................................... 152 The future first, second and third office place ...................................................................... 153 Weighing and selecting alternative solutions for a future match ............................................. 154 Four alternative solutions ...................................................................................................... 155 Consequences in four scenarios of the Netherlands ................................................................. 155 8. Step by step plan: First place, second place welcome third place ...................................... 157 8.1 Introduction ..................................................................................................................... 157 8.2 Towards 2040 in five steps .............................................................................................. 157 The preparation phase 2013-2020 ........................................................................................ 158 Execution phase 2014-2020 ................................................................................................... 159 Designing the workplace of the future .................................................................................. 160 8.3 Future supply: Bits, Bricks & Brains ................................................................................. 165 Future workplaces in an office ............................................................................................... 165 8.4 Conclusion ....................................................................................................................... 167 Designing the third place environment ................................................................................. 169 9. Conclusion ........................................................................................................................... 171 9.1 The changing world of office work .................................................................................. 171 9.2 Answering the research questions .................................................................................. 171 Answering the main research question. ................................................................................ 177 Pitfalls..................................................................................................................................... 178 Context of ICT support for place independent working ........................................................ 178 Management of workers and workplaces outside the central workplace. ........................... 178 9.3 Recommendations for further research .......................................................................... 179 10. Reflection on the research process ..................................................................................... 180 Epilogue ......................................................................................................................................... 180 Bibliography .................................................................................................................................. 182 Appendix 1 Four groups of office work activities ......................................................................... 185 Appendix 2 Flex Offices Concepts ................................................................................................. 188 Appendix 3 Understanding the Hype Cycle .................................................................................. 190 Appendix 4 Relevant ICT Trends ................................................................................................... 192 Appendix 5 Interview Protocol...................................................................................................... 203 Appendix 6 Strategies against scenario's ...................................................................................... 206 Appendix 7 New accommodation requirements .......................................................................... 209 Appendix 8 Critical success factors for designing and implementing the workplace of the future ............................................................................................................................................................. 210 Appendix 9 How to design for your company culture, consider these points: ............................. 212 Appendix 10 Ranking office locations ........................................................................................... 213 Appendix 11 Design and implementation of third place offices, by Spaces ................................. 214 Appendix 12 Office spaces ............................................................................................................ 215 Appendix 13 The office of the future ............................................................................................ 224 R.P.C. (Robert) Rosa 1211854 7 Figures Figure 36 Office places .................................................................................................................... 12 Table 1 Office use over the years .................................................................................................... 13 Figure 52 Emerging Technologies Hype Cycle 2012 (Source: Gartner, 2012) ................................. 14 The decreasing growth of the working force, which results in scarcity of talented knowledge workers, will end in a ‘War for Talent’. In the competitive knowledge economy organisations must do what it takes to attract and retain talent to survive. For organisations this means satisfying the diversifying workforce by offering ‘Choice’ in places they desire to perform their activities while giving them ‘Freedom’ in using ICT the device(s) they find best to do the job (see Figure 60). ........... 16 Figure 60 The anywhere working city (source: (Microsoft, 2012) .................................................. 16 Figure 2 Current supply versus Future demand .............................................................................. 18 Figure 3 Future demand and supply match .................................................................................... 18 Figure 69 1st, 2nd and 3rd Place workplaces 2013-2040 ............................................................... 19 Figure 70 Alternative solutions against scenarios........................................................................... 20 Figure 4 Workplaces in four scenarios ............................................................................................ 21 Figure 71 Step by step time-line 2013-2040 ................................................................................... 22 Figure 5 Office of the future ........................................................................................................... 22 Figure 77 The anywhere working city (source: (Microsoft, 2012) .................................................. 23 Figure 6 Readers guide .................................................................................................................... 25 Figure 7 Third working locations (source: www.regus.com) .......................................................... 31 Figure 8 TelePresence by Cisco ....................................................................................................... 31 Figure 9 Different levels .................................................................................................................. 33 Figure 10 Relevancies ...................................................................................................................... 34 Figure 11 DAS-frame (Source: Jonge et al., 2008) ........................................................................... 36 Figure 12 Model of triangulation .................................................................................................... 37 Figure 13 Research model ............................................................................................................... 40 Figure 14 Respondents suppliers .................................................................................................... 41 Figure 15 Conceptual model ........................................................................................................... 43 Figure 16 Basic office features ........................................................................................................ 53 Figure 17 Uffizi in Florence ............................................................................................................. 54 Figure 18 Uffizi layout ..................................................................................................................... 55 Figure 19 The Four Percent office, Bank of England ....................................................................... 55 Figure 20 Industrialisation............................................................................................................... 56 Figure 21 Frederick Taylor ............................................................................................................... 56 Figure 22 The conventional office ................................................................................................... 57 Figure 23 Wainwright Building: plan ............................................................................................... 57 Figure 24 Demand and supply at Amsterdam office market (source: www.dtz.nl (2013)) ............ 60 Figure 25 Total office supply the Netherlands (Source: EIB et al., 2010) ....................................... 61 Figure 26 Friction vacancy and over capacity, in million square meters (Source: EIB et al., 2010) 61 Figure 27 Development total employment and office employment, index numbers, 1995 = 100 (Source: EIB et al., 2010) ....................................................................................................................... 62 Figure 28 Development office supply and office supply in use, index numbers, 1995 =100 (Source: EIB et al., 2010) ...................................................................................................................................... 63 Figure 29 Moore’s law for transistor counts for integrated circuits, 1971-2011 (Moore, 1995) ... 64 Figure 30 Connectivity of information and People (source: (Hoff, 2011) ....................................... 65 Figure 31 Tablet users (source: Infomart GfK / June 2011) ............................................................ 66 Figure 32 Office space 1980s-1990s (source: (Harrington, 2012)) ................................................. 69 Figure 33 Modern office space (source: (Harrington, 2012)) ......................................................... 70 Figure 34 Typology of office organisations (Source: Vos et al., 1999) ............................................ 72 TU Delft, Real Estate & Housing Graduation Thesis (P4 report) October 3, 2013 Figure 35 Office types and places ................................................................................................... 73 Figure 36 Office places .................................................................................................................... 75 Figure 36 Office places .................................................................................................................... 79 Figure 37 Understanding of the maturity and evolution of technologies (Source: (Linden and Fenn, 2003)) .......................................................................................................................................... 82 Figure 38 The Hype Curve (source: (Linden and Fenn, 2003)) ........................................................ 83 Figure 39 Hype Cycle breakdown (source: ((Linden and Fenn, 2003)) ........................................... 84 Figure 40 Diffusion of ideas (Source: (Rogers, 1995)) ..................................................................... 86 Figure 41 Hype Cycle versus Adoption Lifecycle ............................................................................. 86 Figure 43 ICT related office worker activities ................................................................................. 88 Figure 43 Emerging Technologies Hype Cycle 2012 (Source: Gartner, 2012) ................................. 88 Figure 44 Holographic performance ............................................................................................... 90 Figure 45 Cloud Computing (source: (Armbrust et al., 2010) ......................................................... 91 Figure 46 Augmented Reality .......................................................................................................... 91 Figure 47 Augmented Reality concat lenses ................................................................................... 91 Figure 48 Respondent field distribution ......................................................................................... 95 Figure 49 Cyviz wall (source: www.cisco.com) ............................................................................... 96 Figure 50 Microsoft Lync (source: www.microsoft.com) ................................................................ 96 Figure 51 360 degree camera & microphone: Polycom CX5000 (source: www.polycom.com) ..... 97 Figure 52 Emerging Technologies Hype Cycle 2012 (Source: Gartner, 2012) ............................... 111 Figure 53 Young Kids Learn Tech Skills before Life Skills (source: www.avg.com) ....................... 116 Figure 54 Population growth the Netherlands 1950-2050 (source: CBS, 2012) ........................... 119 Figure 55 Scope prospective and working population (forecast and scenario's) 2010-2040 (source: (Eck et al., 2013)) ................................................................................................................................. 119 Figure 56 Prospective working population development of key countries (source: (U.S. Census Bureau inJorrit Volkers and Berkel, 2012)) ......................................................................................... 120 The decreasing growth of the working force, which results in scarcity of talented knowledge workers, will end in a ‘War for Talent’. In the competitive knowledge economy organisations must do what it takes to attract and retain talent to survive. For organisations this means satisfying the diversifying workforce by offering ‘Choice’ in places they desire to perform their activities while giving them ‘Freedom’ in using ICT the device(s) they find best to do the job (see Figure 60). ......... 128 Figure 60 The anywhere working city (source: (Microsoft, 2012) ................................................ 128 Figure 57 Conceptual objects for future demand ......................................................................... 136 Figure 58 YNNO office layout (source: www.ynno.com) .............................................................. 137 Figure 59 Location assessment criteria (source: (Macke and Hesp, 2012)).................................. 139 Figure 60 Users ‘choice of workplace and location ...................................................................... 140 Figure 61 Distribution of workplace use ....................................................................................... 143 Figure 62 1st, 2nd and 3rd Place workplaces 2013-2040 ............................................................. 143 Figure 63 Regus interior ................................................................................................................ 144 Figure 64 Spaces interior ............................................................................................................... 144 Figure 65 Four scenarios of the Netherlands 2040 (source: (Weel et al., 2010)) ......................... 147 Figure 66 Alternative solutions against scenarios......................................................................... 150 Figure 67 Users ‘choice of workplace and location ...................................................................... 153 Figure 69 1st, 2nd and 3rd Place workplaces 2013-2040 ............................................................. 154 Figure 70 Alternative solutions against scenarios......................................................................... 156 Figure 71 Step by step time-line 2013-2040 ................................................................................. 160 Figure 72 Changing location rankings ........................................................................................... 162 Figure 73 Work spaces (source: (van Meel et al., 2010)) .............................................................. 165 Figure 74 Office of the future ....................................................................................................... 167 Figure 71 Step by step time-line 2013-2040 ................................................................................. 168 Figure 75 Workplaces in four scenarios ........................................................................................ 175 Figure 71 Step by step time-line 2013-2040 ................................................................................. 176 R.P.C. (Robert) Rosa 1211854 9 TU Delft, Real Estate & Housing Graduation Thesis (P4 report) October 3, 2013 Figure 76 3 spaces ......................................................................................................................... 177 Figure 77 The anywhere working city (source: (Microsoft, 2012) ................................................ 178 Figure 78 Surface area per workplace .......................................................................................... 221 Figure 79 Office matchmaker ........................................................................................................ 224 Figure 80 Smart glass .................................................................................................................... 224 Figure 81 Rollable glass ................................................................................................................. 225 Figure 82 When Big Brother is your boss ...................................................................................... 225 Figure 83 Teleprescenc ................................................................................................................. 226 Figure 84 Hologram table .............................................................................................................. 226 Figure 85 Talking with your hands ................................................................................................ 227 Figure 86 Insta-Manufacturing ...................................................................................................... 227 Figure 87 Cafeteria culture............................................................................................................ 228 Figure 88 Subtitled calls ................................................................................................................ 228 Figure 89 A new kind of teambuilding .......................................................................................... 229 R.P.C. (Robert) Rosa 1211854 10