1 00:00:02,560 --> 00:00:07,400 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:07,880 --> 00:00:11,000 Speaker 2: Now to a conversation about real estate. According to a 3 00:00:11,039 --> 00:00:14,440 Speaker 2: new report from CBRE, business leaders across Europe and in 4 00:00:14,480 --> 00:00:18,560 Speaker 2: the US see property as important to achieving the aims 5 00:00:18,560 --> 00:00:20,880 Speaker 2: of their business, but they want more influence over the 6 00:00:20,920 --> 00:00:24,799 Speaker 2: physical spaces that their firms occupy. Joining us now is 7 00:00:24,880 --> 00:00:28,680 Speaker 2: Kieran Bird, who is CEO of the CBRE UK and 8 00:00:28,760 --> 00:00:31,760 Speaker 2: Ireland CBRE Group, of course being one of the largest 9 00:00:31,800 --> 00:00:34,560 Speaker 2: commercial real estate services and investment firms in the world. 10 00:00:34,600 --> 00:00:36,520 Speaker 2: So I'm delighted to have you in the radio studio 11 00:00:36,560 --> 00:00:37,160 Speaker 2: for the first time. 12 00:00:37,240 --> 00:00:38,879 Speaker 3: Kieran, good morning, Thank you. 13 00:00:39,320 --> 00:00:42,360 Speaker 2: So what exactly do executives want then from property? I mean, 14 00:00:42,360 --> 00:00:45,040 Speaker 2: they're under pressure in so many spheres. Why is property 15 00:00:45,040 --> 00:00:45,600 Speaker 2: a focus? 16 00:00:46,880 --> 00:00:50,919 Speaker 4: Look, it's interesting we look at this survey and we 17 00:00:50,960 --> 00:00:55,080 Speaker 4: wonder why real estate wasn't in as much focus, perhaps 18 00:00:55,080 --> 00:01:00,240 Speaker 4: pre pandemic, and I think that was because business leaders 19 00:01:00,240 --> 00:01:02,520 Speaker 4: we're kind of focusing on what really is important to 20 00:01:02,560 --> 00:01:05,160 Speaker 4: them and real estate kind of was left behind. It 21 00:01:05,200 --> 00:01:08,360 Speaker 4: was almost an admin stroke as a cost and maybe 22 00:01:08,400 --> 00:01:12,600 Speaker 4: even finance or HR were the reports through to board. 23 00:01:12,720 --> 00:01:15,720 Speaker 4: And in fact it was the pandemic that brought this 24 00:01:15,760 --> 00:01:18,840 Speaker 4: into focus because if you look back and my goodness, 25 00:01:18,920 --> 00:01:21,120 Speaker 4: doesn't it seem a long time ago, But that there 26 00:01:21,200 --> 00:01:24,440 Speaker 4: almost the panic that nobody was using these offices or 27 00:01:24,560 --> 00:01:27,759 Speaker 4: shops were empty, and so there's a lot of rent 28 00:01:27,840 --> 00:01:31,119 Speaker 4: being paid and no use. And suddenly boards are saying, 29 00:01:31,160 --> 00:01:33,080 Speaker 4: do we need this space? Will we ever go back 30 00:01:33,120 --> 00:01:35,160 Speaker 4: to this space? How will we use it in the future. 31 00:01:35,240 --> 00:01:37,400 Speaker 4: So that brought the focus. 32 00:01:38,120 --> 00:01:41,120 Speaker 2: In terms of are we going back though to the 33 00:01:41,200 --> 00:01:43,120 Speaker 2: kind of pre pandemic. There's been a lot of excitement 34 00:01:43,160 --> 00:01:47,400 Speaker 2: about the return maybe of property, especially offices. There's been 35 00:01:47,400 --> 00:01:51,200 Speaker 2: a huge trough in office values. Are we actually on 36 00:01:51,240 --> 00:01:54,520 Speaker 2: the cusp of things returning to pre pandemic normals? 37 00:01:56,000 --> 00:01:56,800 Speaker 3: I think so. 38 00:01:57,320 --> 00:02:02,640 Speaker 4: Although flexibility and hybrid working from home, although there's many 39 00:02:02,720 --> 00:02:05,000 Speaker 4: leaders out there are saying it's we've got to stop this, 40 00:02:05,080 --> 00:02:07,120 Speaker 4: We've got to get must get everybody back, I think 41 00:02:07,160 --> 00:02:10,880 Speaker 4: there will be flexibility in the future. But there is 42 00:02:10,960 --> 00:02:14,880 Speaker 4: no doubt that many leaders, including myself, are realizing, if 43 00:02:14,880 --> 00:02:18,679 Speaker 4: you really want to drive your business and rebuild those 44 00:02:18,720 --> 00:02:22,919 Speaker 4: cultures that I think have been stretched through this period, 45 00:02:23,280 --> 00:02:25,960 Speaker 4: you want them back in the office. But the office 46 00:02:26,080 --> 00:02:29,880 Speaker 4: needs to be something that rewards your people and enables 47 00:02:29,919 --> 00:02:32,959 Speaker 4: you to collaborate. And I wouldn't I would say that. 48 00:02:34,000 --> 00:02:38,919 Speaker 4: I think there's different businesses, different people. Client facing professionals 49 00:02:39,000 --> 00:02:42,800 Speaker 4: need to connect with each other. Some people can work 50 00:02:42,880 --> 00:02:44,880 Speaker 4: just as well at home, and I think that's why 51 00:02:44,919 --> 00:02:47,440 Speaker 4: there's a hybrid and a flexibility. But there's no doubt 52 00:02:48,080 --> 00:02:49,440 Speaker 4: offices are back. 53 00:02:49,840 --> 00:02:52,000 Speaker 1: When you speak to your clients about what they want 54 00:02:52,040 --> 00:02:53,760 Speaker 1: out of their officers, do you get the sense that 55 00:02:54,080 --> 00:02:57,080 Speaker 1: everyone's hadding for five days back in the office or 56 00:02:57,320 --> 00:02:59,440 Speaker 1: is there still going to be an element of flexmle 57 00:02:59,440 --> 00:03:01,119 Speaker 1: work that's from no. 58 00:03:01,639 --> 00:03:06,240 Speaker 4: I look, as I say, depending on your business, if 59 00:03:06,280 --> 00:03:08,880 Speaker 4: you're client facing, I think there is a likelihood you'd 60 00:03:08,919 --> 00:03:11,120 Speaker 4: want your people in four to five days a week. 61 00:03:11,560 --> 00:03:14,720 Speaker 4: But there is an acceptance and there's a trust that's 62 00:03:14,760 --> 00:03:17,640 Speaker 4: been built over this period. People can work from home, 63 00:03:17,680 --> 00:03:20,359 Speaker 4: and people can work from home really well, but it's 64 00:03:20,360 --> 00:03:24,720 Speaker 4: more project leg If you need privacy, you need time alone, 65 00:03:24,120 --> 00:03:27,560 Speaker 4: or why spend the time travel linking to the office 66 00:03:27,600 --> 00:03:30,000 Speaker 4: when you can work from home. So look, there is 67 00:03:30,040 --> 00:03:33,640 Speaker 4: a hybrid, But there are many businesses out there that 68 00:03:33,760 --> 00:03:36,640 Speaker 4: need four to five days a week because they need collaboration, 69 00:03:36,800 --> 00:03:39,320 Speaker 4: They need individuals to bring energy to each other. I 70 00:03:39,360 --> 00:03:43,880 Speaker 4: think it's probably the one thing that people forget. I 71 00:03:43,920 --> 00:03:46,640 Speaker 4: often hear people saying I work just as well from home. 72 00:03:47,800 --> 00:03:51,320 Speaker 4: Do you bring your energy to your team from home? 73 00:03:51,680 --> 00:03:52,960 Speaker 4: And we know the answer to that. 74 00:03:54,040 --> 00:03:56,600 Speaker 2: But look, there's been strong rental growth, there's been a 75 00:03:56,600 --> 00:04:00,360 Speaker 2: reduction in terms of borrowing costs. But the folk because 76 00:04:00,600 --> 00:04:03,040 Speaker 2: in many parts of Europe is still on the best 77 00:04:03,120 --> 00:04:06,360 Speaker 2: quality buildings on very high environmental standards. We know that 78 00:04:06,400 --> 00:04:09,960 Speaker 2: a lot of landlords and renters are under pressure because 79 00:04:10,600 --> 00:04:13,400 Speaker 2: the new regulations coming in from Europe. By the end 80 00:04:13,480 --> 00:04:18,479 Speaker 2: of this decade, the standards for environmental impact will be 81 00:04:18,560 --> 00:04:21,440 Speaker 2: very high. Do you think that actually we've bottomed out now? 82 00:04:21,800 --> 00:04:23,600 Speaker 2: I mean we've heard it a number of times. Have 83 00:04:23,640 --> 00:04:27,080 Speaker 2: we bottomed out in terms of values for London offices 84 00:04:27,080 --> 00:04:28,320 Speaker 2: for European offices. 85 00:04:29,200 --> 00:04:33,839 Speaker 4: Look, the investment market is a different challenge, and that 86 00:04:34,200 --> 00:04:38,120 Speaker 4: falls back to interest rates, costs of building, costs of construction. 87 00:04:40,080 --> 00:04:43,680 Speaker 4: That is a different almost a different debate. But the 88 00:04:43,720 --> 00:04:47,960 Speaker 4: rental levels of offices are continuing to rise. Ironically, But 89 00:04:48,240 --> 00:04:50,520 Speaker 4: going back to your first point about sustainability and the 90 00:04:50,560 --> 00:04:55,960 Speaker 4: quality of the office, there is no doubt that big 91 00:04:56,000 --> 00:04:59,640 Speaker 4: businesses are now wanting best in class. Our problem is 92 00:05:00,040 --> 00:05:03,360 Speaker 4: supply chain. We haven't been developing for the last four 93 00:05:03,440 --> 00:05:05,080 Speaker 4: or five years the way we would have been in 94 00:05:05,120 --> 00:05:07,960 Speaker 4: the past. So ironically in the way here in London 95 00:05:08,000 --> 00:05:11,520 Speaker 4: and in most cities, grade day offices were a danger 96 00:05:11,520 --> 00:05:14,000 Speaker 4: of potentially running out over the course of the next 97 00:05:14,000 --> 00:05:16,520 Speaker 4: two to three years, and what that is causing is 98 00:05:16,800 --> 00:05:21,320 Speaker 4: rising of rents quality grade day offices. People are there's 99 00:05:21,360 --> 00:05:24,520 Speaker 4: almost we need to get a move on because we're 100 00:05:24,520 --> 00:05:27,000 Speaker 4: going to lose out of space. And that does open 101 00:05:27,040 --> 00:05:30,920 Speaker 4: opportunities for the next tier of offices. You could call 102 00:05:31,000 --> 00:05:34,520 Speaker 4: them to secondary or edge of London or outskirts, and 103 00:05:34,560 --> 00:05:36,239 Speaker 4: I think that those areas will. 104 00:05:36,200 --> 00:05:37,000 Speaker 3: Continue to. 105 00:05:38,480 --> 00:05:42,000 Speaker 4: Appeal more, albeit there's a lot of expenditure required to 106 00:05:42,800 --> 00:05:47,640 Speaker 4: fit an office to the quality. Dare I say of Bloomberg's. 107 00:05:47,560 --> 00:05:53,320 Speaker 2: Yes, Does the issue of tariff's then start to play 108 00:05:53,360 --> 00:05:57,279 Speaker 2: into this? Donald Trump's issued tariffs now and imports into 109 00:05:57,279 --> 00:05:59,640 Speaker 2: the US. I mean, I know CBRE is global and 110 00:05:59,640 --> 00:06:03,320 Speaker 2: so you may have a perspective on that, but tariffs 111 00:06:03,320 --> 00:06:05,240 Speaker 2: are going to make it much more difficult for the 112 00:06:05,279 --> 00:06:08,720 Speaker 2: building industry. Surely they're going to reroute supply chains are 113 00:06:08,720 --> 00:06:11,480 Speaker 2: going to make that kind of building pipeline more difficult. 114 00:06:12,080 --> 00:06:16,400 Speaker 4: Look, Tariff's it's the next challenge. We don't know what 115 00:06:16,520 --> 00:06:20,320 Speaker 4: impact they are going to have as yet. We've been 116 00:06:20,400 --> 00:06:23,480 Speaker 4: quite used to challenges in real estate or in our 117 00:06:23,520 --> 00:06:26,400 Speaker 4: economy over the last five or six years, so it's 118 00:06:26,440 --> 00:06:29,000 Speaker 4: another challenge. But I don't think it's going to stop 119 00:06:29,920 --> 00:06:32,720 Speaker 4: real estate. And the whole purpose of this survey was 120 00:06:33,000 --> 00:06:36,200 Speaker 4: are the boardroom focused enough on real estate? And I 121 00:06:36,240 --> 00:06:39,479 Speaker 4: don't think there is any doubt that the focus is back. 122 00:06:39,839 --> 00:06:43,239 Speaker 4: What we're hearing across the board is the ninety seven 123 00:06:43,240 --> 00:06:46,800 Speaker 4: percent of boards. Actually, I was surprised, pleasantly surprised to 124 00:06:46,800 --> 00:06:49,840 Speaker 4: hear that they now have direct reports through to the 125 00:06:49,839 --> 00:06:54,719 Speaker 4: c suite. Seventy six percent have personal involvement, and I 126 00:06:54,720 --> 00:06:57,440 Speaker 4: think that's encouraging because what they really are saying is 127 00:06:57,920 --> 00:07:01,480 Speaker 4: real estate is a priority, and it's not just it's 128 00:07:01,520 --> 00:07:04,080 Speaker 4: a business enabled how it's going to enable them to 129 00:07:04,240 --> 00:07:06,920 Speaker 4: drive and focus on their business more than perhaps they 130 00:07:06,920 --> 00:07:08,240 Speaker 4: have done in the past. 131 00:07:08,520 --> 00:07:11,280 Speaker 1: You mentioned the headwinds from higher interest rates. Looking at 132 00:07:11,320 --> 00:07:14,200 Speaker 1: the expectations now, we're expecting a fewer rate cuts in 133 00:07:14,280 --> 00:07:18,000 Speaker 1: the US and in the UK than we had been previously. 134 00:07:18,080 --> 00:07:20,760 Speaker 1: How much of a drag our higher interest rates are 135 00:07:20,960 --> 00:07:23,840 Speaker 1: new office investments the cost of debt? 136 00:07:24,120 --> 00:07:29,160 Speaker 4: Right, it's been challenging. There's been this standoff across the 137 00:07:29,200 --> 00:07:31,800 Speaker 4: world is what is a property worth and what some 138 00:07:31,840 --> 00:07:35,200 Speaker 4: are prepared to pay interest rates? I mean that we've 139 00:07:35,200 --> 00:07:39,200 Speaker 4: been teased, but they're slowly coming down, we hope, and 140 00:07:39,240 --> 00:07:43,360 Speaker 4: of course it makes a big impact. However, I will 141 00:07:43,360 --> 00:07:47,360 Speaker 4: go back to that last point. As rents rise, that 142 00:07:47,440 --> 00:07:50,920 Speaker 4: gives a lot of encouragement and hope that there really 143 00:07:50,960 --> 00:07:56,080 Speaker 4: is now an opportunity where values seem more attractive certainly 144 00:07:56,080 --> 00:07:57,680 Speaker 4: than they have done in the past. 145 00:07:58,040 --> 00:08:00,560 Speaker 2: Yeah, I mean do real interest So it's to have 146 00:08:00,600 --> 00:08:03,160 Speaker 2: to come down much further though to make that kind 147 00:08:03,240 --> 00:08:06,400 Speaker 2: of to make the recovery story to really take hold, 148 00:08:06,440 --> 00:08:09,080 Speaker 2: because it's been it's been one that we've been waiting 149 00:08:09,080 --> 00:08:10,800 Speaker 2: for for a couple of years, you know, to happen. 150 00:08:11,000 --> 00:08:12,960 Speaker 4: Yeah, I think it's fair to say they do need 151 00:08:12,960 --> 00:08:15,720 Speaker 4: to come down, and I think we hope that they are. 152 00:08:16,320 --> 00:08:17,360 Speaker 3: But if rent's. 153 00:08:17,040 --> 00:08:24,800 Speaker 4: Going up, there's a meeting of price price that both 154 00:08:25,160 --> 00:08:27,720 Speaker 4: buyer and seller are getting closer and closer. And I 155 00:08:27,760 --> 00:08:30,880 Speaker 4: think we're closer to that point albeit there continues to 156 00:08:30,920 --> 00:08:33,000 Speaker 4: be other challenges and I think that when you look 157 00:08:33,040 --> 00:08:36,079 Speaker 4: at development and the cost of construction, you can't ignore that. 158 00:08:36,160 --> 00:08:38,679 Speaker 4: So there are there are many challenges, but I think 159 00:08:38,720 --> 00:08:41,600 Speaker 4: we're getting closer and closer, and there are obvious movements 160 00:08:41,679 --> 00:08:44,440 Speaker 4: and there are deals starting to happen because of the 161 00:08:44,440 --> 00:08:48,040 Speaker 4: pressure point and the attraction of people or businesses wanting 162 00:08:48,080 --> 00:08:51,760 Speaker 4: to get their people back to Grade A or best 163 00:08:51,760 --> 00:08:52,680 Speaker 4: in class offices. 164 00:08:52,880 --> 00:08:57,080 Speaker 1: What kind of officers are attracting the highest rants in London. 165 00:08:57,120 --> 00:08:59,160 Speaker 1: There's been a number of shifts happening in the landscape. 166 00:08:59,160 --> 00:09:00,839 Speaker 1: We think about the Bag Bay and says moving out 167 00:09:00,840 --> 00:09:02,960 Speaker 1: of Canary or for example, of moving into the city. 168 00:09:03,120 --> 00:09:05,480 Speaker 1: And obviously you've got the big Google development of King's 169 00:09:05,480 --> 00:09:07,800 Speaker 1: Crass as well. What's what's the what is the Grade 170 00:09:07,880 --> 00:09:10,240 Speaker 1: A now for business as when they're looking for office space. 171 00:09:10,360 --> 00:09:13,120 Speaker 4: Well, I kind of a jest, but I walked in 172 00:09:13,200 --> 00:09:16,400 Speaker 4: this building. I mean, why wouldn't you want to come 173 00:09:16,400 --> 00:09:19,560 Speaker 4: in work in this wonderful building. It's it's ticking the 174 00:09:19,600 --> 00:09:23,360 Speaker 4: sustainability box, right, It's I'm no doubt it's ticking wellness 175 00:09:23,360 --> 00:09:27,800 Speaker 4: and health. It's in a location that's almost perfect, right, 176 00:09:27,880 --> 00:09:30,680 Speaker 4: So transportation makes it a big difference. 177 00:09:31,000 --> 00:09:32,359 Speaker 3: You want, you want. 178 00:09:32,160 --> 00:09:35,640 Speaker 4: Your coffee shops, you want your food, you want your entertainment. 179 00:09:36,080 --> 00:09:39,600 Speaker 4: I mean people there's a perception on Canary Wolf and 180 00:09:39,640 --> 00:09:42,040 Speaker 4: it always comes up. But what they have done that 181 00:09:42,040 --> 00:09:45,680 Speaker 4: that it is improved dramatically. I don't think people have 182 00:09:45,760 --> 00:09:48,040 Speaker 4: been there to go and see what inexperience you can 183 00:09:48,080 --> 00:09:52,520 Speaker 4: have both from food, entertainment, the transportation. Only from our 184 00:09:52,559 --> 00:09:55,240 Speaker 4: office bang on bonste you can be in Canary Wolf 185 00:09:55,280 --> 00:09:58,640 Speaker 4: in eleven minutes. So I think it's all about you've 186 00:09:58,640 --> 00:10:00,800 Speaker 4: got to be rewarded for when you travel in and 187 00:10:00,800 --> 00:10:02,680 Speaker 4: you've got to have all of those. And if you're 188 00:10:02,720 --> 00:10:04,640 Speaker 4: trying to get the best talent and you want to 189 00:10:04,679 --> 00:10:07,080 Speaker 4: keep hold of the best talent, there's a fight out 190 00:10:07,120 --> 00:10:09,800 Speaker 4: there for that. And they are attracted to come to 191 00:10:10,480 --> 00:10:13,960 Speaker 4: offices that are in the best locations and easy to 192 00:10:13,960 --> 00:10:14,280 Speaker 4: get to. 193 00:10:14,360 --> 00:10:16,040 Speaker 3: But you can have fun and you can work and 194 00:10:16,120 --> 00:10:17,160 Speaker 3: collaborate when you're. 195 00:10:17,040 --> 00:10:19,800 Speaker 1: There and carry okariy ware. They're still an attractive destination 196 00:10:19,920 --> 00:10:20,600 Speaker 1: for ofice space. 197 00:10:20,800 --> 00:10:26,079 Speaker 4: Unquestionably from me, they're going through change right, they've repositioned it. 198 00:10:26,080 --> 00:10:28,440 Speaker 4: It was known and I think there was perceptions there. 199 00:10:28,480 --> 00:10:31,520 Speaker 4: There's no doubt Canary Wolf is coming back with vengeance. 200 00:10:31,840 --> 00:10:35,120 Speaker 4: But most importantly, they've made it a nice place to be. 201 00:10:35,840 --> 00:10:39,040 Speaker 4: Just there's a perception piece that it takes a long 202 00:10:39,080 --> 00:10:39,760 Speaker 4: time to get there. 203 00:10:39,800 --> 00:10:42,280 Speaker 3: It really doesn't. And when you're there, it's not just 204 00:10:42,360 --> 00:10:46,160 Speaker 3: about towers. You've got you can have fun, you can. 205 00:10:46,120 --> 00:10:48,840 Speaker 2: Oh there's a marketing piece here that's missing. Then maybe 206 00:10:49,360 --> 00:10:52,760 Speaker 2: a last thought on data centers. If you wuld deep seekers, 207 00:10:52,800 --> 00:10:54,640 Speaker 2: you know, there was a lot of focus on building 208 00:10:54,720 --> 00:10:57,720 Speaker 2: data centers in Europe. It's very expensive in terms of 209 00:10:57,720 --> 00:11:00,559 Speaker 2: the energy needs, so there were doubts about that. Now 210 00:11:00,640 --> 00:11:03,319 Speaker 2: Deep seats sort of throwing a bit of a curveball 211 00:11:03,360 --> 00:11:06,599 Speaker 2: in there, data centers in the building. How quickly do 212 00:11:06,640 --> 00:11:08,160 Speaker 2: you think it's going to be built out in Europe? 213 00:11:08,280 --> 00:11:11,520 Speaker 4: Look, data centers have been on the agenda for many 214 00:11:11,600 --> 00:11:15,520 Speaker 4: years now, and with AI, I don't think that's going 215 00:11:15,559 --> 00:11:18,800 Speaker 4: anywhere soon. In fact, the attraction is far greater. I 216 00:11:18,800 --> 00:11:22,520 Speaker 4: think the biggest challenge for us all across Europe across 217 00:11:22,880 --> 00:11:27,040 Speaker 4: the world is power. Right, we need to find locations, 218 00:11:27,040 --> 00:11:29,560 Speaker 4: we need the land, but we need to fix power 219 00:11:29,559 --> 00:11:32,280 Speaker 4: and that probably leads onto another whole big discussion. But 220 00:11:33,000 --> 00:11:35,720 Speaker 4: power at the moment is an issue, particularly in the 221 00:11:35,800 --> 00:11:39,080 Speaker 4: UK but elsewhere in the world. But there's going to 222 00:11:39,120 --> 00:11:41,800 Speaker 4: be demand and I think AI is here to stay.