Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Now to a conversation about real estate. According to a
Speaker 2: new report from CBRE, business leaders across Europe and in
Speaker 2: the US see property as important to achieving the aims
Speaker 2: of their business, but they want more influence over the
Speaker 2: physical spaces that their firms occupy. Joining us now is
Speaker 2: Kieran Bird, who is CEO of the CBRE UK and
Speaker 2: Ireland CBRE Group, of course being one of the largest
Speaker 2: commercial real estate services and investment firms in the world.
Speaker 2: So I'm delighted to have you in the radio studio
Speaker 2: for the first time.
Speaker 3: Kieran, good morning, Thank you.
Speaker 2: So what exactly do executives want then from property? I mean,
Speaker 2: they're under pressure in so many spheres. Why is property
Speaker 2: a focus?
Speaker 4: Look, it's interesting we look at this survey and we
Speaker 4: wonder why real estate wasn't in as much focus, perhaps
Speaker 4: pre pandemic, and I think that was because business leaders
Speaker 4: we're kind of focusing on what really is important to
Speaker 4: them and real estate kind of was left behind. It
Speaker 4: was almost an admin stroke as a cost and maybe
Speaker 4: even finance or HR were the reports through to board.
Speaker 4: And in fact it was the pandemic that brought this
Speaker 4: into focus because if you look back and my goodness,
Speaker 4: doesn't it seem a long time ago, But that there
Speaker 4: almost the panic that nobody was using these offices or
Speaker 4: shops were empty, and so there's a lot of rent
Speaker 4: being paid and no use. And suddenly boards are saying,
Speaker 4: do we need this space? Will we ever go back
Speaker 4: to this space? How will we use it in the future.
Speaker 4: So that brought the focus.
Speaker 2: In terms of are we going back though to the
Speaker 2: kind of pre pandemic. There's been a lot of excitement
Speaker 2: about the return maybe of property, especially offices. There's been
Speaker 2: a huge trough in office values. Are we actually on
Speaker 2: the cusp of things returning to pre pandemic normals?
Speaker 3: I think so.
Speaker 4: Although flexibility and hybrid working from home, although there's many
Speaker 4: leaders out there are saying it's we've got to stop this,
Speaker 4: We've got to get must get everybody back, I think
Speaker 4: there will be flexibility in the future. But there is
Speaker 4: no doubt that many leaders, including myself, are realizing, if
Speaker 4: you really want to drive your business and rebuild those
Speaker 4: cultures that I think have been stretched through this period,
Speaker 4: you want them back in the office. But the office
Speaker 4: needs to be something that rewards your people and enables
Speaker 4: you to collaborate. And I wouldn't I would say that.
Speaker 4: I think there's different businesses, different people. Client facing professionals
Speaker 4: need to connect with each other. Some people can work
Speaker 4: just as well at home, and I think that's why
Speaker 4: there's a hybrid and a flexibility. But there's no doubt
Speaker 4: offices are back.
Speaker 1: When you speak to your clients about what they want
Speaker 1: out of their officers, do you get the sense that
Speaker 1: everyone's hadding for five days back in the office or
Speaker 1: is there still going to be an element of flexmle
Speaker 1: work that's from no.
Speaker 4: I look, as I say, depending on your business, if
Speaker 4: you're client facing, I think there is a likelihood you'd
Speaker 4: want your people in four to five days a week.
Speaker 4: But there is an acceptance and there's a trust that's
Speaker 4: been built over this period. People can work from home,
Speaker 4: and people can work from home really well, but it's
Speaker 4: more project leg If you need privacy, you need time alone,
Speaker 4: or why spend the time travel linking to the office
Speaker 4: when you can work from home. So look, there is
Speaker 4: a hybrid, But there are many businesses out there that
Speaker 4: need four to five days a week because they need collaboration,
Speaker 4: They need individuals to bring energy to each other. I
Speaker 4: think it's probably the one thing that people forget. I
Speaker 4: often hear people saying I work just as well from home.
Speaker 4: Do you bring your energy to your team from home?
Speaker 4: And we know the answer to that.
Speaker 2: But look, there's been strong rental growth, there's been a
Speaker 2: reduction in terms of borrowing costs. But the folk because
Speaker 2: in many parts of Europe is still on the best
Speaker 2: quality buildings on very high environmental standards. We know that
Speaker 2: a lot of landlords and renters are under pressure because
Speaker 2: the new regulations coming in from Europe. By the end
Speaker 2: of this decade, the standards for environmental impact will be
Speaker 2: very high. Do you think that actually we've bottomed out now?
Speaker 2: I mean we've heard it a number of times. Have
Speaker 2: we bottomed out in terms of values for London offices
Speaker 2: for European offices.
Speaker 4: Look, the investment market is a different challenge, and that
Speaker 4: falls back to interest rates, costs of building, costs of construction.
Speaker 4: That is a different almost a different debate. But the
Speaker 4: rental levels of offices are continuing to rise. Ironically, But
Speaker 4: going back to your first point about sustainability and the
Speaker 4: quality of the office, there is no doubt that big
Speaker 4: businesses are now wanting best in class. Our problem is
Speaker 4: supply chain. We haven't been developing for the last four
Speaker 4: or five years the way we would have been in
Speaker 4: the past. So ironically in the way here in London
Speaker 4: and in most cities, grade day offices were a danger
Speaker 4: of potentially running out over the course of the next
Speaker 4: two to three years, and what that is causing is
Speaker 4: rising of rents quality grade day offices. People are there's
Speaker 4: almost we need to get a move on because we're
Speaker 4: going to lose out of space. And that does open
Speaker 4: opportunities for the next tier of offices. You could call
Speaker 4: them to secondary or edge of London or outskirts, and
Speaker 4: I think that those areas will.
Speaker 3: Continue to.
Speaker 4: Appeal more, albeit there's a lot of expenditure required to
Speaker 4: fit an office to the quality. Dare I say of Bloomberg's.
Speaker 2: Yes, Does the issue of tariff's then start to play
Speaker 2: into this? Donald Trump's issued tariffs now and imports into
Speaker 2: the US. I mean, I know CBRE is global and
Speaker 2: so you may have a perspective on that, but tariffs
Speaker 2: are going to make it much more difficult for the
Speaker 2: building industry. Surely they're going to reroute supply chains are
Speaker 2: going to make that kind of building pipeline more difficult.
Speaker 4: Look, Tariff's it's the next challenge. We don't know what
Speaker 4: impact they are going to have as yet. We've been
Speaker 4: quite used to challenges in real estate or in our
Speaker 4: economy over the last five or six years, so it's
Speaker 4: another challenge. But I don't think it's going to stop
Speaker 4: real estate. And the whole purpose of this survey was
Speaker 4: are the boardroom focused enough on real estate? And I
Speaker 4: don't think there is any doubt that the focus is back.
Speaker 4: What we're hearing across the board is the ninety seven
Speaker 4: percent of boards. Actually, I was surprised, pleasantly surprised to
Speaker 4: hear that they now have direct reports through to the
Speaker 4: c suite. Seventy six percent have personal involvement, and I
Speaker 4: think that's encouraging because what they really are saying is
Speaker 4: real estate is a priority, and it's not just it's
Speaker 4: a business enabled how it's going to enable them to
Speaker 4: drive and focus on their business more than perhaps they
Speaker 4: have done in the past.
Speaker 1: You mentioned the headwinds from higher interest rates. Looking at
Speaker 1: the expectations now, we're expecting a fewer rate cuts in
Speaker 1: the US and in the UK than we had been previously.
Speaker 1: How much of a drag our higher interest rates are
Speaker 1: new office investments the cost of debt?
Speaker 4: Right, it's been challenging. There's been this standoff across the
Speaker 4: world is what is a property worth and what some
Speaker 4: are prepared to pay interest rates? I mean that we've
Speaker 4: been teased, but they're slowly coming down, we hope, and
Speaker 4: of course it makes a big impact. However, I will
Speaker 4: go back to that last point. As rents rise, that
Speaker 4: gives a lot of encouragement and hope that there really
Speaker 4: is now an opportunity where values seem more attractive certainly
Speaker 4: than they have done in the past.
Speaker 2: Yeah, I mean do real interest So it's to have
Speaker 2: to come down much further though to make that kind
Speaker 2: of to make the recovery story to really take hold,
Speaker 2: because it's been it's been one that we've been waiting
Speaker 2: for for a couple of years, you know, to happen.
Speaker 4: Yeah, I think it's fair to say they do need
Speaker 4: to come down, and I think we hope that they are.
Speaker 3: But if rent's.
Speaker 4: Going up, there's a meeting of price price that both
Speaker 4: buyer and seller are getting closer and closer. And I
Speaker 4: think we're closer to that point albeit there continues to
Speaker 4: be other challenges and I think that when you look
Speaker 4: at development and the cost of construction, you can't ignore that.
Speaker 4: So there are there are many challenges, but I think
Speaker 4: we're getting closer and closer, and there are obvious movements
Speaker 4: and there are deals starting to happen because of the
Speaker 4: pressure point and the attraction of people or businesses wanting
Speaker 4: to get their people back to Grade A or best
Speaker 4: in class offices.
Speaker 1: What kind of officers are attracting the highest rants in London.
Speaker 1: There's been a number of shifts happening in the landscape.
Speaker 1: We think about the Bag Bay and says moving out
Speaker 1: of Canary or for example, of moving into the city.
Speaker 1: And obviously you've got the big Google development of King's
Speaker 1: Crass as well. What's what's the what is the Grade
Speaker 1: A now for business as when they're looking for office space.
Speaker 4: Well, I kind of a jest, but I walked in
Speaker 4: this building. I mean, why wouldn't you want to come
Speaker 4: in work in this wonderful building. It's it's ticking the
Speaker 4: sustainability box, right, It's I'm no doubt it's ticking wellness
Speaker 4: and health. It's in a location that's almost perfect, right,
Speaker 4: So transportation makes it a big difference.
Speaker 3: You want, you want.
Speaker 4: Your coffee shops, you want your food, you want your entertainment.
Speaker 4: I mean people there's a perception on Canary Wolf and
Speaker 4: it always comes up. But what they have done that
Speaker 4: that it is improved dramatically. I don't think people have
Speaker 4: been there to go and see what inexperience you can
Speaker 4: have both from food, entertainment, the transportation. Only from our
Speaker 4: office bang on bonste you can be in Canary Wolf
Speaker 4: in eleven minutes. So I think it's all about you've
Speaker 4: got to be rewarded for when you travel in and
Speaker 4: you've got to have all of those. And if you're
Speaker 4: trying to get the best talent and you want to
Speaker 4: keep hold of the best talent, there's a fight out
Speaker 4: there for that. And they are attracted to come to
Speaker 4: offices that are in the best locations and easy to
Speaker 4: get to.
Speaker 3: But you can have fun and you can work and
Speaker 3: collaborate when you're.
Speaker 1: There and carry okariy ware. They're still an attractive destination
Speaker 1: for ofice space.
Speaker 4: Unquestionably from me, they're going through change right, they've repositioned it.
Speaker 4: It was known and I think there was perceptions there.
Speaker 4: There's no doubt Canary Wolf is coming back with vengeance.
Speaker 4: But most importantly, they've made it a nice place to be.
Speaker 4: Just there's a perception piece that it takes a long
Speaker 4: time to get there.
Speaker 3: It really doesn't. And when you're there, it's not just
Speaker 3: about towers. You've got you can have fun, you can.
Speaker 2: Oh there's a marketing piece here that's missing. Then maybe
Speaker 2: a last thought on data centers. If you wuld deep seekers,
Speaker 2: you know, there was a lot of focus on building
Speaker 2: data centers in Europe. It's very expensive in terms of
Speaker 2: the energy needs, so there were doubts about that. Now
Speaker 2: Deep seats sort of throwing a bit of a curveball
Speaker 2: in there, data centers in the building. How quickly do
Speaker 2: you think it's going to be built out in Europe?
Speaker 4: Look, data centers have been on the agenda for many
Speaker 4: years now, and with AI, I don't think that's going
Speaker 4: anywhere soon. In fact, the attraction is far greater. I
Speaker 4: think the biggest challenge for us all across Europe across
Speaker 4: the world is power. Right, we need to find locations,
Speaker 4: we need the land, but we need to fix power
Speaker 4: and that probably leads onto another whole big discussion. But
Speaker 4: power at the moment is an issue, particularly in the
Speaker 4: UK but elsewhere in the world. But there's going to
Speaker 4: be demand and I think AI is here to stay.