WEBVTT - Real Estate CEO Ciaran Bird Talks Business and Property 0:00:02.560 --> 0:00:07.400 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:07.880 --> 0:00:11.000 Now to a conversation about real estate. According to a 0:00:11.039 --> 0:00:14.440 new report from CBRE, business leaders across Europe and in 0:00:14.480 --> 0:00:18.560 the US see property as important to achieving the aims 0:00:18.560 --> 0:00:20.880 of their business, but they want more influence over the 0:00:20.920 --> 0:00:24.799 physical spaces that their firms occupy. Joining us now is 0:00:24.880 --> 0:00:28.680 Kieran Bird, who is CEO of the CBRE UK and 0:00:28.760 --> 0:00:31.760 Ireland CBRE Group, of course being one of the largest 0:00:31.800 --> 0:00:34.560 commercial real estate services and investment firms in the world. 0:00:34.600 --> 0:00:36.520 So I'm delighted to have you in the radio studio 0:00:36.560 --> 0:00:37.160 for the first time. 0:00:37.240 --> 0:00:38.879 Kieran, good morning, Thank you. 0:00:39.320 --> 0:00:42.360 So what exactly do executives want then from property? I mean, 0:00:42.360 --> 0:00:45.040 they're under pressure in so many spheres. Why is property 0:00:45.040 --> 0:00:45.600 a focus? 0:00:46.880 --> 0:00:50.919 Look, it's interesting we look at this survey and we 0:00:50.960 --> 0:00:55.080 wonder why real estate wasn't in as much focus, perhaps 0:00:55.080 --> 0:01:00.240 pre pandemic, and I think that was because business leaders 0:01:00.240 --> 0:01:02.520 we're kind of focusing on what really is important to 0:01:02.560 --> 0:01:05.160 them and real estate kind of was left behind. It 0:01:05.200 --> 0:01:08.360 was almost an admin stroke as a cost and maybe 0:01:08.400 --> 0:01:12.600 even finance or HR were the reports through to board. 0:01:12.720 --> 0:01:15.720 And in fact it was the pandemic that brought this 0:01:15.760 --> 0:01:18.840 into focus because if you look back and my goodness, 0:01:18.920 --> 0:01:21.120 doesn't it seem a long time ago, But that there 0:01:21.200 --> 0:01:24.440 almost the panic that nobody was using these offices or 0:01:24.560 --> 0:01:27.759 shops were empty, and so there's a lot of rent 0:01:27.840 --> 0:01:31.119 being paid and no use. And suddenly boards are saying, 0:01:31.160 --> 0:01:33.080 do we need this space? Will we ever go back 0:01:33.120 --> 0:01:35.160 to this space? How will we use it in the future. 0:01:35.240 --> 0:01:37.400 So that brought the focus. 0:01:38.120 --> 0:01:41.120 In terms of are we going back though to the 0:01:41.200 --> 0:01:43.120 kind of pre pandemic. There's been a lot of excitement 0:01:43.160 --> 0:01:47.400 about the return maybe of property, especially offices. There's been 0:01:47.400 --> 0:01:51.200 a huge trough in office values. Are we actually on 0:01:51.240 --> 0:01:54.520 the cusp of things returning to pre pandemic normals? 0:01:56.000 --> 0:01:56.800 I think so. 0:01:57.320 --> 0:02:02.640 Although flexibility and hybrid working from home, although there's many 0:02:02.720 --> 0:02:05.000 leaders out there are saying it's we've got to stop this, 0:02:05.080 --> 0:02:07.120 We've got to get must get everybody back, I think 0:02:07.160 --> 0:02:10.880 there will be flexibility in the future. But there is 0:02:10.960 --> 0:02:14.880 no doubt that many leaders, including myself, are realizing, if 0:02:14.880 --> 0:02:18.679 you really want to drive your business and rebuild those 0:02:18.720 --> 0:02:22.919 cultures that I think have been stretched through this period, 0:02:23.280 --> 0:02:25.960 you want them back in the office. But the office 0:02:26.080 --> 0:02:29.880 needs to be something that rewards your people and enables 0:02:29.919 --> 0:02:32.959 you to collaborate. And I wouldn't I would say that. 0:02:34.000 --> 0:02:38.919 I think there's different businesses, different people. Client facing professionals 0:02:39.000 --> 0:02:42.800 need to connect with each other. Some people can work 0:02:42.880 --> 0:02:44.880 just as well at home, and I think that's why 0:02:44.919 --> 0:02:47.440 there's a hybrid and a flexibility. But there's no doubt 0:02:48.080 --> 0:02:49.440 offices are back. 0:02:49.840 --> 0:02:52.000 When you speak to your clients about what they want 0:02:52.040 --> 0:02:53.760 out of their officers, do you get the sense that 0:02:54.080 --> 0:02:57.080 everyone's hadding for five days back in the office or 0:02:57.320 --> 0:02:59.440 is there still going to be an element of flexmle 0:02:59.440 --> 0:03:01.119 work that's from no. 0:03:01.639 --> 0:03:06.240 I look, as I say, depending on your business, if 0:03:06.280 --> 0:03:08.880 you're client facing, I think there is a likelihood you'd 0:03:08.919 --> 0:03:11.120 want your people in four to five days a week. 0:03:11.560 --> 0:03:14.720 But there is an acceptance and there's a trust that's 0:03:14.760 --> 0:03:17.640 been built over this period. People can work from home, 0:03:17.680 --> 0:03:20.359 and people can work from home really well, but it's 0:03:20.360 --> 0:03:24.720 more project leg If you need privacy, you need time alone, 0:03:24.120 --> 0:03:27.560 or why spend the time travel linking to the office 0:03:27.600 --> 0:03:30.000 when you can work from home. So look, there is 0:03:30.040 --> 0:03:33.640 a hybrid, But there are many businesses out there that 0:03:33.760 --> 0:03:36.640 need four to five days a week because they need collaboration, 0:03:36.800 --> 0:03:39.320 They need individuals to bring energy to each other. I 0:03:39.360 --> 0:03:43.880 think it's probably the one thing that people forget. I 0:03:43.920 --> 0:03:46.640 often hear people saying I work just as well from home. 0:03:47.800 --> 0:03:51.320 Do you bring your energy to your team from home? 0:03:51.680 --> 0:03:52.960 And we know the answer to that. 0:03:54.040 --> 0:03:56.600 But look, there's been strong rental growth, there's been a 0:03:56.600 --> 0:04:00.360 reduction in terms of borrowing costs. But the folk because 0:04:00.600 --> 0:04:03.040 in many parts of Europe is still on the best 0:04:03.120 --> 0:04:06.360 quality buildings on very high environmental standards. We know that 0:04:06.400 --> 0:04:09.960 a lot of landlords and renters are under pressure because 0:04:10.600 --> 0:04:13.400 the new regulations coming in from Europe. By the end 0:04:13.480 --> 0:04:18.479 of this decade, the standards for environmental impact will be 0:04:18.560 --> 0:04:21.440 very high. Do you think that actually we've bottomed out now? 0:04:21.800 --> 0:04:23.600 I mean we've heard it a number of times. Have 0:04:23.640 --> 0:04:27.080 we bottomed out in terms of values for London offices 0:04:27.080 --> 0:04:28.320 for European offices. 0:04:29.200 --> 0:04:33.839 Look, the investment market is a different challenge, and that 0:04:34.200 --> 0:04:38.120 falls back to interest rates, costs of building, costs of construction. 0:04:40.080 --> 0:04:43.680 That is a different almost a different debate. But the 0:04:43.720 --> 0:04:47.960 rental levels of offices are continuing to rise. Ironically, But 0:04:48.240 --> 0:04:50.520 going back to your first point about sustainability and the 0:04:50.560 --> 0:04:55.960 quality of the office, there is no doubt that big 0:04:56.000 --> 0:04:59.640 businesses are now wanting best in class. Our problem is 0:05:00.040 --> 0:05:03.360 supply chain. We haven't been developing for the last four 0:05:03.440 --> 0:05:05.080 or five years the way we would have been in 0:05:05.120 --> 0:05:07.960 the past. So ironically in the way here in London 0:05:08.000 --> 0:05:11.520 and in most cities, grade day offices were a danger 0:05:11.520 --> 0:05:14.000 of potentially running out over the course of the next 0:05:14.000 --> 0:05:16.520 two to three years, and what that is causing is 0:05:16.800 --> 0:05:21.320 rising of rents quality grade day offices. People are there's 0:05:21.360 --> 0:05:24.520 almost we need to get a move on because we're 0:05:24.520 --> 0:05:27.000 going to lose out of space. And that does open 0:05:27.040 --> 0:05:30.920 opportunities for the next tier of offices. You could call 0:05:31.000 --> 0:05:34.520 them to secondary or edge of London or outskirts, and 0:05:34.560 --> 0:05:36.239 I think that those areas will. 0:05:36.200 --> 0:05:37.000 Continue to. 0:05:38.480 --> 0:05:42.000 Appeal more, albeit there's a lot of expenditure required to 0:05:42.800 --> 0:05:47.640 fit an office to the quality. Dare I say of Bloomberg's. 0:05:47.560 --> 0:05:53.320 Yes, Does the issue of tariff's then start to play 0:05:53.360 --> 0:05:57.279 into this? Donald Trump's issued tariffs now and imports into 0:05:57.279 --> 0:05:59.640 the US. I mean, I know CBRE is global and 0:05:59.640 --> 0:06:03.320 so you may have a perspective on that, but tariffs 0:06:03.320 --> 0:06:05.240 are going to make it much more difficult for the 0:06:05.279 --> 0:06:08.720 building industry. Surely they're going to reroute supply chains are 0:06:08.720 --> 0:06:11.480 going to make that kind of building pipeline more difficult. 0:06:12.080 --> 0:06:16.400 Look, Tariff's it's the next challenge. We don't know what 0:06:16.520 --> 0:06:20.320 impact they are going to have as yet. We've been 0:06:20.400 --> 0:06:23.480 quite used to challenges in real estate or in our 0:06:23.520 --> 0:06:26.400 economy over the last five or six years, so it's 0:06:26.440 --> 0:06:29.000 another challenge. But I don't think it's going to stop 0:06:29.920 --> 0:06:32.720 real estate. And the whole purpose of this survey was 0:06:33.000 --> 0:06:36.200 are the boardroom focused enough on real estate? And I 0:06:36.240 --> 0:06:39.479 don't think there is any doubt that the focus is back. 0:06:39.839 --> 0:06:43.239 What we're hearing across the board is the ninety seven 0:06:43.240 --> 0:06:46.800 percent of boards. Actually, I was surprised, pleasantly surprised to 0:06:46.800 --> 0:06:49.840 hear that they now have direct reports through to the 0:06:49.839 --> 0:06:54.719 c suite. Seventy six percent have personal involvement, and I 0:06:54.720 --> 0:06:57.440 think that's encouraging because what they really are saying is 0:06:57.920 --> 0:07:01.480 real estate is a priority, and it's not just it's 0:07:01.520 --> 0:07:04.080 a business enabled how it's going to enable them to 0:07:04.240 --> 0:07:06.920 drive and focus on their business more than perhaps they 0:07:06.920 --> 0:07:08.240 have done in the past. 0:07:08.520 --> 0:07:11.280 You mentioned the headwinds from higher interest rates. Looking at 0:07:11.320 --> 0:07:14.200 the expectations now, we're expecting a fewer rate cuts in 0:07:14.280 --> 0:07:18.000 the US and in the UK than we had been previously. 0:07:18.080 --> 0:07:20.760 How much of a drag our higher interest rates are 0:07:20.960 --> 0:07:23.840 new office investments the cost of debt? 0:07:24.120 --> 0:07:29.160 Right, it's been challenging. There's been this standoff across the 0:07:29.200 --> 0:07:31.800 world is what is a property worth and what some 0:07:31.840 --> 0:07:35.200 are prepared to pay interest rates? I mean that we've 0:07:35.200 --> 0:07:39.200 been teased, but they're slowly coming down, we hope, and 0:07:39.240 --> 0:07:43.360 of course it makes a big impact. However, I will 0:07:43.360 --> 0:07:47.360 go back to that last point. As rents rise, that 0:07:47.440 --> 0:07:50.920 gives a lot of encouragement and hope that there really 0:07:50.960 --> 0:07:56.080 is now an opportunity where values seem more attractive certainly 0:07:56.080 --> 0:07:57.680 than they have done in the past. 0:07:58.040 --> 0:08:00.560 Yeah, I mean do real interest So it's to have 0:08:00.600 --> 0:08:03.160 to come down much further though to make that kind 0:08:03.240 --> 0:08:06.400 of to make the recovery story to really take hold, 0:08:06.440 --> 0:08:09.080 because it's been it's been one that we've been waiting 0:08:09.080 --> 0:08:10.800 for for a couple of years, you know, to happen. 0:08:11.000 --> 0:08:12.960 Yeah, I think it's fair to say they do need 0:08:12.960 --> 0:08:15.720 to come down, and I think we hope that they are. 0:08:16.320 --> 0:08:17.360 But if rent's. 0:08:17.040 --> 0:08:24.800 Going up, there's a meeting of price price that both 0:08:25.160 --> 0:08:27.720 buyer and seller are getting closer and closer. And I 0:08:27.760 --> 0:08:30.880 think we're closer to that point albeit there continues to 0:08:30.920 --> 0:08:33.000 be other challenges and I think that when you look 0:08:33.040 --> 0:08:36.079 at development and the cost of construction, you can't ignore that. 0:08:36.160 --> 0:08:38.679 So there are there are many challenges, but I think 0:08:38.720 --> 0:08:41.600 we're getting closer and closer, and there are obvious movements 0:08:41.679 --> 0:08:44.440 and there are deals starting to happen because of the 0:08:44.440 --> 0:08:48.040 pressure point and the attraction of people or businesses wanting 0:08:48.080 --> 0:08:51.760 to get their people back to Grade A or best 0:08:51.760 --> 0:08:52.680 in class offices. 0:08:52.880 --> 0:08:57.080 What kind of officers are attracting the highest rants in London. 0:08:57.120 --> 0:08:59.160 There's been a number of shifts happening in the landscape. 0:08:59.160 --> 0:09:00.839 We think about the Bag Bay and says moving out 0:09:00.840 --> 0:09:02.960 of Canary or for example, of moving into the city. 0:09:03.120 --> 0:09:05.480 And obviously you've got the big Google development of King's 0:09:05.480 --> 0:09:07.800 Crass as well. What's what's the what is the Grade 0:09:07.880 --> 0:09:10.240 A now for business as when they're looking for office space. 0:09:10.360 --> 0:09:13.120 Well, I kind of a jest, but I walked in 0:09:13.200 --> 0:09:16.400 this building. I mean, why wouldn't you want to come 0:09:16.400 --> 0:09:19.560 in work in this wonderful building. It's it's ticking the 0:09:19.600 --> 0:09:23.360 sustainability box, right, It's I'm no doubt it's ticking wellness 0:09:23.360 --> 0:09:27.800 and health. It's in a location that's almost perfect, right, 0:09:27.880 --> 0:09:30.680 So transportation makes it a big difference. 0:09:31.000 --> 0:09:32.359 You want, you want. 0:09:32.160 --> 0:09:35.640 Your coffee shops, you want your food, you want your entertainment. 0:09:36.080 --> 0:09:39.600 I mean people there's a perception on Canary Wolf and 0:09:39.640 --> 0:09:42.040 it always comes up. But what they have done that 0:09:42.040 --> 0:09:45.680 that it is improved dramatically. I don't think people have 0:09:45.760 --> 0:09:48.040 been there to go and see what inexperience you can 0:09:48.080 --> 0:09:52.520 have both from food, entertainment, the transportation. Only from our 0:09:52.559 --> 0:09:55.240 office bang on bonste you can be in Canary Wolf 0:09:55.280 --> 0:09:58.640 in eleven minutes. So I think it's all about you've 0:09:58.640 --> 0:10:00.800 got to be rewarded for when you travel in and 0:10:00.800 --> 0:10:02.680 you've got to have all of those. And if you're 0:10:02.720 --> 0:10:04.640 trying to get the best talent and you want to 0:10:04.679 --> 0:10:07.080 keep hold of the best talent, there's a fight out 0:10:07.120 --> 0:10:09.800 there for that. And they are attracted to come to 0:10:10.480 --> 0:10:13.960 offices that are in the best locations and easy to 0:10:13.960 --> 0:10:14.280 get to. 0:10:14.360 --> 0:10:16.040 But you can have fun and you can work and 0:10:16.120 --> 0:10:17.160 collaborate when you're. 0:10:17.040 --> 0:10:19.800 There and carry okariy ware. They're still an attractive destination 0:10:19.920 --> 0:10:20.600 for ofice space. 0:10:20.800 --> 0:10:26.079 Unquestionably from me, they're going through change right, they've repositioned it. 0:10:26.080 --> 0:10:28.440 It was known and I think there was perceptions there. 0:10:28.480 --> 0:10:31.520 There's no doubt Canary Wolf is coming back with vengeance. 0:10:31.840 --> 0:10:35.120 But most importantly, they've made it a nice place to be. 0:10:35.840 --> 0:10:39.040 Just there's a perception piece that it takes a long 0:10:39.080 --> 0:10:39.760 time to get there. 0:10:39.800 --> 0:10:42.280 It really doesn't. And when you're there, it's not just 0:10:42.360 --> 0:10:46.160 about towers. You've got you can have fun, you can. 0:10:46.120 --> 0:10:48.840 Oh there's a marketing piece here that's missing. Then maybe 0:10:49.360 --> 0:10:52.760 a last thought on data centers. If you wuld deep seekers, 0:10:52.800 --> 0:10:54.640 you know, there was a lot of focus on building 0:10:54.720 --> 0:10:57.720 data centers in Europe. It's very expensive in terms of 0:10:57.720 --> 0:11:00.559 the energy needs, so there were doubts about that. Now 0:11:00.640 --> 0:11:03.319 Deep seats sort of throwing a bit of a curveball 0:11:03.360 --> 0:11:06.599 in there, data centers in the building. How quickly do 0:11:06.640 --> 0:11:08.160 you think it's going to be built out in Europe? 0:11:08.280 --> 0:11:11.520 Look, data centers have been on the agenda for many 0:11:11.600 --> 0:11:15.520 years now, and with AI, I don't think that's going 0:11:15.559 --> 0:11:18.800 anywhere soon. In fact, the attraction is far greater. I 0:11:18.800 --> 0:11:22.520 think the biggest challenge for us all across Europe across 0:11:22.880 --> 0:11:27.040 the world is power. Right, we need to find locations, 0:11:27.040 --> 0:11:29.560 we need the land, but we need to fix power 0:11:29.559 --> 0:11:32.280 and that probably leads onto another whole big discussion. But 0:11:33.000 --> 0:11:35.720 power at the moment is an issue, particularly in the 0:11:35.800 --> 0:11:39.080 UK but elsewhere in the world. But there's going to 0:11:39.120 --> 0:11:41.800 be demand and I think AI is here to stay.