JLL has launched ‘More than the last mile’, a research report which examines how smarter logistics will help shape cities in the future. Commenting on JLL’s report, Andy Harding, lead director of JLL’s Industrial & Logistics Group, said: “Spurred by the growth of e-commerce and demand for last-mile fulfilment facilities, there has been increasing interest in urban logistics among property developers and investors. However, this is only a part of the story, as the issues associated with logistics in cities are much wider than servicing e-commerce growth. Cities present many challenges but also significant opportunities for real estate in the future. We believe that environmental and efficiency challenges will transform logistics operations in Europe’s major cities.”

Key JLL research highlights include:

• Anticipated rise in demand for different types of logistics facilities, including transhipment facilities (where goods can be transferred onto environmentally friendly vehicles); shared-user consolidation centres; local facilities for last mile fulfilment; multi-storey buildings and underground facilities.
• A need to find new models of city logistics which are sustainable and maximise efficiency while minimising adverse environmental and social impacts, such as air pollution and noise.
• Developing technologies have the potential to address both efficiency and environmental objectives but there are no immediate quick wins.
• Old technologies should not be ignored as partial solutions may be found by looking ‘back to the future’, including, for example, the use of rail or bicycles.
• Increased night-time deliveries in cities would make more effective use of the transport network at times when it has capacity and would cut down peak traffic impacts.
• Logistical considerations need to be at the forefront of city planning and building design.
• Warehouses and suitable land for logistics activities will remain critical for efficient city logistics but if these activities are pushed too far out of the cities they service, this will drive up ‘stem distances’ (from warehouse to customers) and potentially emissions.
• Varying interests of the different stakeholders in city logistics need to be addressed in order to identify new approaches that satisfy all of them.
• Logistics in cities present big opportunities for real estate developers and investors due to strong demand and supply dynamics.

Jon Sleeman, JLL’s head of EMEA Industrial & Logistics Research, added: “From a property market perspective, city or urban logistics buildings are often considered a separate market segment, distinct from ‘big box’ logistics properties, that are mainly clustered at Europe’s major gateways (seaports and airports), along its strategic transport corridors and around its major cities. This segmentation may be valid from a property market viewpoint, but these different types of property are often part of the same supply chains. This being the case, to understand potential opportunities for change in city logistics, we need to take a wider supply chain perspective.”

(Source: JLL)

This week Finance Monthly interviewed Tom Carroll, head of EMEA corporate research at JLL, which released its 2017 report on global CRE trends just a few weeks ago. Here Tom delves into the future of automation in the CRE sector and discusses the current impact its having on businesses.

Could you introduce the need for more automation to benefit the business processes and real estate needs for corporates?

Robotics and automation are already being adopted widely across the corporate world. Going forward, they are more likely to lead to job transformation as opposed to wholesale replacement of human labor. This shift will free up time for innovative, creative and strategic work.

Automating repetitive, simple tasks in business processes will help increase speed, precision and cost efficiency. From a real estate perspective, this means that the organisation will be reorganised. The work that companies do and the way they do it is changing. As the more process-driven elements of work fall into artificial intelligence, the use of freelancers, consultants and contingent workers sourced via virtual marketplaces is becoming increasingly common too. This means that the companies of the future will be leaner and more dispersed allowing their employees to focus more narrowly on value creation.

How are overall roles set to change within large companies on the back of automation, and what about SMEs?

The companies of the future will be leaner, with remaining employees more narrowly focused on value creation and other activities delegated to specialist providers or intelligent machines. Competing for talent, however, will continue to be a major challenge due to slowing growth in the global labour pool across the next 15 years.

Therefore, developing talent strategies to attract and retain the right kinds of employee is essential. There are two generations of talent that firms particularly need to get to grips with to successfully navigate the changes taking place: digital natives and digital dependents. These groups have the digital skills and understanding of technology that companies need to transform their businesses.

What has so far been the impact of introducing automation in business operations?

McKinsey analyzed 2,000 work activities across 800 occupations and found that just 5% of occupations are likely to be become fully automated based on currently demonstrated technologies. However, individual activities in almost every job can be partially automated. Adapting current technologies could allow half of all activities that people are paid for to be automated, equal to almost $16 trillion in wages.

Overall, the report estimates that 49 percent of the activities that people are paid to do in the global economy have the potential to be automated by adapting currently demonstrated technology. While less than 5 percent of occupations can be fully automated, about 60 percent have at least 30 percent of activities that can technically be automated.

The good news is that automation could raise productivity growth, which would be a boon at a time when productivity rates have been falling. McKinsey estimates it could boost productivity growth globally by 0.8% to 1.4% annually in 2015-2065. That compares with the 0.3% productivity boost afforded by the creation of the steam engine in the period from 1850 to 1910.

What would you say is the biggest benefit, and are there any downsides?

Enhanced productivity and lower costs could be significant benefits for companies. Another of the biggest benefits of integrating automated processes is the fact that employees and companies can specialise and focus on value creation, innovation and growth.

As the shape of the workforce changes. Real estate portfolios will be consolidated, with a greater share of space located in urban hubs which appeal to top talent. The design of office environments will be guided by user experience as the competition for talent grows more intense.

What are the best examples of automation in large businesses? What might these look like in future?

Intelligent software is already automating many back-office roles in fields like accountancy, finance and law. E-discovery software, for instance, can analyse millions of electronic documents and tease out ones that might be relevant for a legal case, even when specific words or phrases are not present.

At JLL, for instance, we have signed a global agreement with Leverton to automate lease administration. Leverton’s machine and deep learning technology enables the identification, extraction and management of key terms and data from corporate documents, such as leases and contracts, in more than 20 languages. JLL will integrate these systems into its own global technology platforms to transform the way lease documents are reviewed, analysed and managed for its clients. This way, our clients will benefit from optimised data management, more efficient processing of documentation, reduced operational risk and a more robust audit trail.

Chicago-based Narrative Science has developed software capable of taking raw statistics and data and converting it into prose. Originally used to convert sports statistics into news stories, it’s now being used by a leading international bank to summarise stock activity for the firm’s brokers – a task which was formerly undertaken by a team of 20 people.

Cognitive artificial intelligence (AI) programmes that can respond to natural language will see human to machine collaboration become part of everyday working life. Watson, IBM’s natural language processing artificial intelligence system which famously defeated two human contestants on US prime time quiz show ‘Jeopardy!’ is now being used in fields like medicine, banking and customer services. Watson can even act as a ‘c-suite advisor’, scanning documents, listening in on meetings and advising on which companies to invest in. Ross Intelligence – an application powered by IBM Watson – can answer legal questions asked in natural language by shifting through huge databases of legal documents.

In a similar capacity, Kenshoo – a natural language processing system that another major international bank has invested in – provides detailed answers to financial questions that are asked in plain English. Applications like these – that can interact with humans through speech – will be called on to support or enhance the work of people.

How do you expect workplace attitudes to change in respect to automated roles?

Workplace attitudes are already shifting, just as people are becoming more comfortable with smart technology and robotics in the home. Automation has already transformed manufacturing processes and what we are seeing is an extension into new industries and job functions.

User experience will take primacy in the design of office environments as the war for talent grows more intense. To meet the expectations of the next generation and boost the productivity of those using the office, a greater variety of spaces will be available to work in. Activity based working – an approach to creating workplaces that provide users with shared access to spaces for individual and collaborative work – will become commonplace in workplace design. High-quality services, from food and beverages to recreation spaces, gyms and space to support wellbeing, will become standard features in core locations.

What does the real estate or financial services company of the future look like in respect to automation?

By 2030, companies will look very different than they do today. They will have diverse real estate portfolios that balance core space requirements with greater amounts of flexible space. Core locations will be concentrated in fewer, yet more dynamic, strategic, locations. More of them will be in developing markets with strong talent pools. Automation and outsourcing will streamline the workforces of large companies and reduce the number of full-time staff they employ. Employees will also benefit from greater automation of basic process driven activities within their day to day roles and technology may even improve the work life balance of employees.

Turning our attention to office leasing, Finance Monthly interviewed the Managing Director of JLL Czech Republic and CEE Board Member-Tewfik Sabongui who offers a rich insight into the sector and tells us about the strategies that he employs when advising his clients.

JLL was established in the Czech Republic back in 1992, as the first country from the current seven countries in CEE.

Can you tell FM a little about the services you provide and the kind of clients you deal with?

Our clients are a mix of global, international and local clients to whom we offer a wide range of services, such as leasing services (office, industrial and retail), valuation, investment, project management, residential, design & fit-out, technical due diligence and research.

How do you tailor your services to the needs of each individual client?

It is absolutely critical that we identify and design the scope of our services to the specific client needs and in line with the contemporary trends and requirements of the clients in each market, in order to advise them on how to meet their current and future plans. One of the latest trends in the office sector today for example is "work space" solutions, which are currently important to developers, occupiers and investors alike. Today, a simple design of the office including space plan and work stations solutions or meeting the latest sustainability requirements is no longer enough. We now have to assist with designing an office that will create an environment which will offer ample flexibility, grow productivity and create a "happy" feel, one that will improve internal communication levels, retain employees and attract new talent. On the other hand, each client, depending on his business model, requires dedicated and special attention. Investors will look mainly at yielding and value add assets, ideally in prime locations with blue chip tenant mix, while developers will focus on the right location, the overall size of the project and how much can be build and how to best construct and design it to allow maximum flexibility when dividing the space for multiple tenants. Tenants on the other hand are very similar to the Developers, they look for properties and offices which offer them enough flexible space with a potential for future expansions and growth, an efficient layout, in a good location in terms of amenities and access and developed meeting the latest norms and standards of sustainability.

Are there at times particular challenges involved in delivering services? Do you have any examples?

The challenges are our daily bread and butter. These can be very different as every client needs to achieve a specific goal. However, I’d say that the most common types of challenges that we deal with on a daily basis are of technical and commercial nature. IT solutions are also becoming an integrated part of our modern business conduct and hence there is a constant need and strive to be always ahead of the curve.

As a thought leader, what specific tactics do you implement when assisting clients with office leasing? What are the complexities that you are faced with in the process of negotiating lease terms?

I would say that there are no special tactics – what is vital is to able to carefully listen to what the client is saying and what their needs are in order to provide the right advice and service and work determinably on achieving it. One of the most common mistakes advisors do is to assume things without having properly understood what their clients’ needs are.

What is the process for assisting clients with financial analysis? What are the key considerations that need to be looked at to successfully assist your clients?

It is critical to have a good understanding of both the local market and the global sentiment and requirements, in order to be able to provide quality financial analysis to clients. A proper underwriting of the asset, being able to factor all different types of variables that affect the price calculation, thorough market intelligence and technical due diligence are all imperative for a successful financial analysis, which also need to be supported by solid legal and tax advice, and a targeted marketing plan with well-prepared reports.

Do you have a mantra or motto you live by when it comes to helping your clients with office leasing?

The one thing that I constantly remind myself of when advising clients is that I want to treat my clients the very same way I would like to be treated and to always strive to do everything in the best possible way I can. Personal relationships and building a base of trust and  transparency while maintaining an ethical code are absolutely critical to developing and retaining such relationships.