CBRE - What if You Build It and They Don't Come - Nigel Smith 17 March 2011 En

What if you build it and they don’t come?

by

Nigel SmithExecutive Director. AsiaCB Richard Ellis

17th March 2011

CB Richard Ellis |

Introduction

CB Richard Ellis - 25 years in Asia

Nigel Smith - 20 years in Asia Leasing, Marketing and Designing Office Buildings

Taipei101台北

Taipei 2004

No.7

ICC2009

No.9

Two IFCHong Kong

2003

No.23

508m474m

414m

Ping An IFCShenzhen

2015

No.2

648m

458m

Guangzhou IFCGuangzhou

2010

No.16

370m

Bank of China Tower

Hong Kong 1990

No.39

330m

China WorldTower, Beijing

2010

No.64

CB Richard Ellis |

CBRE Transaction Database covers

32 industry sectors

PUBLISHINGHEALTHCARE EDUCATION IT / TECHNOLOGY

SERVICED OFFICES

PHARMS

SOFTWARE / INTERNET FOOD BANKS

INSURANCE TELECOM INDUSTRY FINANCE AERONAUTICS / DEFENSE

CONSTRUCTION / REAL ESTATE ENGINEERING LAW FIRMS CHEMICALS

AUTOMOTIVE AUDIT AIRLINES ENERGY CONSULTING

ADVERTISING DISTRIBUTION MEDIA FASHION / RETAIL

SERVICES COSMETICS / HOUSEHOLD

RECRUITMENTGOVERNMENTAL

IT SERVICES

Introduction

This Time Last Year we said that…

CB Richard Ellis | Page 7

This Time Last Year

In the light of the GFC

Corporates were re-thinking their Real Estate Strategies

Reduced profits

Increased regulations

Constant change

An uncertain future

Cost Containment

Organizational efficiencies

Corporate Strategy Shifts

New real estate strategies


This Time Last Year

And that they were focusing on:

Their core businesses

Being more flexibility and adaptability

Raising service levels to their customers

Greater transparency and openness

Greater innovation

So a year later…

What are the new occupier trends

What will make them move?


New Trends

With the end of the GFC

There has been a Shift in the way developers, occupiers and investors approach office buildings


New Trends

The old adage of ‘Location, location, location’…

…now no longer works


New Trends

Development Trends• 1970’s = suspended ceilings• 1980’s = raised floors

1990’s

1. Location2. Specifications3. Facilities4. Design5. Management

2000’s

1. Design2. Specifications3. Management4. Environment5. Location6. Facilities7. Sustainability

2010’s

1. Environment2. Sustainability3. Design4. Specifications5. Management6. Location7. Facilities


This is because of:

New Trends

Source: CBRE, USA


Changes in the workspace are occurring

Source: CBRE, Workforce Study

New Trends

CB Richard Ellis | Page 17Source: CBRE, USA

New Trends


New Trends

The ‘new breed’ of occupiers are looking to enhance…

…their quality of life

Say they are working harder and longer hours in order to succeed

*Note: November 2009Say they are looking harder for better investments

41%

48%

*Note: November 2009Believe ‘ambition’ is a key trait to have nowadays33%

*Note: November 2009Think having a ‘long term vision’ for oneself is important42%

Source: BBDO Voices, China


Being fueled By optimism through economic Satisfaction:

They are feeling more• financially secure• career-focused

4.5Same as Before

8More Now

0Less Than Before

4.5Same as Before

0Less Than Before

4.5Same as Before

0Less Than Before

8More Now

8More Now

Financially Secure

Career-Focused

Optimistic

5.2

5.2

5.3


New Trends



But there is also emotional dissatisfaction:

But they are also feeling more • stressed• time-poor • disillusioned

4.5Same as Before

8More Now

0Less Than Before

4.5Same as Before

0Less Than Before

4.5Same as Before

0Less Than Before

8More Now

8More Now

Stressed

Time-Poor

Disillusioned

5.8

5.5

5.2

4.5Same as Before

0Less Than Before

8More Now

Happy 4.5

New Trends


For the 2nd Year In A Row China Registered the

highest stress levels in Asia

New Trends


New Trends

As pressure mounts… Multi national corporations are looking at ways to

balance their workforce within the real estate domain

The New “Triple Bottom Line”

Economic

Social Environment


New Trends

Inspiration is the key to attracting occupiers

• widen their vision• stimulate their creativity• attract highly qualified talent• uplift people’s spirit at work

Building a Reputation


Today’s occupiers want a relationship

So that they can• Enhance employee satisfaction• Build their image• Competitive advantage

This means• Adaptability• Focus• Achieving corporate objectives

Inspiring Occupiers


Occupiers want: • A tailored a design• Flexible lease terms that suits their business• Sustainable management• To be respected

Developers want:• Better tenant mix• Higher rents• Better investment values

Inspiring Occupiers


Developers should this to their advantage

By leveraging the brands of these ‘pedigree’ corporate occupiers

Inspiring Occupiers


Relationships are being built around reputations• Personal• Company• Real Estate And form partnerships

Inspiring Occupiers

Herron Tower, LondonCBRE Appointed

Marketing and Leasing Agent

“Our goal is to foster a relationship between the tenant and landlord based on trust. At the very

least, it’s about giving the tenant peace of mind, but more than that, we want tenants to feel

valued and have a genuine sense of belonging”.


And one of the simplest ways to attract an occupier

…Is to listen and gain their trust

Inspiring Occupiers

The New Design Mantra


The New Mantra

Last year there was the ‘Wow factor’

• Dynamic and Beautiful• Interesting and iconic• Symbols of a city• A focal point of art and people• A Destination


The New Mantra

But also the overall impression

• Landscaped Gardens• Large lobbies• Secure lift lobbies• Stunning views

China World Tower, Beijing, CBRE Appointed Marketing Consultant


The New Mantra

Not just from the outside But also from the inside

1. 3 way office lobby2. High efficiency of 91 - 94 % lettable3. 14.67 m bay depths4. 9 m columns distances5. 1.5 m mullions6. Showers

2ifc, HKCBRE Appointed



The New Mantra

This year there is the ‘Now Factor’• Fast direct lifts• Mobile connectivity• High speed telecommunications• Unlimited power supply• The Vertical city

The Shard, LondonCBRE Appointed Consultant, Marketing Consultant


And more often than not - what they can do for theenvironment

The New Mantra

ENERGY CARBON WATER WASTE

30% 35% 30-50% 50-90%

Greater efficiency and immediate cost savings

Lower CO2 with long-term environmental benefits

Cost savings and conservation of resources

Lower disposal costs and reduced environmental impact


Ultimately show the occupiers how they can:

• Attract and retain staff• Be more efficient• Feel important

…because “from small acorns grow large oak trees”

The New Mantra

Going Green Does Make Financial Sense


The Corporate occupiers are committed

Going Green

Source: CBRE Research, USA


And rental rates are rising in the USA

Going Green



The trend is not stopping

Going Green



The benefits are clearer

Going Green



Not to mention occupier satisfaction

Going Green



Why?

…simply because they are more productive

Going Green


Marketing ‘The Difference’


If developers, occupiers and investors are smart -• These are all value add items• With a premium attached

This can create ‘Competitive advantage’

Marketing the Difference


But only if the benefits are clear and tangible


Factor Features Strengths Weaknesses Opportunities Threats Key Differentiators Benefits Unique Selling Points Key Messages

Location CBD

Proximity to trophybuildings; Exposure to mainthoroughfare & WesternCorridor

Could be percieved asfringe

To cater for financial andprofessional companies

Disruption from theredevelopment of the oldCentral Market Only Grade A Supply in 2008 Provides contiguous space YES Scarsity, opportunity, rarity

Acessibility

SubwayBusTaxiCar

Adjectent to ifc and HKLportfolio and Mid-levelsescalator via footbridges.

Restricted vechicular drop-off in front; Congestedtraffic on Des Voeux Rd.

Footbridge linking HangSeng Bank HQ and ifc/HKLportfolio

Ground floor pedestriancongestion Future footbridge Convenience; comfort NO Connected

Building DesignMain LobbyCurtain wall

Sense of space created byatrium; Fiber optic lightingon curtain wall; uniqueidentity; 1st Floor Lift Lobby

1st Floor Lift Lobby; Novisibility from Ground Signage Pedestrian congestion

Branding opportunities for anchortenants Profile YES Image

Office Design

ShapeCeiling HeightEfficiencyColumn location

Rectangular floor plate;ideal size for professionalcompanies; 94% usablearea; Raised floor system;sidecore

Ceiling height could beconsidered low by financialcompanies; Columnlocation

Indicate similar ceilingclearance as ExchangeSquare

Anchor tenants need to take5 + floors High efficiency

More employees per floor;visibility NO Efficiency

Specifications

PowerAir-conditioningVertical transportationTelcos

Will compete with HKLportfolio Perception (old building) Re brand

Concern expressed fromfinancial sector Power, raised floor Technically sound Yes (raised floor) Over provides

Facilities

F&BShopsService facilities On-site restaurants & shops

Relatively small retailarcade

Raising the brand of thebuilding; meeting the needsof the occupiers

Percieved distance to otheroutlets Boutique Convenience; comfort NO Convenience

Management

HealthSecuritySafety

International Grade Astandard, customer care Pedestrian flow Value-added services Perception Boutique Personalised YES TLC

EnvironmentViewsImage Sea views; Escalator People pollution Footbridge, accessibility

Further delay of CentralMarket redevelopment The area will undergo transformation Upgaded environment NO Enhancing Central

Ownership Single OwnershipSound financialbackground; Experience Wide geographical portfolio

Flexibility to structureinnovative deals Portfolio landlords Boutique Customer focus NO Reliability;Trust

SummaryExtension of Central;

Connected to ifc and HKLportfolio

Congestion Only Grade A Space in2008 Perception

Naming rightsContiguous space

BoutiqueDesign

ConvenienceValueProfile

LocationDesign

SecificationManagement

ImageRarity valueOpportunity

QualityOwnershipBoutique



Because marketing is about changing perceptions

ICC, Hong KongCBRE Appointed



Making a connection to the audience

Seoul IFCCBRE Appointed

Marketing Consultant



CBRE Appointed Marketing and Leasing

Agent

Focus on what is important



Tallest building and icon in GZCBD great location

Art environment: Image, Design

High prestige; Inspire and stimulate; Expand workers life and force and energy;

Vitality and inspiration

Inspired, Innovative,Authentic

Business Partner

Product Attributes

Functional Benefits

Emotional Rewards

Brand Personality

Core EssenceThe workplacethat elevates inspiration

Living environment offer premium grade office location, quality and facilities with Lifestyle elements: shopping, food, entertainment.

Source: BBDO, HK

The core of branding is the Brand Pyramid

The Branding Battlefield


You do this by “building a picture”

The Branding Battlefield

Creating valueMatching the product to their needsTurning cost to advantage


But there is still a problem looming

The over supply of high quality buildings

Branding


Because they all offer the same features and benefits

…So how do you differentiate your building?

Branding

The New Era of Advertising


And you can not simply attract the best tenants by location, marketing or even branding

You now need to be more visible

Branding


Branding

And talk to them in a language they understand


Take for example the banking sector:

Over a decade ago as their sector began the evolution of globalization transforming their industry from

• Patrons to customers• Boardrooms to open plan• ATM’s to airport advertising• To media advertising



Real estate will be the same

Advertising taking the lead - not just marketing Corporate occupiers are

• Sophisticated• Smart• Connected• Can tell the difference

‘Shout it from the roof tops’



Why?

1. They are the same industries who have been leveraging the power of advertising for years

2. They know how effective advertising can be when building trust




This is an opportunity to ‘talk to the occupiers’ in their language - out on the battlefield

1. Financial institutions: 40 - 50 %

2. Professional Service Providers: 15 - 25 %

3. Other Int’l Corporations: 10 - 25 %

4. Real state Developers (if HQ): 5 - 10 %

5. Insurance: 10 - 20 %

6. Government: 5 - 10 %

7. Mining/Energy: 5 - 10 %

8. Other: 10 - 15 %

65%


And the results…

ICC in HK spent US$4,500,000 over 3 years for 2.5 million sm, 13% of the annual rent roll


Morgan Stanley

Credit Suisse

Deutshe Bank


But it is not just about one medium. It’s now about a series of Integrated Messages

• Collateral• Newspapers• Magazines• Outdoor advertising• Events

Global reach…..local marketing


And Finally -

When Will They Come?


Marketing Time Line

Commitment

3 Months

Step 2Development

Design Consultancy

Duration: 3 Months

Step 5

Leasing Strategy

Step 6

Marketing Plan

Step 1Research and

Consultancy

Duration: 3 Months 3 Months

Step 3Marketing Strategy

and Plan

Duration:3 Months

Step 7

Leasing Implementation

Step 4Marketing

Collaterals and Events

Duration: 3 Months

Total duration: 24 Months

Ongoing research. Duration 12 months

Total duration: 12 Months

Pre Completion

Post Completion


Standard Commitment Rates in T2 China Cities

• 10% - on completion• 25% - + 6 months• 45% - + 12 months• 65% - + 18 months• 85% - + 24 months

Commitment

Zone Floor

LettableArea (sqm

gross)Strategy 1 2 3 4 5 6 7 8

TA u/w(sqm)

LOI Signed& DepositPaid(sqm) NIP(sqm)

SeriousInterest(sqm)

Other(sqm)

30 1,447.72 Whole 1,447.42 29 1,466.66 Half 1,466.66 28 1,484.80 Whole27 1,484.80 Sub 1,484.80 26 1,484.80 Whole 1,484.80 25 1,484.80 Sub 1,484.80 24 1,484.80 Sub23 1,484.80 Whole22 1,484.80 Half21 1,484.80 Whole20 1,484.80 Sub

19 1,484.80 Half Jia Shang AD @ 143 1,227.12 257.68 18 1,484.80 Whole 1,484.80

17M17 1,484.80 Whole 1,484.80 16 1,484.80 Half15 1,484.80 Sub 576.12 527.91 14 1,484.80 Half 538.47 13 1,484.80 Half12 1,484.80 Whole 1,484.80 11 1,484.80 Sub 946.99 10 1,484.80 Half 1,484.80 9 1,484.80 Sub Lijunhui @ 146 IFELC @ 140 Qatar @ 142 Hewitt @ 142 Nissin @ 147 Lijunhui @ 146 1,318.22 166.58

81,484.80 Half Rendao Investment @

135Rendao Investment

@ 135 1,151.64

7 1,484.80 Sub Aedas @ 136 HSBC @ 130 AON @ 135 1,113.94 6 1,484.80 Whole 1,484.80 5 1,484.80 Whole 1,484.80 4 1,484.80 Sub 410.27 3 1,484.80 Sub 1,113.26

Total GFA 41,519.18 Total 15,353.58 785.59 8,539.32 946.99 -

Area(Sqms) % Cumulative Ave RentTA signed 15,353.58 36.98% Tenant Area(Sqms) %LOI Signed & deposit paid 785.59 1.89% 38.87% Posco 1,000.00 2.41%NIP 8,539.32 20.57% 59.44% Antonoil 550.00 1.32%Serious Interest 946.99 2.28% 61.72% Aotudesk 200.00 0.48%

Total 25,625.48 61.72% 61.72% Other 1,750.00 4.21%

Hua Tai @ 130

Nike NikeCityland

Leasing Centre

Low

E&Y @ 120

Servcorp @ 115-125

Hesen Power @ 153

Fuji Xerox @ 108

Cisco @ 140

Hesen Power @ 137

Abbott

CBRE @ 126

OCBC @ 125

Shangri-LaStacking Plan

Dated: 11th April 2008

Refuge Floor

High

Chevron/Unocal @ 135

Yi Lang Real Estate @ 135Kerry Development @ 120 IMC @ 136

Jiazhaoye @ 130

SHK @ 150

TCBL @ 130Swire @ 135

CKGSB @ 135

Jiazhaoye@ 130

Jiazhaoye@ 130 Tishman @ 157Alliance Harvest @

140

Hyder @ 138

ZPA @ 150Fan Hai @ 163 Intel @ 155

Autodesk

Case study – Shangri-La, Chengdu


Commitment

Quick fixes can be

• Aligning your building to the target occupiers• Leverage your and their reputations • Build the “Wow” and deliver the “Now”• Differentiate in your marketing• Build a brand that is unique• Do not be afraid to advertise• Commit for the right reasons


The key to success

1. People2. Community3. Environment4. Sustainability

…Value is in ‘their perception’

Commitment

CBRE - What if You Build It and They Don't Come - Nigel Smith 17 March 2011 En

Documents

Transcript of CBRE - What if You Build It and They Don't Come - Nigel Smith 17 March 2011 En