Real estate game changer

IMAGINE you are looking for office space that can accommodate 500 workstations in the central business district of Paris. Previously you would likely engage a real estate agent who might take you to see 10-20 buildings before you make a decision. A new technology now allows you to shortlist buildings within an hour or so, making your search 85 per cent faster.

At the Paris office of international real estate services and investment management firm JLL, you are ushered into a room surrounded by LCD screens. To understand your office requirements, NXT Office - a JLL proprietary software - lists 10 questions for you. By the time you answer, say, eight of the 10 questions, the software already has a pretty good idea of what you are looking for, and narrows down your options to 10 buildings in Paris. These buildings pop up on the screens around you.

You can now "tour" the buildings, with a virtual walk through the floors. The immersive technology enables you to experience the office space by manipulating the floor plans, images and data, using infra-red sensors.

After knowing the fit-out costs for each option, you have zeroed in on two buildings. It's time for you to make a final call by going down, on site, to do a physical inspection. The whole pre-leasing process, which could have taken three to six months previously, has been shortened to a week, possibly even three days.

"This is dramatically changing the way tenant representation is done in Paris," says JLL CEO Christian Ulbrich, who cites the Paris scenario to illustrate how technology is changing the way the firm's leasing teams work. "It is much more productive for all the involved parties. It is delivering you lots of valuable time that you can spend on other things."

Designed by JLL's design and fit-out subsidiary Tetris, the proprietary technology is being rolled out to other markets including London and the United States. JLL - a Fortune 500 company with some 300 corporate offices and operations in over 80 countries - plans also to launch NXT Office in Asia.

Uncharted realm

Like its industry rivals, JLL is actively investing in proptech - or real estate technology - across various regions. "In different ways, we are trying to change our service lines from within and adopt new technology to make them more productive and create that value for clients," Mr Ulbrich says.

But in this new realm that he terms "uncharted territory", JLL needs to be quite agile and entrepreneurial in its approach because yesterday's ideas may well become today's "big hit". Given the rapidly changing environment, JLL does not peg hard numbers to its investment in proptech each year, apart from a budget of 7 per cent of revenue on technology.

The New York-listed firm has bought into a number of proptech startups. Early this year, it set up a new division JLL Spark, which is structured to operate independently and without the typical constraints of most corporate "innovation" or venture arms. This allows the division to be nimble like a startup, while enjoying the backing of JLL's expertise and resources.

JLL Spark's first acquisition was Stessa, a real estate technology platform that allows investors to track and manage the performance of their property portfolios more easily and cost-effectively.

Mr Ulbrich stresses however that JLL Spark does not spell a new business model for the company's forays into proptech. Instead, these are opportunities to learn from investee companies and tap technologies that add value to clients. According to him, proptech startups like to have JLL as an investor to gain access to the market.

"If you have a great idea, that's one thing. How do you address the market with that idea and how do you bring that idea to market and that's what we offer," Mr Ulbrich says.

Despite billions of dollars from venture capitalists and industry incumbents snapping up proptech firms, mirroring the fintech craze in the financial sector, it has not been clear which technology will emerge a game-changer. But JLL is not in the business of chasing fads, says Mr Ulbrich. By using a discerning approach, one which he describes as "a funnel system", JLL analyses proptech companies and invests only in those that can add value to its core services.

So, would JLL acquire industry rivals too? Mr Ulbrich shrugs, saying: "If that makes sense to us."

On the rival firms, his view is that many companies in the market "are very traditional in the way they work and do not offer game-changing technologies".

It "wouldn't make sense for JLL to take them out", he says, adding that the market will "take care of them". "We are much more focused on looking at companies that have some technology that will change the market, so we are spending more money buying software companies and tech companies than traditional competitors."

But that does not rule out the prospect of acquiring companies that can plug significant gaps in niche market segments. To that end, JLL acquired in 2016 a construction-consulting firm Merritt & Harris, to buff up its growing construction management business. Merritt has offices in New York, South Florida and Los Angeles. In the year before, JLL also acquired Brentwood retail brokerage and capital markets firm Wilson Retail Group, which specialises in representing landlords and tenants for leasing and investments sales in Southern California.

Growth roadmap

A 13-year JLL veteran who became global CEO in 2016, Mr Ulbrich declares that the company has a clear roadmap to being Number 1 or 2 in most of its service lines. According to him, JLL is already Number 1 or 2 globally in the leasing and capital markets, a service line that generally refers to investment sales and finance arrangements.

Last year, JLL closed US$170 billion in capital market transactions and completed some 33,800 leasing transactions for landlord and tenant clients, representing 784 million square feet of space. Since the merger of LaSalle Partners and Jones Lang Wootton to create Jones Lang LaSalle in 1999, the firm has achieved a 13 per cent compounded annual fee revenue growth.

"We look at the services we offer and the markets we are in and try to address those markets to be Number 1 and 2. If we are way off and don't see any way to get to Number 1 or 2, we ask ourselves whether that is the right market for us or the right service for us in that market.

"With that approach, we will continue to grow very fast. We have been a fast-growing company and will continue to be a fast-growing company," he declares.

Such confidence is reflected in the financial goals that JLL has set for the next eight years. The company aims to achieve 9 per cent average annual fee revenue growth through to 2025, including a doubling in revenue from capital markets. It is also shooting for over 7 per cent compounded annual growth in revenue from local markets, and a doubling in revenue from LaSalle Investment Management.

"I am very comfortable that we will achieve those targets that we set for ourselves," Mr Ulbrich says, citing four key macro trends that will, in his view, define the future of real estate and present great opportunities for JLL.

Firstly, he believes rising investment allocations to real estate will continue, given the abundance of capital. Real estate is already moving out of the alternative assets pool to become its own uniquely defined asset class. This is driving more capital towards real estate, a trend that he expects to last for the next decade.

Secondly, there is steady long-term growth in corporate outsourcing, underpinned by major occupiers looking for real estate service providers like JLL to drive real estate efficiencies so that they can focus on their core business.

Then there is continuing urbanisation, which Mr Ulbrich notes is happening in both mature and non-mature markets. Debunking the myth that the population and growth surge in cities and towns is taking place only in developing markets like China, he says JLL's research shows that urbanisation is a strong trend even in countries with so-called "bad demographics".

"In Germany, major cities are growing really fast. The empty nesters are moving back to the city to have the cultural experience, they want to walk to the restaurants, the theatres. Millennials do not want to sit in the train for an hour - they want to live where they work."

This is why the Europe, the Middle East and Africa (EMEA) region has been a fast-growing territory - which initially may seem counter-intuitive for those who view it as a mature market, says Mr Ulbrich. During his stint as JLL CEO for the EMEA region for seven years from 2009, the business nearly tripled its revenue and significantly expanded the scope of its service offerings.

Mr Ulbrich also sees similar trends in the US, with strong human influx into the big metropolitan areas in the east and west coasts. Companies are moving to where the talent wants to live, not the other way around as in the past. Technology companies, for instance, are starting to have secondary locations outside of Silicon Valley - one of the reasons why Houston and Austin in Texas, for instance, are emerging as new tech cities, supported by good universities and living affordability.

Mr Ulbrich notes that the fourth trend - rapid advances in digital technology and data - will benefit companies with the financial capacity to invest in technology and those willing to take risks.

Digital wave

As JLL seeks to ride the digital technology wave, its offices across the globe are also due for a revamp to become more tech-enabled. "We are in the process of changing our office space dramatically," Mr Ulbrich reveals.

"With more than 300 offices, you can't do it within two years. If you go to our offices in Shanghai, Mumbai, or Washington, they look completely different from our Singapore office. That is the programme we are running to change the way we work to be more agile and constantly have office space that are showrooms for our clients on how the future of work will have to be designed."

JLL is also going about this in a methodological fashion, collecting data to get the hard facts on how technology is changing the way companies attract and retain talent, impacting their wellbeing, reducing the number of sick days, and how it makes the staff more productive. For instance, with the introduction of collaborative spaces in the London office, JLL has found employees to be more productive when they work out of these spaces than from traditional work-stations. This lends support to its plan to roll out more collaborative spaces in new offices.

But in an era where no sector is immune to technological disruption, naysayers have flagged that if governments completely digitise property ownership titles and push for seamless end-to-end property transactions, that may eradicate the agent's role. Singapore, for one, is pushing for standard contract templates and a digitalised transaction process, and promoting "smart" facilities management through the use of technology.

Asked if he foresees technology eliminating the role of the middleman in property transactions, Mr Ulbrich dismisses such concerns out of hand. Real estate salespeople have a more strategic role than just brokering deals, he asserts. At JLL, leasing and property/facility management made up more than half of its US$6.7 billion fee revenue last year.

"If we define ourselves as just people who are providing information without adding value to that information, then the answer is clearly yes. But we don't see ourselves as that. We are strategic partners to our clients. We are offering strategic advice to our clients.

"There's a whole lot of analytics that we are providing and that's not easy to replicate through some form of technology," he says. "If we are just brokering information, we are highly at risk. If we are providing advice, then I'm not too concerned about our future."

Mr Ulbrich reckons that leasing and facilities management services will still be in demand in 10-20 years but the way these services will be executed are likely to be very different from how they are performed today.

As it is, JLL is already collecting huge amounts of data and turning them into valuable business analytics. If complete market transparency ever becomes a reality, the avalanche of data, when distilled into prized business insights, could yet spawn new forms of real estate services, Mr Ulbrich reckons. That will be a future to behold.

Christian Ulbrich

Chief Executive Officer Jones Lang LaSalle Inc

Diplom Kaufmann degree in Business Administration from the University of Hamburg

1987-1997 Held various positions within German and international banks

1997 - 2005 CEO of Hamburg-headquartered HIH Group

April 2005 - Joined JLL as managing director of JLL Germany

April 2005 - Dec 2008 Member of JLL's EMEA regional board

2009 - May 2016 CEO for JLL's EMEA region

Since May 2016 President of JLL

Since Oct 2016 CEO of JLL

Since August 2014 Director of German developer Vonovia SE