“People make cities, and it is to them, not buildings, that we must fit our plans,” the urban activist Jane Jacobs once said. Of course, people also make buildings, and increasingly, the criteria for the cities and buildings most attractive to people are converging.
This week, Swiss Life Asset Managers published its European Thematic City Index for 2022, highlighting the cities most likely to be resilient in the face of structural change. The asset management arm of Zurich-based insurer Swiss Life Group compared the cities in the index with the five C’s that the organization uses to evaluate both potential new investments and existing holdings: change and disruption; climate and environment; communities and clustering; consumers and lifestyle; and connectivity.
If many of these themes sound familiar, it is because they are also the basis for what are increasingly considered to be the most desirable commercial real estate properties. Increasingly, occupiers are seeking buildings that promote sustainability, innovation and connectivity, and offer employees opportunities to mingle and collaborate. Buildings that are mini-cities, if you will.
Indeed, Henry Chin, global head of investor thought leadership at real estate consultant CBRE, highlighted key elements of asset enhancement for office properties during a presentation at the PERE Asia Summit in Singapore last week. They included amenities such as shared community floors and spaces; health and wellness facilities; shared outdoor community areas; and shared fitted space and collaboration areas. Also on the list were sustainability features, such as energy efficient lighting and controls, high-performance glazing on the exterior façade and green building certification; and building technologies, such as touchless systems, smart elevator systems and biometric face recognition.
It is notable that three of the four amenities highlighted on the list were centered around the theme of communities. Let us now consider the attributes of London, which maintained its top spot in this year’s TCI. Judged on the five C’s, the city came in first place in three areas: change and disruption; climate and environment; communities and clustering. The second to fourth highest-ranking cities on the index – Zurich, Stockholm and Amsterdam – also scored high on the community front.
There are multiple factors behind this greater focus on community among real estate managers and investors. One is the surge in interest in social and impact investing, which places a heavy emphasis on how housing and other types of properties benefit the communities in which they are situated. Another is the ongoing challenge that occupiers currently face in luring employees back to the office. Employers are well aware that one of the most compelling reasons for workers to return to the office is to spend more time with their colleagues. In fact, increasing collaborative space was the most common upgrade that office tenants were planning to make, accounting for 62 percent of respondents in CBRE’s Asia-Pacific Occupier Survey conducted last month.
A third important factor is managers having to think more holistically about their investments. Office landlords have had to rethink their investment and management approach after the pandemic triggered a shakeup in demand in the sector. Those that can futureproof their assets in keeping with top tenant priorities while also selecting the most desirable cities for occupiers will be best placed to weather future disruption. In these highly unpredictable times, such considerations are more critical than ever.