Research

The way we work and shop: Tech and real estate

Technology has changed the way we order a pizza, hail a cab and check in for an appointment, and those changes have affected the buildings we work in and the places we shop. “As an industry we’re just beginning to understand the impact of these changes,” said Mark Stapp, director of the W. P. Carey Master of Real Estate Development program and moderator of a recent panel discussion on the impact of technology on the real estate industry.

2014-02-26

Technology has changed the way we order a pizza, hail a cab and check in for an appointment. Those changes have affected the buildings we work in and the places we shop.

“As an industry we’re just beginning to understand the impact of these changes,” said Mark Stapp, director of the W. P. Carey Master of Real Estate Development program and moderator of the discussion titled “Impact of Technology on the Real Estate Industry” held on February 25. The discussion is part of a monthly series presented by the W. P. Carey School of Business and the ASU Real Estate Council.

Two technological factors making waves in real estate right now are the way people work and how information is stored.

The new cubicle

The traditional office is going away, said Chris Krewson, senior managing director of Newmark Grubb Knight Frank, a commercial real estate advisory firm. Companies are giving their employees an option to work in the office, on the road or from home and that’s changing the office environment, he said. Businesses need less space per employee.

Beth Harmon-Vaughan, principal and managing director of Gensler, an international architecture, design, planning and consulting firm, said from 2010 to 2012, the average square footage per person in an office building reduced from 225 square feet per person to 176.

“Two things driving that are smaller footprints and less paper,” she said.

With the advent of electronic data storage many companies no longer need the square footage to house paper files. Some companies build their own data storage facilities but because of the space needed and the requirements for these facilities, many companies lease storage space in a colocation data center or “colo,” Harmon-Vaughan said.

This trend is creating a need for large data storage facilities, and many of these facilities are coming to the Valley, she said. Arizona’s mild weather and the lack of earthquakes, hurricanes and tornadoes make Arizona an ideal place for safe data storage.

“Data infrastructure is going to be the thing that leads economic development in the future,” Harmon-Vaughan said, “and it already is, really.”

Businesses like law firms and medical offices are moving their files to electronic databases and reducing the size of their office spaces, Krewson said.

“We’re seeing it across the board, it’s affecting every sector,” he said.

Krewson estimated medical offices are reducing their office space footprint by 20-30 percent.

Another reason offices are reducing their size is because employees are working differently, Harmon-Vaughan said. Her company, Gensler, conducts an annual survey of workers across 10 major industries in the United States to look at the trends driving workplace design.

She said the 2013 U.S. Workplace Survey discovered three key findings: focused, heads-down work increased by 6 percent, smaller workspaces were not giving workers the space to collaborate with others and companies that gave workers a choice of workspace grew four times more and had a third of the turnover compared to those companies that did not offer the option.

Harmon-Vaughan said allowing employees to work from home helps a company’s bottom line, “but there’s a consequence to that,” she cautioned.

The workplace drives culture, she said, and it’s important for employees to convene in a physical workplace and interact face-to-face.

The need for smaller office spaces are rendering buildings across the Valley vacant and in some cases obsolete, Stapp said.

“Real estate is big and clunky and hard to change,” he said.

Smarter stores

The changes in the office environment are also trickling into the retail sector. Steve Helm, assistant vice president of property management at Macerich, said they’ve been repurposing space at Scottsdale Fashion Square for non-traditional mall users. He gave an example of a high-tech office tenant looking for a unique space that ultimately chose a former restaurant space in the mall.

“It’s a really cool place for 25 to 30-year-olds to work,” Helm said.

He said some stores have reduced their size, and a few have expanded, to get to the size that allows them to use their space in the most efficient way.

“There’s this right sizing that’s taking place and part of that is because of technology because stores are becoming smarter,” he said.

Helm said Macerich is taking advantage of new technology as well. The company is incorporating searchable mall maps that allow shoppers to key in a product, for example jeans, and the system would show all the stores that offer jeans and give directions to the store the shopper chooses.

Helm also said they’ve just spent more than $200,000 to upgrade the Wi-Fi system at Scottsdale Fashion Square, which is a service to customers but also a research tool. Wi-Fi users can be tracked as they move about the mall, which provides interesting insight into shoppers’ behavior, Helm said. He said some stores have tested the tracking capabilities but received criticism from customers who were unhappy about being watched.

The places we shop and bump into each other are changing, Stapp said, a mall is a social space, it gives people social connectivity.

“It’s more experiential than it is simply a transaction,” he said.

Stapp said technology has also positively impacted how real estate is managed.

”We have better information, more readily available to us all of the time now,” he said. “Managing space becomes easier and more efficient.”

Helm said a useful tech tool he uses is a software program that allows him to see the electric consumption in the shopping center. The program can track demand and show glitches in the system.

During the recent remodel of Scottsdale Fashion Square, Macerich replaced an energy plant with a much more efficient system and has plans for another new plant that could save 40 percent in energy costs, he said, which is significant to the company’s bottom line. The mall’s electricity bill is more than $3 million a year, Helm said.

Macerich has also replaced light bulbs in the mall with more efficient lighting, which provides better light in the parking garages and reduces energy consumption, he said.

“Technology is helping us fine tune the management of our buildings,” Helm said.

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