Editorial

In the midst of the fallout from the dot.com crash and overhype of e-commerce from the late 1990s and early part of this century, it is perhaps a little too easy to be over-sceptical about the role of technology and its impact on real estate. Clearly tales about the death of real estate have been over-cooked, but it is all too easy to be dismissive about technology impact. As Bill Gates said in 1997, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Do not let yourself be lulled into inaction”.

What we are seeing today is an increasing emphasis on pervasive technology(or information and communications technology, ICT). In the fourth quarter of 2004, 52 per cent of households in the UK (12.6 million) could access the internet from home, compared with just 9 per cent (2.2 million) in the same quarter of 1998 (National statistics). But this is not an even regional spread. For example, in 2003/04, the proportion of adults that had used the internet in the three months prior to interview was highest in London and the South East(both 64 per cent) and lowest in the North East (43 per cent). The same “digital divide” is true at a business level also. For example, recent data (Booz Allen Hamilton, 2003) show that smaller businesses have a lower level of broadband access than larger companies.

This emergence of a digital divide, together with continued cultural resistance to ICT, perhaps lends weight to the arguments of those who suggest ICT impact on real estate remains limited. But recent figures suggest e-commerce continues to pose a very real addition to conventional retailing: IMRG suggests,for example, that consumers spent £1.5 million online in the UK in May 2005, up by nearly 36 per cent on the same month from the year before. In stark contrast, total retail sales growth was at its slowest rate since 1947,according to the latest government statistics, with a year-on-year increase of just 0.9 per cent (IMRG web site – www.imrg.org/). Security and technology issues are much less of a problem today, and as people’s work-life balances shift and morph, the internet offers a flexible way of integrating basic tasks into lifestyles. The internet also offers rapid price comparison and cheaper goods. There is no doubt, for example, that the closure of more than 100 Dixons stores in the UK in 2004 was a combination of the company fighting tough competition in the UK from fellow retailers such as Argos, Tesco, as well as online sellers, while profits have been squeezed by high store rents and low prices.

This special issue of JPIF was commissioned therefore to drill deeper and analyse some of the trends and impacts that ICT is having on commercial real estate. The paper by Dixon aims to set the scene by highlighting key issues for research in ICT impact. This paper critically reviews the conceptual frameworks that have been developed for assessing the impact of ICT on real estate. The paper suggests that a “socio-technical framework” is more appropriate to examine ICT impact in real estate than other “deterministic”frameworks. Therefore, ICT is an important part of the “new economy”,but must be seen in the context of a number of other social and economic factors.

Two papers by Tien Foo and Spurge examine the impact of technology in commercial office property. Tien Foo suggests that the evidence from Singapore is mixed as regards ICT impact. Based on a mailed questionnaire survey conducted on office occupiers in CBD of Singapore, 79 per cent of the respondent firms felt that there is no negative impact of an increase use of ICT on the office space. However, some 63 per cent of the respondent firms agree that ICT-enabled changes to working practices were important in affecting the real estate space changes of firms. Using regression analysis, the results also showed that four variables that represent firm characteristics and their attitude towards ICT use were significant in explaining why they perceive no significant impact of ICT use on office space demand. Interestingly, the market rent factor was found to have no influence on the perception of a negative ICT-office space relationship by the sample firms. Spurge’s paper highlights the importance of the digital divide issue within the UK. This paper aims to review recent government policy and provides a context for an exploratory study of broadband take up and use of SMEs in the Thames Valley region. The findings indicate that government policy promoting broadband take up amongst SMEs has been effective in terms of the achievement of targets. That is, the majority of SMEs in the case study area are now equipped with broadband technology to enable them to enhance their performance and competitiveness in the business environment. However, the research also finds that although current levels of engagement with these new technologies may be relatively extensive, they are also fairly basic, with tools being used primarily for communication and searching for information as opposed to advanced applications such as e-business and marketing.

Turning to other types of commercial real estate, Thompson’s paper discusses the impact of ICT upon the industrial property sector through the identification of observable trends now and in the near future. The paper looks at the current ICT influences on industrial property, highlighting the nature of the impact and its implications for the sector. As the paper shows, ICT has accelerated the functional obsolescence of many industrial buildings, not necessarily directly, but through changes linked to demand. This is manifested in the substantial falls seen in industrial stock over the last 30 years. ICT has also been a facilitating factor in the creation of a new breed of specialist, often high-bay, warehousing.

Finally, Snow’s practice paper on call centres suggests they have been one of the economic success stories of the past decade. Rapid employment growth focused on former industrial cities has made the call centre the mass employer of choice for regional development agencies seeking to regenerate unemployment backstops, and future forecasts of employment are equally optimistic. But there are uncertainties that must be addressed. Offshoring of call centre jobs and the emergence of automated and self-service alternatives to live-agent call centres threatens to spoil the industry’s good news story, despite the recent bad press for outsourced call centre operations. As with other booms, rapid growth can be an indication of the speed of future decline, and property investors with exposure to UK call centres should be aware of the possible downsides to this vogue business sector.

So what can we take from these papers, and how is ICT impacting on real estate? First, these papers suggest more research is needed to determine its impact and perhaps longitudinal analysis will reveal a more accurate picture of change. It is interesting to note that in a recent CORENET 2010 survey, for example, that it was found that corporations will require less space to perform effectively. Currently, just 7 per cent have workers spend 25-50 per cent of their time in unassigned office space, but by 2010, 21 per cent of companies will have their employees working remotely up to half the time. Finally, an interesting perspective on the link between workplace design and productivity was highlighted in recent research from CABE/BCO (2005). ICT, as part of the workplace design, can impact on the quality of the physical value of a building and its business value rather than simply its asset value. Indeed, wireless technology (or WiFi) is seen as an important part of this process (BCO, 2005).

What is also clear is that we cannot understand ICT impact in isolation. ICT is important, and does make a difference to the shape and form of real estate products and services that we see today, but ICT does not act alone to transform real estate. However, new types of real estate have emerged as a direct result of ICT (for example, call centres, data centres and serviced offices). There is also a blurring of emphasis between the traditional real estate sectors, and more marginal and secondary locations and property types are already at risk from ICT. Real estate service functions are also changing in emphasis, to reflect modified customer and service provider relationships brought about by ICT and other factors. However, as Gillespie and Rutherford (2004) point out, technological infrastructure is just one element of the built environment and does not in itself make a home, neighbourhood, or city more “liveable” in its own right. Rather, individual lifestyle choices will determine how people (and businesses) use technology in the future.

Editors note: Due to the special nature of this issue, the normal referring procedure of sending each paper to three different reviewers was modified. For this issue, all the papers submitted were subject to review by one member of the editorial board who was an expert in the subject matter concerned.

Tim DixonDepartment of Real Estate and Construction, Oxford Brookes University, Oxford, UK