The end of April brought some long awaited sunshine and, even more greatly anticipated, our annual charity investment seminar. Its focus was people born since 1995, the so-called “generation-z”, in particular how education and technology are changing the skills they need for future success and what this means for real estate.
In my contribution I outlined the UK’s recent structural economic evolution. Over the last 50 years the service sector has replaced primary and secondary industry as the largest jobs provider. In the last 20 years knowledge-based services - tech and R&D - have emerged as the pre-eminent value creators. In the last 10 years self-employment has grown by 31%, much faster than any other employment type.
This evolution has been facilitated by automation and technological advancements. These have increased the demand for creative and technical workers whilst lowering the need for other types of workers. They have created a global serviced-based marketplace which has few barriers to entry. All that skilled workers need to reach a global audience is a laptop and an internet connection. Work can now be done from anywhere.
As a result new jobs are rapidly being created and traditional jobs destroyed. Indeed an estimated 85% of today’s graduates will be doing jobs in 2030 that do not yet exist. The length of job tenures is falling. The only way for gen-z to thrive is to prepare for a career of life-long learning by building broad, adaptable skills which will allow them to transition into multiple unknown roles over time.
The desires of gen-z differ from previous generations too. They place a high value on lifestyle, fuelling strong population growth in major cities centres. They have grown up with the sharing economy in which assets are rented on demand rather than owned and are applying this philosophy to real estate.
This is all very interesting, you might say, but what is the relevance to property investing? Gen-z are highly motivated by non-monetary factors because they have so much choice about how, where and for whom to work and the expectation of a job for life has gone. Incentives like flexible working, training opportunities, secondments and free medical cover can be deal-makers for corporates trying to attract and retain the best talent. So too can real estate if it offers them the chance to work flexibly from a great office in a great location.
What makes a great office? For gen-z it is an office that provides engaging, user-focused space. Offices that meet their needs on demand by providing a range of environments – quiet rooms, breakout space, hot-desks or simply a decent coffee. This is how they worked in university and this is how they expect to work in employment too.
What makes a great location? Typically it is a vibrant, easily accessible city centre offering a mix of leisure, retail and entertainment uses. Affordability, liveability and social networks are important too. Increasingly therefore it is regional cities with universities that provide great locations.
Understanding gen-z is imperative for investors seeking to construct portfolios with longevity that suit the needs of tomorrows’ occupier. Our current strategy includes a bias towards acquiring best-in-class offices in supply-constrained regional city centres. These assets and locations are most likely to benefit from the way the next generation choose to live and work in the context of technological change.
Senior Analyst - Investment Strategy and Risk