There is a type of investor who will spend three months negotiating two basis points off a cap rate and 40 minutes on the design brief. Oh yes, I have met him. This is not, as it might appear, a story about diligence. It is a story about what people choose to take seriously, and the long, slow invoice that arrives when they choose wrong.
Commercial real estate has always had a complicated relationship with beauty. Not the hostile relationship of the philistine, who at least has a coherent logic and honesty to it; something more evasive — an acknowledgment that design matters, followed by the reliable discovery, when the budget gets tight, that it matters rather less than previously thought.
The lobby gets simplified. The ceiling comes down another 30cm. The common areas shrink to the minimum that could still, in a forgiving light, be called common areas. The model still works — for a while. The bill for this habit of mind is now arriving in markets across Asia. It is arriving, as bills tend to, with interest.
What has changed is not the importance of great design. That was always there, embedded in the data for anyone who cared to look — in the spread between retention rates of buildings people loved versus buildings they merely occupied; in the widening yield gap between the experiential and the adequate; in the particular misery of the vacancy that runs six months longer than any comparable because nobody has given the market a compelling reason to care. What has changed is the willingness of tenants to be honest about it.
This is, improbably, the legacy of the pandemic. The question it forced — Why would anyone come to this office? — was always worth asking; it simply required a global health emergency to make it impolite not to.
Once people had worked in spaces that thought about them and then returned to spaces that didn’t, the preference became legible in a way it had never previously been. The indifferent building was exposed, rather late in the day, as a choice — and choices have consequences.
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The interesting thing about the investor case for design is how little it relies on aesthetics. This is good news for an industry that has spent considerable energy being suspicious of the aesthetic argument on the grounds that it sounds like something an architect would say. The actual argument is more mundane and more damning.
A building with generous ceiling heights will accommodate a wider range of uses over its lifetime than one optimised for a single configuration. A structural bay that allows reconfiguration without demolition is a building that can evolve with its tenants rather than forcing them to choose between a space that no longer works and leaving altogether. A common area proportioned for actual human use — the accidental conversation, the impromptu meeting, the five minutes of decompression between calls — generates the kind of community gravity that shows up, eventually, in renewal probability. None of this is vision; it is arithmetic.
What makes design feel expensive is the moment at which it is considered. Considered early, as a brief, it costs very little relative to the total outlay on an asset and pays for itself many times over. Considered late — as a remedy, a repositioning, an attempt to correct in year seven what should have been decided in year one — it costs a great deal and recovers rather less. The industry’s habit of treating it as the latter is not a capital constraint; it is a sequencing error.
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The organisations occupying commercial space in Singapore, Hong Kong and Australia today are not, in the main, indifferent to how their people experience the working day. They have spent several years making public commitments about employee well-being, about the quality of the working environment, about the signal their physical choices send to the talent market. These commitments are, in many cases, sincere. They are also, in a growing number of cases, in direct tension with the buildings they occupy.
A company cannot easily tell its people that it takes their experience seriously and then house them in a space with the acoustic ambition of a railway concourse and the lighting philosophy of a provincial car park. Or rather, it can — companies manage this cognitive dissonance with impressive regularity — but it is paying a price in the only currency the talent market truly understands: the decision, made quietly and without announcement, by a good person to work somewhere else.
This is ultimately the investor’s problem. Not because investors are responsible for anyone’s talent strategy, but because the buildings that lose that argument are the buildings that don’t get renewals. And these buildings are, over any hold period worth discussing, those that don’t perform.
The test I keep coming back to is not sophisticated: Would you want to spend a difficult Tuesday afternoon here? Not a good day — a difficult one. Buildings and spaces reveal themselves on difficult days.
The sector will, in time, correct this. Markets correct most things, given sufficient pain and sufficient patience. What remains to be seen is whether the industry corrects this through genuine change or simply waits until enough unloved buildings reprice until the lesson becomes impossible to avoid.
History suggests the latter. The commercial real estate industry is not, as a general characterisation, an early adopter of its own lessons.
But the buildings that understood it first are already compounding the advantage. They are the ones with the waiting lists, the premium rents, the tenants who respond to the renewal conversation as though they have considered the alternative and found it wanting.
Design is not a cost centre. It was not one 40 years ago when the argument first needed making; it is not one now. The only thing that keeps requiring the argument to be made is the reliable human capacity to look at a number that is large and visible, and mistake it for the only number that matters.
That mistake has a price; the buildings are paying it. So, eventually, are their owners.
Jaelle Ang developed the Four Seasons Hotel and Capella Hotel in Bangkok, co-founded The Great Room and sits on the boards of the Singapore Land Authority and United Hampshire US REIT
