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Emerald Group Publishing Limited
Copyright © 2004, Emerald Group Publishing Limited
This views expressed here are those of the authors' and not necessarily those of their organisations.
The 1990s saw the rise of the Internet together with the development and wider use of high-speed “broadband” communications. Expectations and the business opportunities these technologies presented grew. New services emerged, including the emergence of dot coms (new businesses based on the Internet), which often threatened traditional businesses of the old economy. In some cases, these new start-ups had market capitalisations well in excess of traditional companies, even though these new ventures were not even profitable.
This growth also provided opportunities for the real estate profession. The need for secure off-site data storage led to the emergence of data centres, often located in converted warehouses with users paying significantly higher rents to secure the right locations. Online shopping and travel-based Web sites threatened traditional retailers, with some fearing the collapse of the high street. Even the retail investment market suffered (in part) as a consequence of this.
The office sector was also presented with opportunities. Businesses required broadband communications and so an office without access to such communications would potentially be obsolete. Those with broadband were even seen to command a rental premium though no evidence emerged to support this. The provision of broadband, particularly within a multi-tenanted building also provided the opportunity for landlords to gain extra income through the sale of telecoms services, including the provision of services, such as the sale of stationery, provision of car hire and other business services. It was also seen as a way of reducing tenant turnover and the ability to create a “relationship” with the tenant.
Hindsight of course is a great thing. Many may now regret the heavy sums they invested in certain ventures. The bursting of the Internet bubble led to the collapse of many ventures and the questioning of business models. The occupational markets too are somewhat different, particularly the office markets in London and the South East, where vacancy rates have soared since the late 1990s, with signs only now emerging of a stabilisation in supply.
So did we all take flight to the clouds? Was all the hype and euphoria a waste of time? It could be argued that the Internet bubble has not burst, merely deflated. Indeed, there is merit in this. For sure, some of the above ventures may not see light of day in the way they were first conceived. Nevertheless, the reality is that technology will not go away. We rely heavily on telecommunications, the Internet and high-tech products generally.
According to the 2003 International Benchmarking Survey by the Department of Trade and Industry (DTi) over 90 per cent of businesses now have access to the Internet; closer to 100 per cent for businesses employing over 50 people. Use of the Internet is seen as a way of reducing costs, although it is now generally accepted that increased revenues will not arise from its use. A digital divide is however, evident with smaller firms (generally those employing fewer than ten people) reducing their use of the Internet. At present only 45 per cent now have access, compared to over 60 per cent in 2001. High access costs and maintenance are key issues, though perhaps not surprising given the recent economic climate.
Broadband itself is being used increasingly by firms of all sizes, with the number of firms with Internet access using broadband connections (i.e. over 2 megabits per second) rising from 50 per cent in 2002 to 63 per cent in 2003. Of course, access is one thing, deriving value from the services is another and it is here that the room for growth in the provision of services exists, especially for smaller businesses, for example only:
32 per cent of UK firms use electronic data exchange, i.e. accept or exchange electronic documents, data files of payments;
22 per cent of firms use video conferencing facilities;
38 per cent of large firms use an extranet, falling to just 6 per cent of micro businesses; and
60 per cent of large firms use online ordering systems – fewer than 20 per cent for micro firms.
Even the number of individuals with Internet access has risen from 2.3 million in 1998 to 11.9 million by September 2003 (Source: ONS), with 3 million people currently accessing with broadband communications. With broadband costs reducing there is room for expansion, given that over 80 per cent of the population is able to make use of broadband. With the UK economy starting to expand following a period of slow growth over the past 2 years so businesses will seek to invest. This investment will inevitably include new technology and use of high-speed communications. As these figures show, there is much room for growth and the potential to supply services, particularly for the smaller firms who may not be able to provide and run systems in-house.
These findings corroborate a survey undertaken in 2002 from the perspective of occupiers' in the Thames Valley. This showed that 90 per cent of respondents considered broadband to be vital or very important to their business. The survey also showed the emergence and wider use of alternative working practices including home working, which ideally requires broadband communications in the home. Such findings are no doubt relevant to other areas of the country, especially in the major towns and cities of the UK.
In contrast to this demand, the property profession has been relatively slow in its response. As the paper in the Journal shows, education is an issue, with some professionals failing to comprehend fully the various technologies and terminologies. This will change, though professional bodies and telecom providers alike can bridge this gap. It may also serve to improve the availability of services to tenants, who are often left to resolve IT and telecom issues themselves. Perhaps, the 50 per cent of small businesses who have failed to realise the opportunities technology presents could be assisted in this way?
This is not to say the profession is ignorant. Office and building design is improving to enable communication links to be provided within buildings. Some buildings are pre-wired. Some buildings even have a supplier to provide IT and related services, though this is largely restricted to the existing buildings. The fact that providers and relationships exist is evidence of a realisation and understanding within the profession of the potential. It just needs to be marketed to a wider audience. Through understanding tenants' needs, landlords can start to build “relationships” and maximise the value of their asset. It may not bring in revenue in the short-term, but in the longer term it may be beneficial in reducing voids.
As the major economies around the world begin to grow so the focus on IT to deliver cost savings and improve customer relations will come to the fore again. How technology develops to foster this further will only be borne out in time. In doing so businesses and the property profession need to be aware and alert to the possibilities technology provides.
Nigel AlmondJones Lang LaSalleVivienne SpurgeOxford Brookes University