- Christian Ulbrich, CEO of JLL, spoke with Insider about the challenges facing real estate.
- He said high-end offices will triumph over remote work even as companies scale back their footprints.
- Ulbrich described how technology is changing real estate but cannot solve the affordable housing shortage.
In 2013, Christian Ulbrich pleaded with colleagues at commercial real estate giant JLL to realize the urgency.
He said JLL — a global company with $19.4 billion in revenue in 2021 best known for providing advisory, brokerage and property management services to Fortune 500 companies and large owners — would need to reinvent itself to stay relevant.
“Ten years from now, we should be a technology company serving real estate, because the world is going to change,” recalls Ulbrich, now CEO of JLL. “And if we don’t change, we will be left behind.”
Nine years later, Ulbrich told Insider he was wrong about one thing. The drug’s technological transformation is taking more than a decade — but that’s not for Ulbrich not trying.
Since his appointment as CEO in 2016, Ulbrich has made technology a core part of the company, launching a joint venture fund, JLL Spark. Now part of JLL Technologies, the fund provides advice and support to real estate technology, or proptech, startup companies that promise to make it easier to buy, sell, maintain, build, rent and market real estate.
One of the latest steps highlighting Ulbrich’s vision is JLL’s acquisition of Building Engines, a construction operations software company, for $300 million in the fall of 2021. The company will allow JLL’s property management clients to monitor building systems, suppliers and other operations on a central platform.
But even Ulbrich admits technology alone cannot solve the real estate industry’s physical problems in 2022 — among them the threat of remote work on office space, and a worsening global housing affordability crisis. Add to that the specter of rising inflation and the climate crisis, and technology is just the bare minimum needed to meet the challenges of the future, said Ulbrich.
He said JLL has hired 8,000 people over the past year to provide deeper advice on key issues facing the industry.
Ulbrich showed Insider how JLL is thinking about the biggest economic problems right now.
office future
Long after employers held most of the cards, he said, Ulbricht is seeing a re-mixing of relationships between companies and their employees.
Major shifts are taking place in the labor market. The rise in remote work caused by the pandemic has led to fights within companies, such as Apple, urging workers to return to the office. Some employees are looking for new jobs at companies that work only remotely.
As a result, Ulbrich said, he expects the office space that companies take in generally will decrease. He added that many companies see remote work as a way to reduce real estate costs and delight employees by reducing their travels.
He said that while most of the cutbacks will happen to “less successful companies,” he doubts office layoffs are a sustainable approach for any major business over the long term.
By comparison, Ulbrich said that “highly successful companies” see their offices as ways to attract and retain the best possible talent. Before the pandemic, companies in the biggest cities were already buying and renting first-class spaces and outfitting them with the latest designs and amenities.
Now, with a more geographically dispersed workforce, employers across the country are applying the same positions to what were previously considered branch offices, Olbrich said.
“We’ve seen, at the height of the pandemic, big tech companies come to us and say, ‘Bring me the best possible buildings across the United States,’ where before that they were only on the coasts,” Olbrich said. “They say, ‘We can’t get enough talent on the coasts, so get us the best building possible in Denver or Austin or Atlanta.'”
Escalating rents and escalating problems
One of the key economic stories for 2022 is the return of levels of inflation not seen since the 1970s, causing widespread price hikes.
But price increases in one sector, rent, are of particular concern to Ulbrich, even if they help boost revenues for the company he runs. Ulbrich said 2021 was the first year that the company’s residential capital markets team did more business than its desk capital markets team, as residential properties, both multifamily and single-family, became a sought-after asset for commercial real estate. Property.
A skyrocketing rise in rents can be good for the underlying value of buildings, and therefore good for brokers like those at JLL who hold a percentage of the deal by working on behalf of buyers, sellers and financiers of real estate deals. Bigger deals mean a bigger slice of the pie, but they can have a bad effect on the very fabric of the economy.
“We have to accept that if we still want nurses to work in our hospitals and people to work in local restaurants, we have to give them housing space that they can afford,” Ulbricht said.
He described housing affordability as one of the biggest social questions of our time, adding that housing is a part of the economy where the forces of supply and demand do not always act according to academic theories.
Ulbrich said that while supply-demand equilibrium may work “brilliantly” in consumer industries where producers can easily adjust the quantity of the good they manufacture, housing, with high construction costs and limited land areas to build on, is not. One of those industries.
He said that even technology that promises to reduce home-building costs – the goal of many building technology startups – won’t be able to solve the problem on its own.
“I don’t think that building cheaper just through innovation will help us here,” Ulbricht said.
He cited affordable housing subsidies by some governments as the only way forward.
“We have to massively support the social housing sector,” Olbrich said. “I think that’s the only answer to that.”