BY DATUK STEWART LABROOY

'For everything, there is a first time.' – A Star Trek Quote

I GREW up watching Star Trek – a TV series about the interstellar adventures of James T. Kirk and the crew of the Starship Enterprise, an exploration vessel of a 23rd-century kind of the "United Federation of Planets". What was fascinating about the series was that it painted a future with mobile phones and other technologies which have since become reality today. In this “Opinion” piece, I would like to dwell on the future of space in the real estate context and how the technologies that we saw on the silver screen back then are today affecting our real estate demand.

I learnt a new term last month – “The Flat White Economy”. It was a book written by a childhood friend of mine Douglas McWilliams. Douglas is the Executive Chairman of CEBR, one of UK’s leading specialist economics consultancies and now one of the most respected sources of business advice and research. His mission has been to make economics relevant to businesses and his forecasts have been highly accurate.

In the Flat White Economy, he talks about the rise of digital enterprise in London since the Global Financial Crisis, which caused a collapse of the banking system in 2008. What is interesting is the fact that digital enterprise has spawned four times more jobs than the banking sector since the crisis and London is now growing at one and a half times faster than Hong Kong.

This phenomenon is best described after the most popular coffee of the technophiles the flat white, which has swapped the city’s champagne and fast car lifestyles for bicycles and shared flats in the East End of London. This has started a string of digital cities that, he says, will emerge with the technology revolution that is happening at the speed of light. It will be at the centre of a new economy that will drive immigration and with it creativity when talents from all over the world converge in one location.

The question that this “Opinion” piece tries to address is whether the “flat white” economy has indeed arrived in Malaysia and will it have an effect on our real estate offerings.

There is no doubt that the invention of the smart phone and tablet computers, coupled with High Speed Broadband (HSB) services, has had a huge impact on our economy today. We are seeing for the first time many traditional businesses we have learned to live with all our lives starting to disappear; travel agents, book shops, photo printing shops, photocopy services, radio taxi services and large banking halls with counter service, to name a few. These vanishing businesses, which are being replaced by online solutions, are having an impact on the demand of real estate today.

So what is replacing this loss of demand? What we are seeing are the real estate requirements of smaller start up offices to cater for the Gen Y entrepreneurs who are very much a part of the digital economy. The battle for this space is just heating up as new entrants vie for a slice of the pie. They are called the virtual and services office market and although small today, they have the potential to be a major game changer in the coming years.

Where the action is
Imagine that you are a new graduate starting a business for the first time and don’t have the capital to start an office (and if you do, most probably in an obscure location as the rents are cheap – may be a shop lot) and don’t want the expense of fitting out an office and paying all the deposits.

Today you can have an office in smart upmarket neighbourhoods such as Bangsar, Mont Kiara or Puchong for a fraction of the cost, and enjoy the benefits these locations bring. The reason these offerings will be successful is that the current crop of new entrants to the employment market demand to be “where the action is” and if you want to employ and retain these workers at the peak of their creativity – a shop lot in the middle of nowhere is not the solution.

A virtual office is a business location that replaces a workspace with cyberspace. This would allow employees and business owners to use technology such as computers, laptop, cell phones and Internet access from any location. Broader services include the use of a desk (daily or monthly rates) or conference room and perhaps a locker – but all this comes as an additional cost. The serviced office segment is the premium product that secures a proper office on a contract for three to six months.

Has the flat white economy arrived in Malaysia? Possibly. We are witnessing the start of some very promising success stories like MyTeksi, Lelong.my, Zolara, and Kautim.my, for example. So what do these success stories mean for Malaysian real estate? If the “flat white” economy does indeed succeed in taking root in Malaysia, it would create a huge jump in employment and develop the creation of a much larger knowledge-based economy. With this it will lead to higher salaries and a narrowing of the imbalances that exist in the current wage structure in our economy.

If any of these new businesses grow to become a Google or an equivalent, it will then become a major player for some serious real estate demand for the new offices that are being built in the city centre. Just as London attracts all the talents in Europe because it is a “happening” city – Kuala Lumpur can lay claim to having a similar buzz. However, I would caution that when embarking on new office developments, developers and property owners should bear in mind that what they create should cater for the Millennials (Gen Y and soon to be- Gen Z) and they have very different ideas of what they find attractive in an office.

I just read that Google has put the brakes on its new London office development because it was in the words of Founder Larry Page “too boring”. He wanted the exterior to have a look that will last a 100 years and reflect the rather zany interiors that Google offices have now become legendary amongst the technophiles.

In summary, I believe we now have the beginnings of a new economic direction, work culture and space requirements appearing in Malaysia driven by technology. With it we will see the decimation of many traditional businesses and the emergence of a whole new raft of exciting businesses. Beam me up Scotty!

>> Datuk Stewart LaBrooy was the chairman of Malaysian REIT Managers Association.