#WorkBold Podcast Season 3 Episode 5

How does KPMG Head of UK Real Estate value Space-as-a-Service?

Real estate is becoming a business to consumer proposition

Andy Pyle #WorkBold Podcast

Andy Pyle, Head of UK Real Estate for KPMG, joins Bold Founder, Caleb Parker, to chat about valuing Space-as-a-Service income streams within real estate assets.

Andy believes the Space-as-a-Service mindset is going to end up being 100% of the real estate market.

He says Covid has driven corporate occupiers to ask why they have offices, and many occupiers will give space back to landlords via break clauses, defaults or at lease events.

Therefore a lot of space will need to be repurposed to meet the demand of what people want.

This means real estate is becoming a business to consumer proposition, and the capital markets need to get their head around valuing the income streams generated through the multiple service layers of the Space-as-a-Service Model.

In this episode you're going to hear how KPMG values Space-as-a-Service assets, why Andy believes service drives retention and value, and how re-purposing retail assets as Space-as-a-Service can not only save retail landlords, but also support local entrepreneurs and spur job creation.

Connect with Andy on LinkedIn

Connect with Caleb on LinkedIn

If you have any questions or feedback on this episode, email podcast@workbold.co

Value Bombs

  • The Space-as-a-Service (SPaaS) mindset is going to end up being 100% of the market
  • Covid has driven corporate occupiers to ask why they have offices
  • Occupiers stuck in long leases will start to partner with SPaaS operators to re-purpose space and reduce long-term liabilities
  • Many occupiers will give space back to landlords via break clauses, defaults or at lease events
  • Space will need to be repurposed to meet the demand of what people want
  • Real estate is becoming a business to consumer proposition
  • Providing more services improves customer retention and margins
  • Enlightened landlords have already recognised they need Space-as-a-Service in their portfolio
  • Space-as-a-Service has become an essential part of the product mix
  • Lease arbitrage in Space-as-a-Service is not sustainable. Landlords should move to partnership models with operators.
  • The capital markets need to get their head around the multiple income streams in Space-as-a-Service
  • Space-as-a-Service assets never go to zero, whereas if an asset has 1 large occupier, if they move out the income of the asset goes to zero
  • Valuation should be the sum of the parts: intrinsic value of building + multiple service layers and the income they produce
  • Buildings operated as customer centric offer more services and therefore customer profitability increases
  • We should value Space-as-a-Service income streams as a business, not a "real asset"
  • If RICS doesn’t evolve their valuation model for Space-as-a-Service we’ll start to see a RICS value placed on the core asset, and a business valuation firm value the service layers on top as a business.
  • SPaaS is also relevant for retail and industrial assets
  • There is too much retail space; some should be repurposed to SPaaS to support local entrepreneurs and spur job creation.
  • This would support the hub & spoke real estate strategy of many corporate occupiers
  • Network effects help when valuing an asset to compare trends across the various income streams

About Andy Pyle

Andy is Head of UK Real Estate for KPMG, and is responsible for overseeing all of the firm’s services to Real Estate clients. He leads KPMG’s transaction advice to fund managers, direct investors and corporates on large and complex real estate acquisitions and disposals, particularly portfolio deals or where assets are sold in corporate structure. He is a chartered accountant and has significant experience as a reporting accountant on real estate IPOs and capital market transactions.

With 25 years of professional experience, of which the last 18 have been as a full-time transaction adviser, as you can imagine Andy has advised a number of investors who have bought and sold real estate assets in the UK and Europe across the diverse range of sectors, including commercial office, retail/shopping mall, industrial/warehousing/logistics, residential, self-storage, student accommodation and serviced office sectors covering both development and investment assets. He has advised on some of the largest transactions in the European real estate market.

You may have seen Andy on stage at one of our industry’s top conferences. He regularly speaks on the impact of tech disruption on the real estate sector. Speaking of tech Andy leads the Technology & Innovation Working Group for the British Property Federation and was placed 6th on the LendInvest PropTech Powerlist.

If you’re on Twitter, go follow Andy. He’s @AndyJPyle and he often challenges our industry with thought provoking commentary that’s landed him on Duke Long’s Top 100 Commercial Real Estate People You Must Follow On Twitter.

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