MODUS Asia Edition | Q3 2017 by ROF Media

MODUS ASIA Q3 2017 RICS.ORG/MODUS

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ASK THE BIG QUESTIONS

Q3 2017

Business Valuation Conference 2017 Friday 1 December 2017 09:00-17:00

Grand Ballroom The Conrad Hong Kong Pacific Place, 88 Queensway, Admiralty, Hong Kong

HOURS

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Contents MODUS ASIA Q3 2017 RICS.ORG/MODUS

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MAGAout with S MAGA intention “Employees might notDUSset the Z Z DU to join a corrupt organisation, but over time they find themselves in a situation where they don’t have a choice”

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06 DIFFERENCE OF OPINION Are Hong Kong and Singapore’s retail fortunes about to change? We hear two points of view 07-13 NEWS IN BRIEF Industry news, advice and information for RICS members 08 THINKING: JAMES ASSERSOHN JLL’s director of retail for Asia-Pacific discusses the trends that could see the region leaving the West behind 11 PRESIDENT’S COLUMN Amanda Clack FRICS reflects on the importance of RICS’ thought leadership role in promoting the profession worldwide

Features

Foundations

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14 MALL TO PLAY FOR How operators in Asia are leading the way 18 COVER STORY Does corporate culture breed unethical behaviour, or are we our own worst enemy?

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DONALD A PALMER, STATE UNIVERSITY OF NEW YORK COVER STORY, P18

44-45 CAREERS Spotting potential in your interviewees; Arcadis Indonesia’s Natalia Pujiyanti MRICS 46 BUSINESS Do you really need to work in an office?

26 BOARD GAINS Dispute boards are a great way to keep your construction project running smoothly

47 LEGAL 101 The rules for retail differ depending on which country you’re in – don’t get caught out

30 BEST BEFORE 2047 Can Japanese housebuilders kick their buildthem-cheap, knock-them-down habit?

48 PROFESSIONAL DEVELOPMENT How to prepare a successful tender

34 CATCH ME IF YOU CAN The explosion of peer-to-peer lending has created a headache for regulators

49 SALARY SURVEY A run-down of the RICS and MacDonald & Company Salary and Benefits Survey 2017

26 UNDER LOCK AND KEYCHAIN Cracking the data centre code

50 MIND MAP Collyer Bristow’s Simon McIlroy on the merits of using blockchain in property transactions

32 SYDNEY’S NEWEST DARLING International Convention Centre on display

PLUS 48 Events

Views expressed in Modus are those of the named author and are not necessarily those of RICS or the publisher. The contents of this magazine are fully protected by copyright and may not be reproduced in any form without the prior permission of the publisher. All information correct at time of going to press. All rights reserved. The publisher cannot accept liability for errors or omissions. RICS does not accept responsibility for loss, injury or damage or costs that result from, or are connected in any way to, the use of products or services advertised. All editions of Modus are printed on paper sourced from sustainable, properly managed forests. This magazine can be recycled for use in newspapers and packaging. Please dispose of it at your local collection point. The polywrap is made from biodegradable material and can be recycled.

Q3 2017_MODUS A SI A 03

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THEOLUDDITE’S STAND Sir, I wanted to write and extend my solidarity with the Secret Surveyor (Intelligence, p13, Q1 2017). Never before has this column struck such a chord with me, as this is a hugely understated problem, not just in the world of surveying, but with society in general. I see people everywhere that never stop any more to reflect and be comfortable with their own thoughts and occasional silence. It’s a worrying trend for the future, and I just hope that everyone gets bored of it and we return to some form of normality. I doubt this will be the case, but there has to be a balance in life. James Goodman, York, UK TUMBLER ACCOUNT Sir, My wife was recently walking in the woods with our dog when she was forced to contact me to convey some urgent information. As I was in a meeting, she resorted to sending me a text message. Unfortunately she tripped and hurt herself rather badly. Her accident was witnessed by a passing gentleman who, rather than helping her and asking if she was OK, laughed uproariously before continuing on his way. On being passed a copy of your magazine by a surveyor friend of mine, I saw the letter from Nigel Price (feedback, p5, Q2 2017). The similarities of the story were striking. So, judging by the article, surveyors like to obstruct people by means of common assault and laugh at them when they hurt themselves. What a caring, tolerant profession! The Secret Businessman

Join the debate If you have any comments on any of the stories on Modus Asia, the editorial board welcomes you to send them in – in Chinese or English. We will publish them in their original format with an English translation. Get in touch at editor@ricsmodus.com 如对亚洲版 Modus 的内容有任何回应，欢迎以中文或英文电邮至编辑委员会。阁下之意见将以原文（辅以英译本）刊登。电邮地址为 editor@ricsmodus.com。

DRINKING BUDDIES Sir, I couldn’t agree more with the Secret Surveyor (Intelligence, p13, Q2 2017). I am also approaching the end of my career, but unlike the Secret Surveyor, most of mine has been in the corporate sphere, rather than in private practice. He refers to over-regulation and huge time pressures. We have similar issues – but more along the lines of excessive reporting, meetings about meetings and an apparent lack of trust in our abilities. There is now a need to sense-check everything and refer to external parties because, as the Secret Surveyor says, if they get it wrong: “Litigation is the first, not the last resort.” It seems like the Secret Surveyor and I have quite a bit in common, so I would certainly buy my new-found friend a coffee when next at RICS HQ in London. Sadly, there is no longer the pleasant little bar at Great George Street where we could have enjoyed a beer instead! Guy Allan MRICS

WRONG DIRECTION Sir, I eagerly picked up my latest copy of Modus, keen to read the article on China’s Global Positioning System, as shown on the cover (Q1 2017). Perhaps it would have a comparison of US GPS with the Chinese Global Navigation Satellite System, BeiDou? As you know, the article was nothing about GPS, but a report on China’s New Silk Road. The article was quite informative but I wonder how many other surveyors were disappointed to find the content didn’t meet their expectations. Perhaps next time an article on GPS can actually be about that well-known and essential navigation system? Ruth Adams FRICS, director, Route Geographic Consultants COMING UP SHORT Sir, After picking up a recent edition of Modus, I was shocked to discover that reading an issue qualifies for one hour of informal CPD. What nonsense! Surely 15 minutes, maximum. Though of little relevance to geomatics, the magazine is of a high quality. However it is not appropriate to claim CPD by reading this from cover to cover. Mark Griffin FRICS

MODUS ONLINE

Read the latest and all previous issues of Modus Asia at rics.org/modus. To unsubscribe your hard copy and receive a digital edition only, email your name and/or membership number to ricseastasia@rics.org with the subject line “Unsubscribe Modus Asia”.

FOR SUNDAY Editor Oliver Parsons / Art Director Sam Walker / Deputy Editor Andy Plowman / Contributing Editor Alex Frew McMillan / Junior Designer Katie Wilkinson / Creative Director Matt Beaven / Account Director Karen Jenner / Advertisement Sales Director Emma Kennedy / Asia Advertising ROF Media, Bryan Chan, +852 3150 8912, bryan@rofmedia.com / Production Manager Michael Wood / Managing Director Toby Smeeton / Repro F1 Colour / Printers ROF Media / Cover Image Jamie Cullen / Published by Sunday, 207 Union Street, London SE1 0LN wearesunday.com / For RICS James Murphy and Kate Symons [UK] / Jeanie Chan [Asia]

Q3 2017_MODUS A SI A

Intelligence

News / Reviews / Opinions / Reactions

DIFFERENCE OF OPINION

Is the worst over for Hong Kong and Singapore’s retail markets? Discuss.

for hong kong’S retaiL market at LeaSt, there haS been a gradUaL improvement in sentiment. Total sales returned to positive territory in March 2017 for the first time in over two years, suggesting the slump has finally come to a halt. In April, sales grew again at 0.1% year-on-year to HK$35.2bn ($4.5bn) – a sign of a market gaining momentum. The luxury market also reversed its decline for two consecutive months. Sales of jewellery, watches, clocks and valuable gifts rebounded from significant drops early last year. Once the dominant force during the heydays of Hong Kong retail, the sector is unlikely to regain its place as market leader, however, SEAN ELLISON SENIOR ECONOMIST, ASIA PACIFIC, RICS because momentum is shifting to mid-priced goods. Growth in total visitor arrivals to Hong Kong turned the retaiL Segment haS been a drag on the SingaPore positive again in the first four months of 2017, after falling and Hong Kong commercial property markets since 2014. 4.5% to 56.7 million in 2016. Tourist numbers from Retail has suffered from a combination of low demand and mainland China also started to pick up after declining for a surplus of supply, while underlying macroeconomic conditions have also two consecutive years, with year-on-year growth of 3.3% in acted as a brake. Although there has been some recent optimism that the the first four months of 2017. The slowing depreciation of worst may be over, there are indications that suggest otherwise. the Chinese yuan against the dollar has also preserved the Data from the RICS Global Commercial Property Monitor suggest that purchasing power of mainland visitors. there may be further room to fall. Although the downward momentum has All these signs point to a bottoming out of the Hong Kong slowed, sentiment remains negative. Capital values in the retail sector are retail market, whereas in Singapore, the retail market likely to continue falling through the rest of 2017, and similar trends are remains challenging. Consumer confidence is still low, which evident in the rental market. The retail segment of the headline RICS investor has led to a drop in retail spending across the board – and on index has been in negative territory for the last five quarters, while the RICS food and beverage in particular. Prime retail rents have occupier index has fallen for 10 quarters. slipped island-wide, and market players are struggling to Even if demand levels start to meet supply, there remains a structural find business strategies to navigate the tough retail climate. challenge in the form of Asia’s growing online retail sector, which will continue to sap demand away from traditional bricks-and-mortar outlets. Policy uncertainty also clouds the outlook. Tourism from mainland China Still in the dumps or on the rebound? remains a key driver for retail, which is dependent on a benign Beijing. Join the debate at rics.org/linkedin, Chinese capital controls are unlikely to ease significantly, given debt maturity or tweet using #RICSmodus is scheduled to peak in 2018. Macroeconomic factors such as the activities of the Trump administration and Brexit could derail a nascent global recovery, which would disproportionately affect Singapore and Hong Kong. So our risk outlook for both territories’ retail markets remains negative. 06

RICS.ORG/MODUS

INTERVIEW ALEX FREW MCMILLAN ILLUSTRATION NEIL STEVENS

HELEN MAK MRICS, ASSOCIATE DIRECTOR, HEAD OF RETAIL SERVICES, HONG KONG, KNIGHT FRANK

ASIA

STRUCTURAL ASSESSMENT The world needs to spend $49.1tn on infrastructure between 2016 and 2030, with almost 60% of that required in emerging economies

$49tn 59%

Source: McKinsey & Co, 2016

AFRICA EASTERN EUROPE

NEWS IN BRIEF

12%

WESTERN EUROPE

CHINA

29%

6% OTHER ASIA 6% INDIA

CHINA

HOSTILE-TAKEOVER TUSSLE LEAVES GOVERNMENT IN CONTROL OF VANKE

Panel discusses why diversity is intrinsic to how we work

STATE AID Shenzhen Vanke Plaza opened in 2013 and was the developer’s first prime shopping mall in south China. Now, the city’s government controls the entire company

Top investors in Singapore for risk management forum

INFOGRAPHIC IAN DUTNALL IMAGE ©CALLISONRTKL

US/CANADA

4% 5% MIDDLE EAST

rics.org/modus

A group of leading investors from across Asia-Pacific gathered in Singapore recently, to take part in the RICS Global Investment Risk Management Forum. Among the items discussed was the likelihood of the region’s recent bull-run for commercial property coming to an end. Yield compression across Asia-Pacific and higher yields on US fixed income were cited as contributing factors to this scenario. Participants noted that prime properties in core markets remain in short supply for the levels of capital that need to be deployed.

Intelligence

7% SOUTH AMERICA

Hong Kong’s real estate professionals gathered together earlier this year for the launch event of the Hong Kong Board Diversity and Inclusion Committee. Held in WeWork’s Tower 535, the highlight of the evening was an interactive and engaging discussion on how businesses and individuals can develop a more diverse and inclusive mindset. The panel was represented by professionals from across generations, genders, sexual orientation and ethnicity, and comprised Swire Properties’ Henry Bott MRICS – RICS Hong Kong’s Young Surveyor of 2017; Link REIT’s CEO George Hongchoy FRICS; Mabelle Ma MRICS, Swire’s director of development and valuations; Celine Tan, co-chair for Pride Asia at JP Morgan and co-chair of the Hong Kong LGBT Interbank Forum; and WeWork’s Joann Ngai. The moderator was Standard Chartered executive director Peter Sargant.

22%

China’s highest-profile hostile takeover attempt has ended in failure for the private companies that entered the fray. Instead, the state stepped in. China Vanke, until last year China’s largest housebuilder, was subject to an unsolicited offer from little-known insurer Baoneng Group, which started accumulating Vanke shares in late 2015. The battle intensified throughout 2016, prompting China’s stock regulator to tell both sides to settle the dispute as quickly as possible. Hostile takeovers are almost unheard of in China, where even listed companies are typically controlled by their founding

LINKING STARTED BY Ben Hickman, CSSW.London

A client has sold my survey to another prospective buyer but my Ts&Cs state that reports aren’t to be forwarded to third parties without prior consent. How do others deal with this? If the first client is benefiting from selling your work without your permission, why not seek a solicitor to recover the additional

tycoons. But Vanke founder Wang Shi gave up control when the company went public in 1991. Via its insurance unit Foresea Life, Shenzhen-based conglomerate Baoneng had built itself into Vanke’s largest shareholder, surpassing the 15% stake held by state-owned enterprise China Resources. Shi brought in the Shenzhen Metro Group, the governmentowned operator of the city’s subway system, as a white knight. China Resources resisted Shi’s original plan, which would have diluted its shares. But after an improved offer, it sold its stake to Shenzhen Metro in January at a 7% premium. It fared better than China Evergrande Group, which in 2016 moved past Vanke as China’s largest developer. Evergrande itself built up an opportunistic 14% stake in Vanke, which in June it sold to Shenzhen Metro at a loss of ¥7.1bn ($1bn). Although Baoneng still owns its shares, the Shenzhen municipal government put up a WeChat post at the end of March stating that it had assumed control of Vanke.

REVIEWING THE LATEST DISCUSSION POINTS AT RICS.ORG/LINKEDIN fees received by your client for selling your work to a third party without authorisation? Gary Buglass MRICS In my reports, I say that [the client is] not obliged to hand over the report to agents but if they wish to do so they can contact me and I will release a version for the purpose marked “not for resale”. Geoff Hunt FRICS

Send them an invoice. Point out if they don’t pay they are personally liable. The estate agent will have played a part in this. Jon ChartersReid MRICS Your PII company should provide advice and wording that specifically negates any liability on your part to unnamed and unknown third parties. Sam Spencer MRICS Q3 2017_MODUS A SI A

“Asia’s retail sector is evolving so rapidly compared with the developed markets of the West, it’s hard to see how the rules learned there could be applied here”

ith its new-found wealth and rapidly urbanising population, Asia is now in the driving seat when it comes to innovation in retail real estate. Indeed, JLL’s 2016 Destination Retail reported that 12 of the top 20 growth cities for retail worldwide are in Asia, eight of which are in greater China. The sector is evolving so rapidly in comparison with the developed markets of the West, that it’s hard to see how the rules learned in Europe and the US can be applied here. At a macro level, the adoption of new technologies, urbanisation and a booming middle class are all creating significant challenges and opportunities for developers and mall operators. While it’s hard to generalise about the region as a whole, there are certain aspects of Asia’s retail sector that distinguish it from more established markets and which offer an insight into where it is leaving them behind. The first is a shorter lease structure. Hong Kong leases, for example, typically run to three years, compared with 10-20 years in the UK or US. A shorter lease makes it difficult for retailers to amortise fit-out costs but, in less mature markets, this can be an advantage because of the fast-changing nature of urban development and infrastructure. What might be a prime location now may not be in five years’ time – particularly in China’s rapidly developing cities. Having the flexibility to follow a city’s shifting social and economic landscape is a very important requirement for brands. Another factor is the – quite literal – vertical structure of many of Asia’s malls. Hong Kong’s Langham Place, for instance, has traffic from the basement to the 13th floor.

08 RICS.ORG/MODUS

Asian mall operators and developers are adept at ensuring that consumers circulate throughout such spaces. Many Western brands may not understand, especially on paper, that a location on the fourth floor may still get ample footfall. But it is the fast pace of technology adoption where Asia is truly leading the way. China’s retail technology is rapidly outstripping that of Europe and the US. E-commerce leaders such as JD.com and Alibaba’s Taobao and TMall are threatening shopping centre sales and rewriting the rules of distribution and marketing. China’s WeChat social media platform also holds immense power because of its ability to provide a seamless retail experience. Two friends chatting about a product can buy the item, have it delivered within hours, and then review it – all without leaving the platform. So the infrastructure and speed of online shopping, particularly in China’s Tier 1 cities, is astonishingly fast and efficient. But even Alibaba founder Jack Ma concedes that the online-offline distinction will eventually blur, with e-commerce becoming a “traditional” industry over time. Successful retailers, Ma believes, will meld online, offline, logistics and big data to produce a “New Retail” conglomerate. Developers are already future-proofing their assets with state-of-the-art technology in response to consumer demand. Some malls, for example, have adopted gaming technology to help increase footfall by offering shoppers the chance to accrue incentives such as free parking and loyalty points. The integration of such technologies has helped mall operators understand the consumer and offer a better shopping experience through data-rich insights. As e-commerce transforms retail, the focus of malls has shifted from simply selling products to being a community hub in which people socialise and spend their leisure time. Increasingly, malls in Asia are allocating more than 30% of the entire retail area to food-and-beverage operations, or to entertainment, creating a new breed of experiential shopping centre. In a generation, then, it may well be European and US mall operators that are reading the rules of operation from Asia, instead of the other way around. READ MORE ABOUT the latest developments in Asia’s retail markets on p14

ILLUSTRATION ANDREA MANZATI

JAMES ASSERSOHN DIRECTOR OF RETAIL, ASIA-PACIFIC, JLL, HONG KONG

Intelligence

NEWS IN BRIEF

WE LIKE

rics.org/modus

Revised Red Book 2017 now mandatory for valuers The updated version of RICS Valuation – Global Standards 2017 (the Red Book) is out now and its is use mandatory for all RICS valuation professionals. The new edition reflects the growing importance of combining professional, technical and performance standards to provide clients, governments, regulatory bodies and the public with high-quality valuations. The update follows a review by the International Valuation Standards (IVS) Council earlier this year. The key changes are: incorporation of IVS; referencing of international standards for ethics and measurement; greater clarification on what is mandatory and what is advisory; revision of PS 1 & 2 to reinforce aspects of particular relevance to valuation; revision of PS 2 to reference RICS conflicts of interest; revision of existing VPS 1-4; inclusion of new VPS 5 on valuation approaches and methods; revision of VPGA 1-7; addition of new VPGA 8 on valuation of real property interests; revision and retitling of VPGA 9 on identification of portfolios, collections and groups of properties; revision and retitling of VPGA 10 on matters that may give rise to material valuation uncertainty. rics.org/redbook2017 One Belt, One Road technical visit to China hailed a success RICS members from Hong Kong recently completed a fruitful technical visit to Chengdu and Chongqing in western China. During the five-day tour the group met with local government officials to learn more about the strategic One Belt, One Road initiatives under way in the two cities; shared their knowledge of Hong Kong’s public transportation sector; and visited landmark projects by Hong Kong developers. rics.org/twocities

SEE WEED? Sugar kelp may not look appetising in raw form, but it is high in protein and is easy to grow

3D ocean farming What’s that? Agriculture will need to become more productive as the world population grows, but what if we could supplement our demand for food by using the depths of the sea? Bren Smith, owner of Thimble Island Ocean Farm in Connecticut, US, is one of a new breed of “3D” ocean farmers. After warming waters stunted his yields of oysters, Smith adapted his operation to grow vertical columns of sugar kelp, as well as baskets of clams, oysters and scallops, from horizontal lines stretched out in the sea. How is it useful? In an area of 90,000 ft2 (8,360 m2), Smith says his vertical columns can grow 26 tonnes of kelp in five months. Scaled up, it could be a vast source of nutrition for the planet. “Our seaweed has more protein and iron than red meat, and more calcium than milk,” he claims. Kelp also contains sugars that can be used to make biofuel. What’s next? The biggest challenge is not the growing process, but convincing more people to eat the product. However, it can be made palatable with the right preparation and branding – for example, many countries in Asia consume seaweed products in their daily diet. As the climate changes, Smith envisions more fishermen similarly adapting their operations. “I don’t want a farm with 1,000 acres,” he says. “What I want is thousands of fishermen with their own 20 acres and a boat, who can share infrastructure to create kelp noodle and biofuel.” greenwave.org/3d-ocean-farming

ON RECORD

WHO’S SAID WHAT… AND WHY THEY’VE SAID IT

It is not always true You’re not going that trees reduce to regulate tourism air pollution by limiting the NATIONAL INSTITUTE FOR HEALTH number of beds

AND CARE EXCELLENCE (NICE) In draft guidance published for local governments to combat air pollution, UK NGO Nice notes that leaves and branches can slow air currents, causing pollutants to settle. Planners should take into account the adverse effect that trees can have on air quality if badly sited or unmanaged.

MANEL CASALS director general, Barcelona Hoteliers Association The city of Barcelona has passed a law to curb tourism as visitors overwhelm the city. The law seeks to limit the number of beds on offer from hotels and apartments. But of the 32 million people who visited in 2016, 23 million were day-trippers. Q3 2017_MODUS A SI A

SOMETHING IN THE AIR Whatâ&#x20AC;&#x2122;s harder: making people fly, or building a theatre in a Unesco World Heritage Site? Both are tricky, but the brief to design the Shaolin Flying Monks Theatre, complete with a gigantic wind tunnel that allows the monks to fly high while practising their scenic arts, was clearly too good to miss for Latvian architect Mailitis. The theatre is located near Mount Song in Henan Province, China, which is considered to be the birthplace of Zen Buddhism, so a site-sensitive design that respects the historical and natural heritage of the area was critical. The theatreâ&#x20AC;&#x2122;s contourfollowing form and use of local materials go some way to meeting that brief, even if the anticipated influx of tourists might not.

10 RICS.ORG/MODUS

15 10

15 0

CHINA

MALAYSIA

20 Mbps

TAIWAN

Mbps

VIETNAM

Intelligence

Mbps

JAPAN

20 Mbps

AUSTRALIA

Mbps

SINGAPORE

Mbps

NEW ZEALAND

THAILAND

HONG KONG

Mbps

30 0

Source: Akamai, 2017

20 Mbps

China might be one of the fastest developing countries in the world, but it has a lot of catching up to do in terms of average internet speed

SOUTH KOREA

WATCHING THE DIAL-UP

20 Mbps

HONG KONG & SINGAPORE

FLURRY OF DEALS SEE RECORDS TUMBLING

20 10

Mbps Mbps Mbps Mbps Mbps Asian property prices continue to surge to new highs. A Chinese bid has smashed the SOUTH KOREA HONG KONG NORWAY SWEDEN SWITZERLAND record for a development site in Singapore, while records have fallen in Hong Kong in20 20 20 20 20 20 spectacular fashion. Mbps Mbps Mbps Mbps Mbps Mbps In Singapore, a joint bid from Logan SINGAPORE JAPAN FINLAND NETHERLANDS LATVIA UK Property Holdings and the Nanshan Group paid S$1bn ($723m) in May for a residential plot close to the Queenstown MRT stop. The 955,000 ft2 project has space for up to 1,160 homes. At S$1,050/ft2 ($757/ft2), the bid broke a 20-year-old record in the Lion City by 32%. Logan was also part of a record-setting pair in Hong Kong, where Chinese developers AMANDA CLACK FRICS RICS PRESIDENT bought 60% of all the land sold by the LEAD ROLE government in 2016. Joining forces with if chartered SUrVeYing eXiStS for anY reaSon, it iS to bring aboUt PoSitiVe mainland developer KWG, in February Logan RICS’ leadership change through a better built environment and better stewardship of the on initiatives purchased a residential plot on Hong Kong’s land and natural resources. We cannot achieve that alone, hence our progress such as the Ap Lei Chau. The site fetched HK$16.9bn international in collaborating with like-minded bodies to develop global standards. After ($2.2bn), at the time a record lump sum standards my year as your president, I have come to see how much thought leadership movement will for a government property sale in the city. matters. It gives us the authority to advocate solutions and exercise influence. ensure its voice The record did not last long. The sale of is heard on the That is why we have begun to refresh our approach to leading thinking in the first prime commercial lot in Central for global stage our sector. Perhaps the most tangible example is our World Built Environment two decades brought out local heavy hitters Forum, which held its second annual summit in Shanghai earlier this year. and their mainland competitors. Henderson The event brought more than 50 expert speakers together to share their Land Development won the bidding war over strategic insights with over 700 participants from across the globe. Leading eight others by offering HK$23.3bn (US$3bn) for the site: a car park on Murray Road. professionals from service providers, corporate occupiers, developers, Henderson has promised a “landmark office financial bodies, government and regulators discussed the implications for building” that should be completed by 2022. the built environment arising from China’s One Belt, One Road initiative. But perhaps the best example of Hong In part this was about raising RICS’ profile in China and the wider AsiaKong’s frothy market is the HK$5.18m Pacific region. It also demonstrated to leading international partners, such ($660,000) spent by construction tycoon as the Urban Land Institute and McKinsey, that RICS can play a leading role Kwan Wai-ming … on a parking space. For a through showcasing our own knowledge on a shared platform with other 188 ft2 spot, that equates to HK$27,553/ft2 2 bodies respected for their research. More importantly, it opened doors for ($3,533/ft ) – another all-time high. RICS to deepen our relationship with leading regional and global bodies, and ultimately to develop commercial opportunities for chartered surveyors. To understand the opportunities, the OECD estimates that in the next 20 years, global infrastructure investment will amount to $57tn, with around $1.5tn invested annually in the One Belt, One Road countries. To quote Vincent Lo, chairman of the Hong Kong Trade Development Council and developer Shui On: “The Belt and Road cannot just be a Chinese initiative – it has to be global to succeed because it is a huge undertaking with no fixed scope or borders. It’s up to all of us to define it and take action.” I am immensely proud that our work on standards and thought leadership means that RICS can be part of this hugely exciting initiative of global significance. I am also immensely proud that, thanks to our pool of BUMPER PRICE responsible and highly qualified professionals, we can deliver on our promise. A record HK$5.18m was paid for a parking space Follow Amanda on Twitter @amanda_clack at Emperor Group’s Upton residential tower

ILLUSTRATION BERND SCHIFFERDECKER

“Our expertise gives us the authority to exercise inﬂuence”

Q3 2017_MODUS A SI A

Upcoming Upcoming RICS RICS activities activities inin ASEAN ASEAN KualaKuala Lumpur, Lumpur, Malaysia: Malaysia: • FIDIC • FIDIC Contract Contract Fundamentals: Fundamentals: 22 Aug 222017 Aug 2017 • BIM•Fundamentals: BIM Fundamentals: 24 Aug 242017 Aug 2017 • Real• Estate Real Estate Investment Investment and Valuation: and Valuation: 19 Sep 192017 Sep 2017 • FIDIC • FIDIC Making Making and Managing and Managing Claims: Claims: 26 Sep 262017 Sep 2017 • BIM•Implementation BIM Implementation and Management: and Management: 28 Sep 282017 Sep 2017 • Property • Property Valuation Valuation for Non-Valuer: for Non-Valuer: 23 Oct 232017 Oct 2017 • FIDIC • FIDIC Dispute Dispute Resolution Resolution and Dispute and Dispute Adjudication Adjudication Board: Board: 24 Oct 242017 Oct 2017 • BIM•Managing BIM Managing Contractual Contractual Risk: Risk: 26 Oct 262017 Oct 2017 Singapore: Singapore: • Real• Estate Real Estate Investment Investment and Trusts: and Trusts: 29-3029-30 Aug 2017 Aug 2017 • Property • Property Valuation Valuation for Non-Valuer: for Non-Valuer: 7 Sep72017 Sep 2017 • RICS • RICS ACREACRE Mediation Mediation Course: Course: 30 Oct 30toOct 3 Nov to 32017 Nov 2017 Manila, Manila, Philippines: Philippines: • FIDIC • FIDIC Contract Contract Fundamentals: Fundamentals: 23 Sep 232017 Sep 2017 • FIDIC • FIDIC Making Making and Managing and Managing Claim:Claim: 28 Oct 282017 Oct 2017 • FIDIC • FIDIC Dispute Dispute Resolution Resolution and Dispute and Dispute Adjudication Adjudication Board: Board: 25 Nov 252017 Nov 2017

For more For more details details on the on the courses: courses: rics.org/ASEAN rics.org/ASEAN 12 RICS.ORG/MODUS

Intelligence

NUMBER CRUNCH WHICH COUNTRY GENERATES THE MOST RETURNS FROM ITS BUILT ASSETS, AND HOW IMPORTANT ARE THEY TO THEIR ECONOMIES? Source: Arcadis Global Built Asset Performance Index, 2016

CHINA

$10.4tn (9.3)

2016

SECRET SURVEYOR

2015

$5.4tn

“I was sick of being judged by my ability to answer ridiculous questions from interview panels”

y first APC attempt went very badly wrong. I’d been working full time as a graduate surveyor, studying for a master’s in real estate and working towards my APC for three years. The intense pressure led to burnout. My referral report suggested I wasn’t confident or knowledgeable enough. But I knew deep down this wasn’t true – I’d just lost myself somewhere along the line, getting caught up in other people’s ideas of how to negotiate the challenge. So, I went back to the drawing board, hatched my own plan and passed six months later. Once chartered, and with a few more years’ experience under my belt, I decided it was time to further my career with new challenges in a new company. I had six years’ experience and knew I was a good surveyor, but was absolutely dismayed at the outcome of interviews. One firm suggested that I was too young and would have to start at graduate level. Another said I would have to re-do my training to conform to their standards. Another said I wasn’t specialised enough, after questioning me on how I would inspect their boardroom. I was sick of being judged by my ability to answer ridiculous questions from bored-looking interview panels. So I took a leap of faith and started my own firm. Since starting, I’ve heard it all: not old enough; not got the managerial skills to run a team; not got a reputation to get clients; not got the experience to handle clients’ demands. But I haven’t let any of that stop me from building my business. It’s taken me outside my comfort zone and, yes, I’ve made mistakes. But it’s been my best achievement, and there’s nothing like “failure” to drive success. ARE YOU INTERESTED in writing a future Secret Surveyor column? Send your musings on the profession to editor@ricsmodus.com

(5.2)

INDIA

$3.6tn (3.1)

JAPAN

$1.9tn (1.9)

MEXICO

INDONESIA

GERMANY

(1.2)

(1)

(0.98)

$1.4tn TURKEY

$0.8tn (0.78)

$1.2tn FRANCE

$0.8tn (0.76)

$1tn UK

$0.7tn (0.7)

BRAZIL

$1tn (0.92)

Total built asset returns

MEXICO

63.6% (59.9)

PHILIPPINES

59.4% (59.2)

CHINA

52.9% (53.9)

(58.7)

UAE

INDONESIA

(45.6)

(46.9)

49.8%

SINGAPORE

MALAYSIA

(45.7)

(43.6)

45.4%

TURKEY

56.1%

48.4%

45.1%

26.3%

THAILAND

54.3% (53.5)

INDIA

45.8% (44.3)

Built asset returns as a proportion of GDP

(27.2)

The world’s built assets generated $36tn in 2016. Although the bigger economies of China and the US hold the lion’s share of this, the picture looks a little different if you compare returns as a percentage of GDP. Emerging economies tend to rely more heavily on their built assets to generate economic returns as

they have heavier manufacturing industries, hence Mexico topping the list of built asset performance relative to GDP. In the UK, the proportion is low owing to a smaller manufacturing base, and is falling due to low rates of public and private investment in the creation of new assets. Q3 2017_MODUS A SI A

Retail

MALL TO PLAY FOR

A modern shopping centre needs to operate on the cutting edge where retail and technology meet – a sector in which Asia is fast becoming a market leader Words Alex Frew McMillan Illustrations Andrea Manzati

sia’s emerging middle class and its love affair with retail have created a regional petri dish in which conditions are perfect for innovation. A blend of technology and demographics is being employed to draw in consumers and keep them happy, with newly built malls designed to get customers to linger longer and keep coming back for more. Developers in Asia, for instance, are turning over up to 30% of floor space to “gastronomy” in all its forms, making the mall a dining and entertainment destination, not just a place to pick out clothes. That is double the top rate in Europe, and even there food-and-beverage space has doubled or tripled in the last five years. If you build it right, the customers will come. Half of the world’s top cities for international expansion are in Asia, according to JLL’s attractiveness index for cross-border retailers. Hong Kong is second only to London, while floor space in Shanghai, Singapore, Beijing and Tokyo is also highly in demand. But it is not just those gateway cities that are catching retailers’ eyes. Developing Asia, and the metropolises of Bangkok, Mumbai and Manila, are also on the radar. The strategies deployed in developed Asia now appeal to newly wealthy consumers in emerging nations. Of greatest potential for retail and logistics in the region is Indonesia, as well as India, suggests Todd Lauchlan FRICS, JLL’s Jakarta-based country head, although the capital investment is far from having been made, he adds. “People are looking at the demographics, and the scale, and saying you’ve got to be able to make money there,” says Lauchlan. “Whether people can actually unlock it is another question.” Developed and developing Asia hold very different promises. Japan’s retail market is mature, highly developed, and lucky to show any growth. Household spending should increase from $2.8tn in 2017 to $3.1tn by 2021, forecasts BMI Research, for an annual pace of growth of 2.6%. China, on the other hand, will see some of the fastest rates of retail

14 RICS.ORG/MODUS

亚

growth in the world over the next five years. Annual growth in household spending will crest close to 10.25% and slow to “only” 9.7% at the end of that period. Occasionally, the two worlds meet. The Chinese developer Greenland Group bought Chiba Port Square, a scheme to the east of Tokyo, for $60m at the end of 2015. Greenland, one of China’s most acquisitive developers internationally, partnered with the Japanese duty-free-store operator Laox on the purchase. The deal paves the way for Greenland to expand into Japan, which it sees as stable diversification away from China’s risk. The shopping centre that is part of the mixed-use project has been revamped into an outlet mall, with Laox keen to learn from the developer’s knowledge in building and managing multiple asset classes. It is China’s demographics that catch the eye. The macroeconomic trends are “compelling” in the eyes of Enoch Lim, CEO of mall investor CCH Asset Management. But broad-brush trends do not make it easy to operate on the ground. Zara and Gap, both big Chinese success stories, found last year difficult and had to close stores. H&M’s tough 2016 in China even weighed down its global operations, as brands squeezed each other out of prime locations and undercut on price. Lim, whose company has built a mall of its own in Shanghai, as well as buying an existing one, focuses on the catchment area first. It is important for operators to be able to deliver »

Q3 2017_MODUS A SI A 15

Retail

If it doesn’t carry through – end to end – to users of the product, then it doesn’t matter how good your experience is in the mall

daytime footfall for tenants. Weekends and evenings are not enough. That means the draw area for a mall must include offices – technology parks if possible – as Lim describes it: “a population of white-collar workers that can potentially come to a mall at lunch, and do a bit of shopping.” If they are able to attract the right footfall, operators then need to ensure those feet fall in the right place. Traditional shopping malls in China have been basic, large rectangles. That, to Lim, means a boring 200m walk to the store you want to visit, and an even more boring 200m walk back. Instead, CCH Asset Management designs or buys malls with a circular arrangement. “You want a curved edge that can provoke the human curiosity,” Lim explains.“You have a will to keep on walking, thinking‘what’s around this bend?’” His company did not intend to be a developer. But when it found the right plot of land at a very attractive price in Shanghai, it could not pass up the opportunity. The result was the Mall Jinqiao, an 861,000 ft2 (80,000 m2) development in Shanghai’s Jinqiao district. “It’s not for the faint of heart,” Lim says of building a mall from scratch. Suburban malls look to education-related tenants and food and beverage, both of which command lower rents than fashion, for steady business. “I need to be able to sustain a lower rental coming from these guys, but averaging out to have a high yield on my cost.” With The Mall Nanxiang, an existing centre that has been rebranded, the catchment area was still the key. It was surrounded by housing developments that were little-served by retail, Lim felt, and the mall was very conveniently located, with a subway stop across the street.

evelopers in mainland China tend to favour residential real estate because the apartments are pre-sold, guaranteeing cashflow. They build as quickly as possible, then move on to the next project. They do not typically have the time or inclination to build up a management team, and would struggle with the ongoing management of a mall. Lim feels that creates opportunity in China for companies that can negotiate an attractive price on an established asset from a residential developer. “We come in with the operations and do the heavy lifting,” Lim says. That is part of the evolution of the region.“I think the malls here need to change, and I think they are changing.” Asia’s rapid uptake of technology is a driver of that change. The ITU World Telecommunication/ICT Indicators database shows that Singapore and Japan are the most-wired nations in the world in terms of mobile broadband penetration, with 123% and 113% coverage of the population, respectively – as an individual can have more than one account. South Korea, on 106%, is not far behind. With mobile technology deploying fast in developing Asia, retailers in the region must factor in not just e-commerce but also the device buzzing in the user’s hand when they think about how to draw in consumers. Retail does not really enter the conversation when people are planning or discussing smart cities in Europe. But Linda Chandler, smart cities lead for Asia-Pacific at Microsoft, says it most certainly does in Asia. “Retail is a big part of Asian culture,” Chandler says. “And there’s a drift to embrace it as part of smart cities.”

16 RICS.ORG/MODUS

LINDA CHANDLER Microsoft

Mall operators are some of the early adopters of retailrelated technology, which they understand can drive traffic to their premises. How they do that, though, is still very much up for grabs.“We’re seeing different styles emerging,” says Chandler. “It’s not just about providing WiFi.” WiFi is a good start, though. Being able to “sniff” the presence of online devices might help operators to predict where footfall is heading, or lure in shoppers that otherwise might pass by. Externally, a mall’s network could connect to a Siri-style concierge on someone’s phone, with the two technologies“brokering”a connection. If the mall operator’s system is really smart, it might detect an upcoming birthday on the phone, and then direct its owner to suitable stores to purchase a gift, using past purchasing as a predictor. Technology is also useful for “wayfinding”, helping drive traffic to harder-to-reach parts of a shopping centre that may have specific products or services that appeal to a customer. Wayfinding can also identify the nearest parking space to a restaurant for which a phone’s user might have a reservation.

handler notes that retailers have been slow to understand the interplay between external technology and their own systems. It is one thing to suggest that a customer might like a particular store, quite another to direct them to the exact shelf, offer matching products, and tell them whether their sizes and those of their spouse are all in stock. “You can’t stop at the threshold of the retailer,” she says. For now, “sometimes there’s not a joined-up solution. If it doesn’t carry through – end to end – to users of the product, then it doesn’t matter how good your experience is in the mall.” Viewing the mall as a product to promote, as well as an evolving entity full of warm bodies and wireless connections, is the challenge facing the modern operator. As they rise to that, the next generation of shopping spaces will evolve. Given the fertile soil, that growth is sure to come in Asia. n

LINDA CHANDLER Microsoft

Q3 2017_MODUS A SI A 17

Ethics

KENNETH LAY FORMER ENRON CEO

18 RICS.ORG/MODUS

Cover story

A FALSE FRIENDS Why do otherwise apparently decent people do terrible things in business? Modus investigates the influence of corporate culture and self-deception on unethical behaviour Words David Adams Illustration Jamie Cullen

JUST A DELUSION Kenneth Lay was convicted of 10 counts of fraud for his role in the collapse of Enron, but claimed he was the victim of a conspiracy

re you a good person? Are you sure? Even if you have never done anything unethical in your line of work, can you really be certain that will always be the case? We have all seen headlines about corruption, fraud and unethical behaviour in the workplace, from the biggest corporate scandals to stories about managers at small companies putting their fingers in the till. In some cases, the perpetrator seems to have had bad intentions from the start. In 2014 Colette Wilson, a company secretary at a UK IT firm, admitted stealing almost £800,000 from her employer over several years, using the money to buy expensive goods, treats and even building work. After her actions came to light, it was revealed that she had already served a prison sentence for stealing from a previous employer. But it is not always so easy to put bad behaviour down to something as simple as greed. In many cases there are more complex reasons why an individual who otherwise appeared to be a decent member of society came to act in an unethical way. Some of the individuals whose actions led to the biggest corporate scandals in history clearly believed themselves to be “good” people. In 2004, when interviewed by US broadcaster CNN, former Enron CEO Kenneth Lay declared that “most important to me was my integrity [and] my character” – a statement somewhat at odds with his collusion in a multi-billion-dollar fraud. This sort of doublethink seems to be shared by many individuals who participate in actions taken by their employer that they know could have terrible consequences for others: financial mismanagement that might wipe out an individual’s pension savings, or the disastrous collapse of a building constructed using poor-quality materials. Sometimes the key factor that leads to unethical behaviour in the workplace is the intensity of competition. Donald A Palmer, a specialist in organisational behaviour and ethics at the State University of New York, suggests that unethical behaviour often occurs when businesses are operating in a competitive environment that drives people all the way up to the line between right and wrong. He draws an analogy with football players fouling each other:“You’re not going to win the ball unless you’re doing things at the margins of fair play.” A second reason, Palmer suggests, is that individuals are also very strongly influenced by the incentives, power structures and rules that guide behaviour within an

organisation. Some of the rules in question may not be written down, but they may govern anything from the accepted protocol for a specific business process, to an organisation’s policy on document retention – which can be exploited by unscrupulous individuals – or conventions that mean certain individuals never attend particular meetings, so can deny knowledge of some events or decisions. Individuals are also subject to what Palmer calls “situational social influences” inside organisations. “For example: when you are unsure what to do you look to people who seem to be navigating the situation successfully, typically people with higher status,” he explains. This sort of peer pressure can be particularly powerful if an individual’s future prospects within an organisation appear to be in jeopardy. Kweku Adoboli, a UK-based rogue trader whose actions trying to recover big losses with further failed bets on the markets cost Swiss bank UBS £1.5bn in 2011, claimed the culture within the bank encouraged employees to break rules to maximise profits. In August 2016, he told London newspaper City AM that managers at the bank had told him: “Kweku, we need you guys to push the boundaries harder and you won’t know if you’ve pushed hard enough until you get a slap on the wrist.” Stress, whether or not directly related to work, may also play a role in making people behave in ways they might not otherwise have expected to behave, suggests Rachel Lewis, associate professor in occupational »

Q3 2017_MODUS A SI A 19

Cover story

and business psychology at the Kingston Business School in the UK.“If we feel under pressure we are more likely to act without considering our actions fully,” she says. All these forces act together on individuals who are already pushing up against the line separating right from wrong, says Palmer. “Your boss may say ‘It’s your responsibility to do these things for the organisation.’ Employees might not set out with the intention to join a corrupt organisation, but over time they find themselves in a situation where they don’t have a choice.”

Palmer’s studies into organisational misbehaviour have included research into doping in professional cycling, where members of a team, often those whose performance seems to be in decline, have been persuaded to use banned performanceenhancing substances. He also highlights a process whereby employees take incremental steps towards illegal activity. “You’re gradually asked to do more and more, and eventually you’re asked to do something that is clearly unethical and illegal,” he says. There are many examples of this process in action, from accountants asked by bosses to amend financial records, to a gradually illegal extent; or newspaper journalists using ever more morally or legally dubious methods to obtain confidential information. The upshot, says Palmer, is that many people spend their working lives navigating ethical

TAKE FIVE

Ethical disasters in big business ENRON For many years, until the truth came to light in 2001, executives at energy giant Enron hid billions of dollars lost in failed deals, and also persuaded auditor Arthur Andersen to ignore irregularities on the company’s balance sheet. Shareholders filed a $40bn lawsuit against the company and it filed for Chapter 11 bankruptcy. The scandal led to wholesale legislative and regulatory reform. CONSTRUCTION PRICE RIGGING IN THE UK In 2008, the Office of Fair Trading named 112 companies that had colluded to increase the costs of possibly thousands of public sector construction projects. Firms that did not want to win the contract submitted

20 RICS.ORG/MODUS

bids that were too high, and were sometimes rewarded by the successful bidder via secret payments. MADOFF From as early as the 1980s, Bernie Madoff had effectively been running his investment securities firm as a Ponzi scheme in which notional returns could only be paid to investors if they recruited new investors. Madoff was exposed when the scheme collapsed in 2008, with the total amount of money missing from client accounts almost $65bn. In June 2009, he was sentenced to 150 years in prison. VOLKSWAGEN The German auto manufacturer suffered a severe blow to its reputation in 2015, when it was revealed

it had cheated tests on exhaust emissions from some diesel engines. The fraud has affected about 11 million cars. A complex international recall and compensation programme could eventually cost VW at least €18bn in direct costs alone. THE SICHUAN SCHOOLS SCANDAL Government officials and construction companies in Sichuan, China, were found to have used substandard specifications and materials in more than 7,000 schools, stealing the money saved in the process. During an earthquake in May 2008, many of these buildings collapsed very quickly, leading to the deaths of at least 5,000 students and serious injury to a further 15,000.

CROSSING THE LINE Kweku Adoboli lost £1.5bn trying to cover the losses of his unauthorised trades. He claimed UBS management had asked staff to take risks

dilemmas, often in situations where it is not clear whether a specific action is “right” or “wrong”, as it lies in a grey area where rules, regulations and perhaps criminal law do not offer definitive answers. The leadership of an organisation is partly to blame if unethical behaviour becomes commonplace among its employees, whether that leadership is negligent or corrupt. Unfortunately, says Lewis, the corporate world is also full of organisations whose leaders direct the business to take unethical actions: through exploitation of staff on low pay or harsh contractual conditions, or by engaging in tax avoidance, for example. It is not surprising, she suggests, that employees of such businesses may not feel particularly bound by ethical constraints. “[The corporations] are your role models, in a way,” she says. “You will perform in accordance with those behaviours.”

or is it easy for individual employees to break these patterns. An ethical organisation, or industry, might seek to make whistleblowing easier by providing the means to report concerns in confidence and without the risk of retaliatory action. But in practice, even if someone decides to do what they believe is “the right thing”, they may find it difficult, says Peter Bolton King, Global Property Standards Director at RICS. “If you are in a more junior position, it’s very difficult to go to your boss and say you don’t like what the firm is doing.” Simon Webley, research director at the Institute of Business Ethics in London, points to research conducted by his organisation that showed 20% of survey respondents were aware of misconduct within their companies, but less than half of them went on to raise concerns about it. Of those who did, only 39% were satisfied with the outcome. Jane Rendell, professor of architecture and art at the Bartlett School of Architecture, »

Ethics

KWEKU ADOBOLI UBS ROGUE TRADER

Q3 2017_MODUS A SI A 21

Ethics

DAVID KUGEL EX-BERNIE MADOFF EMPLOYEE

22 RICS.ORG/MODUS

Cover story

PRICE OF LOYALTY David Kugel said he had no knowledge of Bernie Madoff’s Ponzi scheme, even though his actions helped conceal the fraud

University College London, is currently researching ethics in the built environment. She believes the decline in trade union representation has made it harder for individuals to flag up unethical behaviour, in part because it forces them to act alone. “If people are in a precarious situation at work, they don’t have the confidence to speak out,” Rendell says. She suggests that more collective voices arguing against unethical behaviour could help to reduce corporate misbehaviour.

ut culture is only part of the story. Since exposure of recent corporate misdemeanours – in particular the worst excesses of financial companies – extensive efforts have been made to root out unethical corporate behaviour. They have not yet solved the problem. Clearly, part of the issue is the personal motivations of individuals themselves. One area of academic and scientific study is looking at how individuals who might otherwise never commit an unethical act find ways to justify unethical behaviour in the workplace. Research by Celia Moore, associate professor at the Department of Management and Technology at Bocconi University in Milan, has examined the roles played by self-deception and unconscious processes in unethical behaviour. In an essay Moore wrote for the book Cheating, Corruption and Concealment: the Roots of Dishonesty, she posits: “We have a strong desire to believe that we are moral, but are often tempted to cheat, lie, steal, or take other moral shortcuts in order to gain something for ourselves that we do not deserve … individuals actively misrepresent reality to themselves, so that we can remain the heroes of our own narratives.” She summarises a range of academic research and experiments completed in recent decades that show how humans have “a deep-seated need to see themselves in a positive light”, even if they are aware they

have behaved in an unethical way. This “misalignment between our actions and our beliefs” – can only be resolved either by a change in behaviour or in our beliefs. The latter is usually the easier choice. Moore lists three strategies humans use to justify bad behaviour. The first she calls Motivated Attention, in which individuals pay more attention to evidence that allows us to maintain a positive view of ourselves, and less to that which paints us in a worse light. A second strategy is Motivated Construal, where we are aware of the reality of our behaviour, but find ways to view it as either morally innocuous or justifiable. The third is Motivated Recall, which involves forgetting past actions we regret, and even inventing or distorting memories to create a self-serving version of the past (box, below). Individuals may also justify their actions by relying on an arbitrary line defining what is and is not allowed within an organisation. This can mean they take actions that appear reasonable within the organisation, even if they look morally reprehensible from an external perspective. One example, Palmer

suggests, would be when members of the UK parliament were found in 2009 to be claiming excessively on their expenses. As Palmer points out, public outrage was amplified because some MPs did not acknowledge they had done anything wrong. Technically speaking, however, most of them had not broken any rules. I f an individual does take their lead from a set of rules, professional bodies such as RICS can have a crucial influence. “Chartered surveyors have to work within the ethical standards as defined by RICS,” notes Andrew Knight, deputy dean at the School of Architecture, Design and the Built Environment at Nottingham Trent University. “That’s something that should give their clients confidence.” »

INSIGHT

What’s your motivation? In her essay the Role of Self-Deception in Unethical Behaviour, Celia Moore explains three strategies that humans use to justify bad behaviour. MOTIVATED ATTENTION Whereby we focus on evidence that makes us look good and ignore that which makes us look bad. The behaviour comes from the same instinct that makes us ask if we are doing the right thing in a given situation, even when we know the answer is unfavourable to us or, at best, inconclusive. MOTIVATED CONSTRUAL When we know exactly what we’ve done, but find ways to see it as

neither here nor there – ethically speaking – or somehow justifiable. We find ways of looking at reality that somehow make our actions feel acceptable, while also minimising our responsibility for those actions. Moore cites two examples, the first being David Kugel, who worked as a trader for Bernie Madoff (Take five, p20) and appears to have deliberately avoided asking Madoff about the source of investment returns paid to clients in what was, in reality, a Ponzi scheme. And second: soldiers guilty of war crimes who convinced themselves that their actions were reasonable, in part

because enemy combatants had in some way “deserved” their treatment. MOTIVATED RECALL In which we try to forget past actions we regret, and may even invent or distort our memories to make ourselves look better. The concept of a “selective” memory is familiar to most of us. If we are honest, we can probably all admit to having practised motivated recall ourselves. Indeed, if you can claim never to have done any of these things – whether in a work context or otherwise – it is probable that you are a perfect example of these theories in action. Q3 2017_MODUS A SI A 23

Cover story

Even if a surveyor – or a member of a profession bound by such rules such as accountancy – is working for an employer that is not itself a member of a trade association, this adherence to the rules by an individual with key responsibilities can effectively lend integrity to the governance of the company, Knight suggests. Of course, the existence of such guidelines may also create further difficulty, if an employer asks someone to do something that contravenes the rules of the professional association. Clearer guidelines, stronger regulation and robust regulatory enforcement can all help to reduce incidents of unethical behaviour, but genuine cultural change is

required to stamp it out within organisations, says Webley. “The key is clear guidance given by senior management,” he says. He also recommends that organisations try to create an open culture, within which individuals are able to raise concerns without fear of retaliation. Knight agrees: “Although you don’t change a culture overnight, by those actions you get people to think slightly differently, and then new people that come in need to plug into that new culture, rather than the old.” Palmer advocates the use of recruitment to complement such efforts. Firms should seek to hire individuals who will embrace an ethically responsible culture, he says. He would also like business schools to offer students stronger guidance and training around these issues. How an organisation interacts with wider social influences is also an important factor. Companies may struggle to maintain ethical standards if working in countries

VIEW FROM ASIA

Getting it out of the system Sometimes people behave badly because the prevailing system of the country in which they work leaves them with little alternative. In China, property valuers working for some state-owned companies are paid commission based on the value of a property sale, and also have to submit bids to win business based on the price they say they can get for a client. This means they have two strong incentives to inflate property values. William Ng, director of asset management for real estate at UBS Asset Management in Hong Kong and an APC assessor for RICS, has sometimes been unable to recommend certification for

24 RICS.ORG/MODUS

individuals working in China because this system means they cannot possibly comply with the ethical standards required by RICS. Individuals are always likely to be tempted to engage in some form of corruption if, Ng suggests, their salaries are not high enough to fund the living standards to which they aspire, as is the case with managers at some state-owned Chinese companies. But that could apply to almost anyone who craves more money than they can legitimately accrue, not just to specific groups of individuals. Recent and ongoing corruption scandals associated with

construction projects in countries such as Qatar and Brazil illustrate the type of difficulties faced. Companies often find themselves trying to operate in a system where workers may be exploited, while individuals and organisations in positions of power demand bribes in return for their cooperation. Nor is there a reasonable excuse for any individual or business to be complacent about the possible presence of corruption in any country. As the former US vice-president Joe Biden put it in 2014: “Fighting corruption is not just good governance. It’s selfdefence. It’s patriotism.”

whose economic systems encourage corruption – either actively or passively (box, left). Webley suggests there should be more collaboration and sharing of information between international companies that are considering working in such countries. This could be particularly important for firms working on construction or infrastructure projects. And finally, another good reason for an organisation to try to ensure that its employees avoid unethical activity is the need for the company to safeguard its reputation, in the eyes of current and future customers, shareholders and staff.“Younger people are more interested in knowing who they are going to be working for and what their ethical policy will be,”says Bolton King.

his is perhaps particularly important in a profession such as surveying, suggests Knight, because the best graduates joining the industry will be able to choose where to work. “Firms that are perceived to work with integrity, in the way they do business and the way they treat their employees, are the ones that the best graduates want to work for,” he says. It is possible, of course, that idealistic youth may become corrupted, in time. It may also be extremely difficult to behave ethically when whole industries, and even entire countries, seem to accept a degree of unethical behaviour as unavoidable. But in an increasingly transparent business world, where an ever greater share of brand value rests on corporate reputations, unethical behaviour cannot be concealed forever. Its consequences will eventually damage an organisation, sometimes beyond repair. n

RICS RECENTLY PUBLISHED a Professional Statement on conflicts of interest. For more information, visit rics.org/conflicts. Unsure about your ethical position? RICS runs a confidential helpline for members in need of advice. Call +44 (0)20 7334 3867

Do you want to practise as a mediator? Becoming an RICS Accredited Mediator benchmarks your quality and expertise in mediation practice The RICS Mediation Training programme is a Singapore International Mediation Institute (SIMI) registered training programme. Upon successful completion of the training programme, you will have the option to join the SIMI Credentialing Scheme as a SIMI Accredited Mediator Level 1. The course consists of two modules: â&#x20AC;˘ Module One: Introduction to Mediation and Mediation Advocacy â&#x20AC;˘ Module Two: Practical Mediation Skills and ACRE Mediation Training The course will be held on 30 Oct to 3 Nov 2017 in Singapore

Find out more at rics.org/MEDIATIONSG

Q3 2017_MODUS A SI A 25

START WILL YOU PAY FOR A DISPUTE BOARD? YES PAY $20,000 AND TURN LEFT NO ADVANCE DOWN THE RIGHT TRACK

E: TAG HOR EL S ,000 STE AY $10 P

DISPUTE! ENTER ARBITRATION: FREEZE UNTIL YOU THROW A SIX

Words David Blackman Illustration Aleksandar Savic

Why are projects becoming embroiled in ever longer and more costly construction disputes? Far better to avoid the conflict in the first place

BOARD GAINS

S WH MISS T TOP! ILE W B OA AG R E O T U R N RD A EING S PPO DISP INT MEN UTE TS

$ LOCAL AUTHORITY OFFERS STREAMLINED PLANNING SERVICE: PAY $10,000 AND TAKE ANOTHER TURN

$ LABOUR SHORTAGE: MISS A TURN

onstruction has justifiably earned a reputation as one of the most conflict and dispute ridden of all industries. And despite the efforts to promote a less adversarial culture on our building sites, evidence suggests that disputes are becoming more protracted. An annual survey conducted by Arcadis shows that such disputes are taking longer to resolve: up to an average of 13 months in 2016, compared with nine in 2010. There has to be a better option than the constant rows that end up poisoning relationships across the industry. In an effort to head off such disputes, the industry is starting to focus on a more grown-up approach: seeking to avoid such conflicts in the first place. On international construction projects, arbitration has become the de rigueur mechanism for sidestepping expensive and protracted litigation over the past 50 years. “Nobody in the international arena wants to throw themselves on the mercy of foreign courts,” says one leading dispute resolution expert, speaking off the record. Furthermore, most countries have adopted the 1958 New York convention, under which the decisions of arbitration panels must be enforced. However, arbitration can be slow and unwieldy, concedes Cyril Chern, a Londonbased barrister who has been handling construction disputes across the globe for nearly 50 years. “It’s one step better than court but it takes time,” he says, adding that it can take over a year to achieve an outcome via arbitration, by which point relationships on a project could have thoroughly soured.

WORK DELAYED BY BAD WEATHER: GO BACK ONE SPACE

DISPUTE! BOARD RESOLVES ISSUE EARLY: TAKE ANOTHER TURN

Fellow London-based barrister Abdul Jinadu works extensively on African construction projects, and agrees with Chern:“It used to be thought that arbitration was always cheaper and quicker than litigation. That’s not the case any more.” “You can have extra costs such as arbitrator fees and hiring a room, which you don’t have with litigation because the court is free,” says Kevin Owen, managing partner in the Singapore office of global commercial law practice Meyer Brown. Chern says that the “biggest trend” in construction disputes is to take one step back from arbitration and seek to avoid the conflicts in the first place. The principal mechanisms for doing this are dispute boards and conflict avoidance panels, much like those recently introduced by public agency Transport for London (box, overleaf). Most dispute boards typically consist of one or three members. If the board just contains one individual their appointment will have to be agreed by all parties. The alternative is three members, two of whom will be nominated by each of the parties, plus an independent chair. Each party’s board member must be acceptable to the other. Mark Entwistle FRICS, an international dispute resolution expert, says: “Although two of the members have been nominated by the parties, they are independent of the parties and will be completely impartial.”

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RICS maintains an international panel, which parties can draw on when putting together a dispute board. Establishing a standing board at the beginning of the project is the best option, argues Jonathan Cope FRICS, vicechairman of the Society of Construction Law, headquartered in the UK. “Standing board members should be appointed at the beginning of the project and go to meetings even before the dispute has arisen,” he says. Jinadu agrees:“When a dispute arises you are not starting from scratch and you will have an idea of what’s going on.” For Chern, speed is the main benefit of dispute boards, which must reach their decisions within 28 days. This makes them particularly well suited to dealing with problems that crop up during projects, he explains.“With arbitration it will take a year or two: even mediation is at least a year. Dispute boards are faster, and prevent the problem becoming a problem,” says Chern, who also likes the inquisitorial nature of the dispute board system. “They are not sitting passively like an arbitrator does. The dispute resolution »

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DISPUTE! ENTER ARBITRATION: PAY $10,000 OR MISS A TURN

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board can start ferreting out information that it feels is necessary.” Whether it is worth setting up a standing board partly depends on the scale of the project. A conflict avoidance panel has been set up to oversee the Queensferry Crossing over the River Forth in Scotland, which has a budget of £1.35bn. “If a value of a project is less than £500,000, it would be difficult to justify paying for a board,” says Entwistle. Preserving relationships is one of the principal reasons for setting up conflict avoidance mechanisms. This factor will be particularly important with a client that has a dominant position in a marketplace, argues Cope, pointing to a UK example. “If you are carrying out a motorway contract, most of your turnover will be for one client: the Highways Agency. You can’t afford to fall out of bed with them unless you have to.” Entwistle agrees:“[The contractors] want to maintain harmonious relationships with their client and have a fruitful partnership. I suspect that will be less of an issue at the smaller end of the scale.” The biggest drawback to dispute boards, however, is their cost. Parties often fail to see the point of paying to prevent disputes that might never crystallise. Jinadu acknowledges that cost can be a bugbear, particularly when setting up a three-person board. “Dispute boards are generally expensive because you are employing three people for the duration of the project.” The counter argument, says Cope, is that the costs generated by conflicts outweigh those involved in running dispute boards. And the bigger the contract, the greater the likelihood that costs will be hefty. One

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dispute avoidance expert estimates that on major projects, parties are unlikely to get “much change out of a million dollars”when they become embroiled in a dispute. Chern adds that, on large projects, dispute boards can deliver economies of scale. “You have a pretty good idea what [a panel is] going to cost, as opposed to arbitration. With dispute boards you can have 10 or 100 issues and the fee will be the same,” he says. “The larger and more complicated a project, the better it works.” One way of economising is to keep the board updated about the project by reports, rather than via site visits. Another is to appoint a board on an ad hoc basis when a conflict has arisen. Going down this route can be a false economy though, warns Jinadu. As well as the time it takes to set up a panel, “you lose the advantage of being involved from the get-go”. Cost is not the only factor holding back the adoption of dispute boards, either. All parties involved in a contract need to be willing participants before one can even be set up. Securing agreement on who sits on the panels can also cause delays, says Cope, who also acknowledges that conflict avoidance will not be to everybody’s taste. “Some people will want their day in court because they can’t agree.” But, he adds, the anecdotal evidence from board members is that they have helped to

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stop disputes arising. And their take-up is spreading. RICS has teamed up with several professional bodies to form a joint working party on conflict avoidance, which is developing a pledge to embed dispute avoidance procedures into a range of construction and engineering contracts. Cecily Davis, a partner at law firm Fieldfisher in London, predicts that the government’s decision to give the green light to schemes of national importance, such as Hinkley C nuclear power station and the High Speed 2 rail line, will provide a fillip to the use of the boards in the UK. “There is likely to be significant investment in infrastructure that will merit the use of dispute boards,” she says, noting that their use has been enthusiastically adopted on transport projects. It may be too early to declare peace in our time for the construction industry, but many professionals will be hoping that wider take-up of conflict avoidance will make it a better tempered place to work. n FOR MORE INFORMATION about the RICS Dispute Resolution Service, visit rics.org/drs

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DISPUTE! GO TO COURT: PAY $20,000 OR MISS TWO TURNS

Dispute boards

CASE STUDY

Never a cross word spoken

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COMPLETION! CONGRATULATIONS, YOU HAVE COMPLETED YOUR PROJECT. DID YOU STAY ON BUDGET?

Underneath the streets of London, Crossrail, the £14.8bn project to create a new east-west rail link, is entering its final stages. When services start running at the end of 2018, it will not just be central London’s rail capacity that has increased. The number of passengers using existing Underground stations that interchange with Crossrail will also rise. Public agency Transport for London is redeveloping several of these interchanges, such as Bond Street station, which is being given a £300m upgrade to cope with the 40,000 additional daily passengers it will be catering for when the new line opens in 2018. Given the scale and complexity of these projects, which will have to be carried out cheek by jowl with functioning Tube lines, TfL realised there would be plenty of scope for disputes. Jonathan Cope FRICS says that TfL saw the case for nipping disputes in the bud, and collaborated with RICS to set up a conflict avoidance panel. Rather than a standing board that is embedded in the project from the beginning, the panel is a more ad hoc arrangement that can be set up at short notice when issues arise. Any party involved in a TfL contract can refer a dispute to the panel. If the parties to the contract cannot agree on the composition of the panel, RICS will select an appropriately qualified person. Cope argues that the panels are less adversarial than adjudication, which has become the most common mechanism for resolving disputes in the UK. Within 21 days of its appointment, the panel will issue a non-binding recommendation. Overall, Cope says that the panels have been perceived as a success by parties. “I know other employers are looking at it as an alternative to avoid going to arbitration or adjudication.”

Q3 2017_MODUS A SI A 29

Housebuilding

From construction to demolition in just 30 years, Japanese houses have a shelf life scarcely conceivable in other markets. What’s behind this unique culture … and is it sustainable? Words Alex Frew McMillan

ew would disagree that we live in a disposable culture. But the idea that a home is something that is bought, used up, and then destroyed, just like a car or a can of soda, is foreign to most. Not in Japan. Japanese homes are typically expected to last only 30 years before they must be replaced – some estimates even suggest 15 years. Government policy has encouraged this process, in a bid to boost the economy by creating jobs in the construction industry. Structures are written off for tax purposes after 30 years if they are timber framed, the most common building method for homes in Japan, and 45 years for reinforced concrete, typical for commercial property. As a result, the purchase of secondhand homes becomes risky. Housing structures do not store any of the wealth that they generally do in the West. “The Asian mentality is, the newer, the better,” comments Hashimoto Mitsuo, president of real estate broker Housing Japan. Homes in Japan therefore lose their value at a far higher rate than in the US, for example. Research by Jiro Yoshida, an associate professor of business at Pennsylvania State University’s Smeal College of Business, found that a residential structure depreciates at 7% per year in Japan, while the figure is only 1% in the US. Homes in newer and more densely built neighbourhoods far from central business districts lose value the fastest. Commercial properties in Japan are even worse off, losing their value at a rate of 10% every 12 months. There are various factors at play that lead people to think of housing as a deteriorating asset. Key among them is that Japan was hit hard by bombing in the Second World War. “There was a need to build very fast,” says Mitsuo. Cheap buildings that could be deployed quickly were the order of the day. 30 RICS.ORG/MODUS

They did not last. They also failed to keep pace with escalating safety requirements in a country that experiences around 20% of the planet’s strongest earthquakes. Japan overhauled its earthquake-resistance standards in 1950 after the Fukui earthquake, 1971 (Tokachi earthquake), 1981 (Miyagi earthquake) and 2000 (Hanshin-Awaji earthquake). The proportion of homes destroyed in each instance was a small part of the national stock, but the safety changes rendered existing homes obsolete as technology advanced, Yoshida notes. A high depreciation rate causes households to spend more of their income on housing, arguably perpetuating Japan’s two-decadelong economic slump. It also has an adverse effect on the environment, ultimately leading to more and more demolitions and increased carbon dioxide emissions. In the biggest cities, the bulk of any homebuyer’s budget goes towards the plot they are buying. That, in turn, leaves little in the kitty for frills when it comes to the construction of the building itself. “Because land is so expensive, people do not invest enough in their homes,” says Seth Sulkin, president and CEO of Tokyobased commercial real estate developer Pacifica Capital. »

BEF SHOOTS AND LEAVES Japan’s population has been declining for a decade. This, coupled with a tendency for younger people to leave rural areas for cities, means the countryside is emptying out

BEST ORE 2047

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Housebuilding

Most ‘Japan Inc’ salarymen will sign up for one of these home schemes, so it’s easy to sell subdivisions out

CHRIS LANE Majime Capital

o cater for the demand for new homes, Daiwa House and other housebuilders specialise in “kit houses” and off-plan schemes that allow prospective homebuyers to pick from a range of standardised floor plans. The pieces used in construction are all pre-ordered from the factory, meaning there is zero waste on site, and build time is kept to a minimum. “Most ‘Japan Inc’ salarymen will sign up for one of these home schemes, so it’s easy to sell subdivisions out. You just sign on the dotted line and get a house,”comments Chris Lane, chief operating officer of Majime Capital, a Hong Kong-based real estate investment firm specialising in Japan. The country’s preference for new homes does, however, create a market for leased homes, among students and others who cannot afford to buy a property. Lane’s company and others like it buy older homes in good locations and renovate them for student housing, Airbnb-style short-let accommodation or long-term rentals. The price of the home is sometimes less than the value of the land itself. Lane claims rental yields of 10%-25% a year: an amazing rate of return for those who are able to manage the property successfully. Majime Capital also banks the land for future use. The stress on new houses also creates strong demand for prefabricated homes. Purehabu homes, as they are known in Japan, comprise around 15% of the overall number

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of new houses completed nationwide in any given year. In 2016, that resulted in the construction of 148,528 prefab homes, out of a total 967,237 domestic structures built, according to figures from the Japan Prefabricated Construction Suppliers and Manufacturers Association. Tokyo is naturally the centre of attention, accounting for 14% of all prefab homes last year – similar to its 15% share of the market for all new homes. Meanwhile, the neighbouring prefectures of Kanagawa, Saitama and Chiba account for another 22% of total prefabs built in 2016. Purehabu used to be synonymous with low quality. But the technology has evolved, just as it has in other manufacturing industries. “The quality of prefabricated houses is very high,” Yoshida says. This has been proved in some high-profile incidents. A prefabricated home built by Asahi Kasei was the only structure to survive the flooding of the Kinugawa river in 2015. Pictures of the house standing strong amid the mud and rubble of the aftermath were broadcast nationwide. Meanwhile, Japanese housebuilder Sekisui Heim – which constructs 70% of its homes in factories – envisions that its homes will last for three generations. But generational transition and inheritance has created problems of its own in Japan. There are around 8 million akiya, or abandoned houses, across Japan, according to the Financial Times. They are empty for a variety of reasons – the home was abandoned as younger members of a family gravitated toward the city centre, an elderly owner died and left no heir, the bank repossessed the home after Japan’s bubble burst and has been unable to sell it on, or the owner is simply too hard to track down.

PHOTOGRAPHY CHRISTIAN SCHMIDT (MAIN IMAGE); GETTY

EMPTINESS INSIDE Japan builds nearly 1 million new homes a year, despite having a backlog of 8 million abandoned houses

Mostly, though, Japan’s population is simply shrinking: by close to 275,000 people per year. The number of births will likely drop below 1 million this year, for the first time since anyone started counting, back in 1899. This year will also mark a full decade of annual population declines. Akiya homes become a blight on their neighbourhoods, with people dumping rubbish in the garden and the house gradually falling apart, sometimes even rendering the homes next door impossible to sell. Older buildings are also more likely to collapse in earthquakes, and fire-fighting access for the neighbourhood can become a problem in cases of real decay. Real estate broker Katitas has bought, remodelled and then sold on more than 40,000 secondary-market homes, via its 100 branches around the country. Whereas most brokers act as intermediaries, the company takes on the risk of owning the home with an eye to locking in greater profits on the sale. It currently turns over around 3,000 homes a year. Akiya houses are a prime target – vacant properties account for around 40% of sales – because the company is seeking “latent value” for housing that is difficult to sell, or is located in under-used areas. Katitas has no competitors at a national level, and local players tend to come and go in a niche business that requires specific expertise. It has stepped up the pace this decade, doubling its portfolio of properties. Ultimately it aims to transform not just individual neighbourhoods but the mindset of homeowners, and the entire Japanese housing market. It is positively evangelical about that prospect.“We believe the housing market in Japan will shift from centring on new houses

to focusing on used houses that can be lived in for a long time,” CEO Katsutoshi Arai explains in the company’s mission statement. He enthuses, in an email to Modus Asia: “We have a vision to ‘bring as much joy as possible to towns and cities’, and advocate a way of living that cherishes the community.” The process of overhauling homes fills a hole in the market. Buyers tend to be families that are renting – the mortgage on a Katitas home is often less than the monthly rent on a comparable property. The head of the household is typically between 30 and 40 years old but has not yet managed to get on the property ladder, in a country where even opening a bank account is a chore.

ecause of the mindset that housing is, by nature, temporary, home improvement is not quite the force that it is in many other countries. Money spent on remodelling accounts for around 3% of total household spending, but the market is weak. Home improvement outlay was down 8% in December 2016 compared with a year ago, and positive only in four months last year, data from the Ministry of Internal Affairs and Communications show. Although 2017 may report a slight gain since 2016 was so subdued, analysts at the investment bank Nomura note that overall consumer spending has fallen for 24 straight months in Japan. The household spend on repairs and maintenance has remained low

since the rate of consumption tax was increased in the spring of 2014. The government hopes to stimulate interest in high-quality secondary-market homes through tax breaks, and it is also offering subsidies for energy-efficiency upgrades and repairs. As a result, housing equipment and building materials suppliers are beefing up their business in that area. As for the materials already tied up in first-generation homes due for demolition, most of the wood, plastic, metal and glass gets reused, but the rest is discarded. Renovating houses and pumping them back into the secondary market therefore presents a huge opportunity to benefit both the environment and the economy. It will take a shift in mindset, something that often takes a generation to pull off, but there is plenty of motive to make use of the existing housing stock. Will Arai and his kin be successful in producing that sea change? They are fighting against a post-war cultural norm that has become ingrained. But if Japan can make the transition away from the new to the used, it could be to the benefit of all.  Q3 2017_MODUS A SI A

Technology

Peer-to-peer lending is disrupting the real estate industry and lawmakers are struggling to keep up. But in the rush to regulate, do we risk stifling the most exciting innovators? Words Mark Wilding Illustration Francesco Bongiorni

34 RICS.ORG/MODUS

n the wake of the Global Financial Crisis, a new generation of lenders emerged. At a time when the flow of credit from the banks had slowed to a trickle, and rock-bottom interest rates were prompting investors to seek out new opportunities, “alternative finance” provided a solution. The term referred to a wide range of peer-to-peer lending and crowdfunding platforms. Borrowers struggling to access credit by traditional means could for the first time be connected with individual investors prepared to place their money where the banks would not. From the outset, the real estate market was a significant beneficiary of this rapidly growing industry. In China, the largest alternative finance market in the world, property represents one of its most active submarkets. Research by the Cambridge Centre for Alternative Finance revealed that more than $5.5bn was lent in China against real estate assets through alternative finance platforms in 2015. That same year, a study by the University of Oxford found that almost

£700m had been invested in UK property through peer-to-peer and crowdfunding platforms, making real estate the country’s most popular alternative finance sector. For many years, both countries have allowed an innovative source of real estate financing to develop and innovate, unencumbered by the yoke of legislation. The UK has promised tighter rules in a bid to protect investors. In China, meanwhile, the authorities recently announced a series of measures aimed at reigning in the industry after a series of high-profile platform failures. Both governments have signalled a need for more stringent regulation, but neither wants to halt the growth of an increasingly important industry. The dilemma leaves regulators attempting to walk a tightrope – protecting consumers while encouraging financial innovation. In Britain, the authorities have sought to play the role of a supportive, but critical, friend. The government has encouraged peer-to-peer lending, investing £85m in small businesses via the sector. However, regulators have, at times, been less positive. In February 2016, former Financial Services Authority chair Lord Adair Turner raised concerns about the checks being conducted on borrowers, telling the BBC: “The losses that will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses.” In December 2016, the Financial Conduct Authority (FCA) questioned whether investors were being exposed to risks that “may not be sufficiently understood”. China’s more laissez-faire approach to the regulation of alternative finance was as much

by accident as it was design, suggests Wei Hou, a senior analyst at Sanford C Bernstein in Hong Kong. “Among regulators, they did not know who should be responsible,” he says. One of the issues was around how these new firms should be identified. “Peer-topeer lenders were classified as technology companies in China, so basically there was no one regulating them.” Alongside a ready supply of borrowers who had long been denied credit by the traditional banking sector, this lax regulatory environment allowed the industry to balloon in size. The Chinese alternative finance market now dwarfs all others in the AsiaPacific region. Take Hong Kong, a centre of international finance which has nevertheless seen peer-to-peer lenders and crowdfunding platforms struggle to gain a foothold. Leo Lo MRICS, director at Crowe Horwath, says both peer-to-peer lending and crowdfunding “are still governed by old sets of licences as both traditional banking and securities activities”in Hong Kong, a situation that has made “the growth and innovation of these sectors sluggish”.

ut, if a lack of regulation has helped China’s alternative finance sector to grow, it has also had catastrophic consequences. In February 2016, the police arrested 21 executives at Ezubao, the country’s largest peer-to-peer lending platform, when evidence emerged that the company was in fact a giant Ponzi scheme. More than 900,000 investors, who had collectively committed more than $6bn based on promised returns of up to 14% a year, look likely to be left with nothing. And Ezubao was not the only one. In less than 10 years, close to 4,000 peer-to-peer and crowdfunding platforms had emerged in China as the alternative finance market ballooned. Most were legitimate businesses. However, Hou says: “Some of them were just pure fraud.” Following Ezubao’s collapse, the Chinese authorities introduced a series of rules aimed at cleaning up the alternative finance sector. Peer-to-peer platforms are now required to use third-party banks as a custodian for customers’ funds. Caps have been placed on the amount that can be lent »

Q3 2017_MODUS A SI A 35

Technology

to a single customer and the number of platforms from which customers can borrow. “The intention is to protect customers,”says Hou. “It’s not that peer-to-peer is a bad business model. The general tone is that [the government wants the industry] to be complementary to the pure banking sector.” Hou believes this process will kickstart a process of consolidation. “The total outstanding credit is still growing but the number of platforms is shrinking because they don’t comply with the new regulation,” he says. “We will see volume start to accrue with the top 20 or 30 platforms.” Although a smaller and less diverse market may suggest less innovation, Hou is not so sure. “Right now, everyone is so focused on recruiting investors and borrowers. In my view, most of the peer-to-peer companies are currently spending most of their energy and attention on marketing. The remaining players may be able to think about better business models.”

nlike China, the regulatory environment for alternative finance in Britain has evolved gradually. Originally overseen by the Office of Fair Trading, responsibility for the sector transferred to the FCA in April 2014. Firms already trading at that time were allowed to continue under interim permissions, pending full authorisation from the FCA. So far, the move towards becoming a fully regulated industry appears to have had little impact on the sector’s growth prospects, as new lenders continue to enter the market. Gillian Roche-Saunders, London-based head of compliance at law firm BWB, believes FCA authorisation could help the sector grow.“You’re seen as safer if you’re regulated by the FCA,” she says. There are also more concrete benefits. Lenders authorised by the

Peer-to-peer lenders were classified as technology companies in China, so no one was regulating them



WEI HOU Sanford C Bernstein

FCA will be allowed to offer an Innovative Finance ISA, providing tax-free interest on peer-to-peer loans, increasing the attractiveness of the sector to investors. Property lending platform Landbay was one of the first to receive FCA authorisation, a process that took 15 months. CEO John Goodall says securing ISA manager status was a big milestone, but he also points to other upsides.“A lot of our partners are FCA regulated and I think they get comfort from that.” Likewise, authorisation could open avenues to a new source of clients. “To my knowledge, independent financial advisers have not really looked at peer-to-peer in any serious depth,” he says. “Now that it is an authorised product, it makes it a little easier.” Despite providing some obvious benefits, there have already been suggestions that the move towards greater regulation has disproportionately affected some of the more innovative platforms. While a handful of firms have received authorisation, many are still waiting. Roche-Saunders says: “The FCA wants a firm to stay still while it’s judging whether the business plan is stable. That’s quite difficult in a market such as this. Everyone’s trying to innovate and grab the consumer’s imagination.”In her view, among

those still waiting, “a good chunk are the firms that have done more innovation”. Some of the more innovative solutions have also found themselves the subject of FCA scrutiny. To date, investments made via peer-to-peer platforms have not been covered by the Financial Services Compensation Scheme, which protects customers of other financial services firms. The industry’s response was to create provision funds, whereby platforms set aside a portion of their fees to compensate lenders in the event that borrowers default. The FCA has since raised concerns that these funds could “introduce risks to investors that are not adequately disclosed and may not be sufficiently understood”.

espite this tension, at least some established peer-to-peer lenders are actively calling for regulatory measures to go further. The Peer-to-Peer Finance Association, a group of nine lenders that includes property-based platforms Landbay and LendInvest, believes more rules should be put in place to protect consumers. Goodall says: “We’ve always taken the view that two basic things are very important in peer-to-peer: people need to understand the risk, and be able to be compensated for that risk.” The FCA will consult this year on rule changes designed to provide “adequate investor protection while allowing for innovation and growth in the market”. For some lenders, these changes will provide the industry with validation. But it seems likely that something might also be lost. “I always think there is a cost to regulation,” says Roche-Saunders. “There’s no doubt you won’t be able to innovate and grow in an unfettered manner.” 

CASE STUDY

How Airbnb became an unwelcome guest

Proptech firms have a history of running up against regulators – who frequently find themselves on the back foot as they struggle to cope with the pace of innovation. It should come as no surprise, therefore, that one of the most successful proptech firms has also proved one of the most troublesome to regulators. Airbnb, the online platform that allows individuals to rent 36

RICS.ORG/MODUS

out their homes to tourists, has transformed the holiday lettings market since launching in 2008. In the process, it has found itself at loggerheads with city authorities around the world. One of Airbnb’s greatest battles took place over hotel taxes. In many cities, tourist accommodation is supposed to be subject to tax which, at least at the outset, many Airbnb hosts neglected to pay.

After arguing for many years that it had no responsibility to ensure such taxes were paid, the company eventually backed down and now collects these on behalf of hosts in numerous cities. Such disputes have done nothing to dent the popularity of the service, despite its legality still frequently being called into question. In New York, the company’s largest

market, short-term lets are officially banned but enforcement action was rarely taken. That is, until February this year, when the city issued its first fines to illegal Airbnb hosts and promised a crackdown on illegal listings. For many companies, the threat would seem existential, but Airbnb has displayed a tendency to overcome such obstacles.

Hong Hong Kong Kong nominations nominations

Open: Open: 18 18 September September 2017 2017 Close: Close: 1 1 December December 2017 2017

Join Join our our briefing briefing session session

Date: Date: Thursday 21 September 2017 Thursday 21 September 2017 Time: Time: 16:00 – 17:30 16:00 – 17:30 Venue: Venue: RICS office, Room 3707-09, Hopewell Centre, RICS office, Room 3707-09, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong 183 Queen’s Road East, Wan Chai, Hong Kong

rics.org/hkawards rics.org/hkawards M AY 2017_MODUS

Protecting the vast amount of data we now produce every day demands an incredibly specialised type of property, and the surveying skills to match Words Katie Puckett Illustration Jonathan Petersen

hey could be as vast as an Alibaba distribution centre, as energy-hungry as a steelworks, and as critical as a power station or hospital. Yet many of us will never have seen a data centre – or at least that is what you may think. And that is exactly how their owners want it. “You’ve been past a lot more than you know,” says Darren Hill MRICS, associate director of JLL’s EMEA data centre team in London. “But that’s the whole idea. You’re not supposed to know where they are.” The reason for this is simple. Data centres are the internet. They are “the cloud”. They are the huge, humming sheds through which every email, Google search, Netflix movie, online transaction and Donald Trump tweet must pass as it circles the earth. Just a few minutes of downtime could be disastrous for the companies, governments and financial markets that rely on them, so data centres are designed to be constantly operational, and protected from every conceivable threat – natural or man-made. Anonymity is the first step in a rigorous high-security philosophy that leaves nothing to chance. “Data centres are one of the most expensive building types on the planet, and the IT equipment that’s in them is massively important to the businesses that use them,” says Andrew Jay MRICS, head of data centre solutions for EMEA at CBRE.“So the people who are responsible for that equipment are paranoid – they’re paid to be paranoid. The goal is that once a server is plugged in and powered up, the next time it will be turned off is when it’s at the end of its life.” Physical security is just one aspect of ensuring a data centre remains operational. They must have security of power supply, adequate cooling to keep the equipment within operating temperature range, and they must offer a windproof and watertight

environment, even in extreme weather or during seismic events. Jay explains the data centre developer’s philosophy:“They would start by saying: ‘Let’s have a really good power supply – but assume that gets cut off, let’s have a second one, from a different substation. But actually, what if they’re both turned off at the same time – let’s have some generators. But let’s assume that when I need the generators, they don’t all start, so we’ll have some back-up generators.’It’s the same with the cooling system, and with the connectivity to the building. They go to the ‘nth’ degree on everything.” From there, it is not hard to see that the security systems must be pretty substantial (box, overleaf). Once you get into that paranoid mindset, where does it end? In fact, as the market has matured, resilience has been codified into globally recognised industry standards, such as those set by the Telecommunications Industry Association (TIA) or the Uptime Institute (UTI). UTI “tier 3” data centres are “concurrently maintainable”, so any part can be taken down for repairs or maintenance without affecting the running of the facility. Tier 4 have two completely separate paths, for power, cooling and network. Retrofitting older centres is not necessarily viable: “It’s very hard to turn a tier 2 into a tier 3 – you need to have done it from scratch,” says Mark Trevor MRICS, head of Cushman & Wakefield’s EMEA data centre advisory group. Governments may also have their own specifications, such as the UK’s “business impact levels” – IL3 being for restricted or high-level government information and the highest, IL6, for use by the secret services. Site selection is critical. A data centre cannot be on a floodplain or under a flight path, needs to be as far from any hazard as possible, but have excellent power and network connections. Jay finds that the role of the RICS professional is often to mediate between the many specialists involved – translating the security experts’concerns for the commercial team, and vice versa. So if, for example, the security expert baulks at a prospective site next to a main road, Jay knows it is because there is a risk of ramraiding or explosions caused by passing »

UNDER LOCK AND KEYCHAIN 38 RICS.ORG/MODUS

Data centres

Q3 2017_MODUS A SI A 39

Data centres

petrol tankers: “Our skill is that we can speak the language of all different interest groups and bring them together.” But there is a limit to how many of these remote sites there are, particularly as the era of big data puts ever greater demand on the space required to process, analyse and store the world’s information. According to IBM, every day we create 2.5 quintillion bytes of data – a quintillion is 1 followed by 18 zeros – and 90% of all the data that exists today has been created in the last two years. The big consumers of data centre space are the three “hyper-scale” providers: Amazon, Microsoft and Google. They can locate their vast facilities anywhere in the world, dictated by a variety of factors. The Nordic countries can attract power-hungry tech giants with cheap, green energy and the free cooling of a cold climate. US firms have also flocked to Ireland for its low rate of corporation tax.

eanwhile, there is a parallel trend for“edge”data centres close to population centres, which can deliver large amounts of data where it is needed with as little latency as possible – minimising the buffering on your Netflix stream. This is where achieving anonymity is hardest. Many such facilities are concealed in nondescript buildings with mirrored windows or suspicious amounts of plant or communication equipment on the roof.“The perfect scenario is a shed in acres of open land, surrounded by high fencing and armed guards,” says Hill. “But you’re just not going to get that in many places around the world, especially not in big cities.” The strongest growth area for data centres is Asia-Pacific, home to some of the world’s most youthful populations yet to fully come

The perfect scenario is a shed in acres of open land, surrounded by high fencing and armed guards 



DARREN HILL MRICS JLL

online. Indonesia, for example, has more than 260 million people and a median age of just 28. “Smartphone penetration is below 50% but it still totals something like 50 million users,” says Hong Kong-based Paul Dwyer MRICS, JLL’s regional lead for data centre services. Alongside its great potential, this region also presents a range of climatic, seismic and geopolitical threats, as well as the prospect of rolling blackouts in some places. But the paranoid data-centre mindset stands developers in good stead when entering new markets – they already build fortresses with multiple back-up systems, which negates a lot of these issues.“There are many codes of practice, and larger data centre providers have their own standards to meet,” says Paul Johnson, regional director for Faithful+Gould in Hong Kong. “It would be catastrophic if the power went down, but there are a multitude of tests during the commissioning stage to ensure that it will not.” Due diligence when choosing a site is even more important, however. “It’s about being a little bit more cautious and managing a raised risk profile,”says Dwyer.“Some places are more stable than others. In Indonesia, we’d be looking at back-up supplies of fuel

and deliveries. It’s inevitable that power is going to go down, so we look at what we need to do to stay online.” The region’s four primary markets are Tokyo, Singapore, Hong Kong and Sydney, but there is also considerable development in Malaysia, Vietnam, Thailand and the Philippines, as the centre of demand shifts. Shanghai could be added to the list, Dwyer suggests, with some caveats. “It’s not where you’d put your first or only deployment in Asia-Pacific. You wouldn’t look to do too much due to the barriers to entry to mainland China. You’d want to hold most of your critical information outside the border.”

okyo has lost market share to Hong Kong and Singapore over the last five years, partly because they are better located for emerging markets in south-east Asia, but also because it is so seismically active.“Tokyo is moving most of the time,” says Dwyer. “There’s a lot of good technology that can help but, ultimately, if something big enough happens, nothing is going to withstand it.” Companies are now prioritising development in Osaka, he adds. “It’s on a separate tectonic plate to Tokyo, and it’s got a separate power grid, so it’s a very suitable disaster recovery location.” But local threats are only half the story. What data centre operators are not responsible for is the cyber-security of the information within – arguably a much greater risk, as illustrated by the unprecedented cyber-attack last October that disrupted services across Europe and the US. After all, if you had the choice of mounting a Mission Impossible-style break-in, or hacking from the comfort of your armchair, which would you choose? 

SECURITY CHECK

Think you can break into a data centre? Even visiting a data centre is a pretty tall order. There may be as many as eight layers of physical security, “and that’s before you even get to the room that holds the server racks”, says JLL’s Darren Hill MRICS. “Essentially, there’s no real limit to how well you can secure a data centre.” This is what you are up against. Prior notification All visits must be notified at least 24 hours in advance, along with details of a 40

RICS.ORG/MODUS

passport or other official photo ID. Prepare to show this many times when you get on site, too. Perimeter fencing Robust, high, ram-proof and topped with razor wire – if not electrified – the fencing around data centres leaves nothing to chance. The whole site will be monitored by CCTV, with no blind spots. Vehicle traps Do not expect to just drive your car through a

single barrier. There will be two, trapping you inside until the guards are satisfied that you are who you say you are. This will be mirrored by airlock doors inside, too – if you make it that far. Biometrics Well-drilled security personnel are on site 24/7 – but to eliminate human error, visitors must also pass technological checks such as fingerprint recognition or retina scans. Access logs will be retained.

Everything else Even if you manage to clear the reception area, you may still struggle to get anywhere near the allimportant equipment. Server racks can be fitted with an almost limitless number of security add-ons, depending on what they contain and how risk-averse the owner of the data is – from a single padlock, via a lock and key, to dedicated caging with additional biometric checks.

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Discover more resources and download our free BIM Level 2 Guidance Document at info.lr.org/modus. Q3 2017_MODUS A SI A

SYDNEY’S LATEST DARLING

When the city decided it was short of worldclass conference, exhibition and concert venues, its solution was to build all three on one site. Brendon Hooper reports

Client New South Wales Government Developer Lend Lease / Infrastructure NSW Architects Hassell and Populous Quantity surveyor Rider Levett Bucknall

42 RICS.ORG/MODUS

MANIFOLD FORMS Contained within the angular, origami-like structure of the highly adaptable convention building are two theatres, 70 meeting rooms and Australia’s largest ballroom

Stretching back from the water’s edge and spread across three distinctive new buildings, the International Convention Centre (ICC) Sydney packs an astonishing amount of activity into one site. Designed by Hassell and Populous for Infrastructure New South Wales and Lend Lease, the A$1.1bn ($840m) complex replaces the Sydney Convention and Exhibition Centre and forms part of the A$3.4bn ($2.6bn) regeneration of Darling Harbour. However, plans for the project were not universally welcomed. Philip Cox, architect of the original centre, which only opened in 1988, described the demolition of his award-winning scheme in 2013 as “an act of vandalism”. Although the original redevelopment proposal retained the existing buildings, the idea was rejected by Infrastructure NSW, which decided they were too small to meet demand. Instead, the new development has been constructed on a much bigger scale, across three buildings: a convention centre capable

Case file

NO DRAWBACKS Retractable seating means the theatre’s 9,000-capacity auditorium can be set up in various configurations to cater for both concert and conference audiences

GREAT OUTDOORS Outside the theatre, improvements to the public realm include additional green landscaping in Tumbalong Park and an open-air event space for 11,000 people

IMAGES GUY WILKINSON

BOXING CLEVER Enclosed balconies break up the facade of the main exhibition centre, behind which are two giant halls that can be subdivided into seven smaller spaces

of running three separate, concurrent events that boasts two theatres and Australia’s largest ballroom; a main exhibition building with more than 376,000 ft2 (35,000 m2) of floor space and a 54,000 ft2 (5,000 m2) open-air event deck; and an 8,000-capacity concert venue. Sydney-based Matthew Harris FRICS, managing director of Rider Levett Bucknall, explains that the project’s complexity was intriguing, particularly because his team’s quantity surveying role was not a traditional one. Instead, they were required to perform more of a due diligence function, overseeing the overall procurement process through a public-private partnership (PPP) method. Under the PPP arrangement, a reference design was produced by the state government, around which the bidding teams were able to develop their plans.“The ‘developed design’ was key to the assessment process, as it gave the bidders the ability to enhance and improve the reference design,” says Harris. “It was a real challenge to collaborate and coordinate

with such a diverse team of contributors on such a large PPP project, as each had their own targets and deadlines to meet.” RLB’s technical due diligence on the bid process involved reporting to more than 20 financiers, who were either debt or equity providers on the deal. The report covered the ICC’s design, engineering and delivery of the capital works, specification compliance, programme, risk identification and life-cycle impacts. “In addition, we had to address how the complex would be operated and maintained once completed,” says Harris. This meant ensuring sustainable design practices were in place to help the buildings achieve high recycling targets during the construction period, and for them to later operate with optimal resource efficiency. “For example, we had a target to recycle 90% of the materials, such as steel and concrete, from the previous structure,” continues Harris.“The on-site crushing of demolished concrete, and using it as base course and fill, significantly reduced the quantity of

imported material. The existing structure of the link building was also retained and incorporated into the facility.” Furthermore, rainwater harvesting and reuse should cut potable water use by 14% compared with Australian standards. The complex will also generate around 5% of its electricity from a solar energy scheme in which members of the public can buy shares. Hassell and Populous’ remit also covered the surrounding public realm, which has been upgraded to better connect pedestrians to central Sydney. The joined-up nature of the design is one of Harris’favourite aspects of the complex: “I like how the exhibition building considers the function of spaces internally, and goes on to connect with its surroundings, for example, the projecting boxes and the event deck overlooking Tumbalong Park. The project has brought new life and activity to the whole area.” n TAKE A VIRTUAL TOUR of ICC Sydney at bit.ly/ICCSydneytour

Q3 2017_MODUS A SI A 43

Careers / Business / Legal / Training

Foundations CAREERS If you’re hiring for a new role, using the interview correctly is critical in finding the right candidate. Here’s how to do it right

PLAN TO SUCCEED

Let’s face it, no one likes job interviews. But, however nerve-wracking it is for candidates, the process is no less anxious for those conducting the interview. It’s on their shoulders that certainty of a hire must rest – and a poor interview will be unlikely to help them choose the right candidate. “There are lots of things to think about,” admits Kate Cafferky HR manager at quantity surveying firm, Bruceshaw. “To ensure consistency, we use a core set of questions that are asked for any particular role, but after that we also feel interviewing is a two-way process. You’re looking to establish whether someone can contribute and build a career, so a more holistic approach has to be taken – one that touches on the candidate’s softer skills and personality. Cultural fit is just as important as their ability to fulfill the role on a technical basis.” Cafferky brings in a technical interviewer to discuss specific elements about a role, but advocates keeping a balance between technical and soft skills examination. “A good interview must have both,” she says. “Taking time to read candidates’ CVs/covering letter helps to identify areas for discussion or further investigation.” Without a proper plan, interviews can become wayward and not cover ground they should. So concerned was Merita Memisi, HR director for the UK at developer HB Reavis, that she decided to address it. “Interviews weren’t structured; there was no clear definition of the type of people for roles. So, in addition to developing technical

Consistency is king Have a core set of questions. It is fairer, and allows you to make better comparisons. Can I get a witness? If it’s a technical role, you need an expert with you – but don’t let this take over the interview. Open up Find out more about the candidate by letting them lead the conversation for a proportion of the interview. The right fit If there’s a candidate you like, but they are better suited to another role, keep them on file. Be nice They are interviewing you, too. Know why they should come and work for you, and tell them. 44 RICS.ORG/MODUS

competencies for each role, we’ve created a process that removes inconsistency. We score 40% on intellectual and 40% on emotional capacity questions, leaving the rest for more old-school – but necessary – personality and fit conclusions.” One thing she does do is ask how someone would go about solving an issue in their new role – to “get them outside their comfort zone” – but this does not mean she takes all personality out of the process. “I start the interview off in the same way for everyone, but I like to see how the candidate dictates the flow of the conversation. If we go way off, I’ll pull them back in, but you can’t be too prescriptive – you’re looking for someone you can get on with after all.” The practice of “hiring for potential” – rather than the actual job role – has suffered some backlash recently, with critics saying it creates expectations firms might not be able to meet. However, Memisi says her interview process allows for this. “When you find talent, you want to keep it,” she says, “and we’ve actually put people into different roles because the interview process reveals people’s true strengths.” Memisi and Cafferky agree that a competency-based approach to interviewing is a must – this is where candidates are required to answer questions about their ability in the context of actual events. So, too, is something many often forget – actually trying to make people comfortable, and representing the employer brand values. “Interviewers must have the employee value proposition at the forefront of their minds during interviews,” says Cafferky. “They must know how to portray benefits that any potential employee receives in return for their skills, capabilities and experience.”

ON RICSRECRUIT.COM Taken a final decision? Make sure they want to stay with this advice on employee engagement, at rics.org/engagement

WORDS PETER CRUSH ILLUSTRATION GIOVANNA GIULIANO PORTRAIT DAVID CHRISTOVER

ANY QUESTIONS?

Foundations

TIMELINE

1998 Studies architecture at the Bandung Institute of Technology

MY WAY

Natalia Pujiyanti MRICS DEPUTY DIRECTOR, ARCADIS INDONESIA, JAKARTA

2003 Joins Davis Langdon & Seah Indonesia as a quantity surveyor

THE PRESENT Becoming chartered was a huge milestone in my career. I was one of the first construction professionals in the country to qualify, and clients see me in a different light when I say I’m an RICS member. In 2015, after being with Arcadis Indonesia for 12 years, I was promoted to deputy director. My day-to-day work involves mostly high-level estimating, including value engineering, engaging new and old clients, and giving basic QS training to our junior staff. It’s so important to share our knowledge here, because formal education is not yet available to them.

2008 Completes distance-learning postgraduate QS course via the College of Estate Management

THE BEGINNING I like to let my imagination run wild when thinking about design. I’m from Bandung in Indonesia, which still has a lot of beautiful historic European-style buildings and at a young age they inspired me to become an architect. In 1998, I studied architecture at the Bandung Institute of Technology, THE FUTURE graduating four years later with cum laude. Luckily, only a My dream is to make quantity surveying month later I joined a multi-disciplinary firm as junior a recognised profession in Indonesia. Not architect, drafting and specifying materials, even though the just a branch of architecture, but to have its own individual course. Some steps are real estate industry was experiencing a recession. already being made with RICS, and hopefully in the next few years we can establish a THE CAREER BREAK Six months later, my manager asked whether I wanted to be recognised quantity surveying course at an seconded to the quantity surveying department. I became Indonesian university. totally engrossed in the job. So I started to explore the best rics.org/nataliapujiyanti ways to become chartered, and in 2003 I secured a job at Davis Langdon & Seah Indonesia – now Arcadis. Quantity surveying is not a recognised profession in Indonesia, so it was crucial for me to graduate from a certified course. Three years later, Arcadis offered me a scholarship for a distancelearning postgraduate QS course via the College of Estate Management in the UK. “My dream is to make quantity surveying It was a tough experience, juggling work assignments, but I graduated in 2008, a recognised profession in Indonesia, and went on to pass the APC in 2010. not just a branch of architecture”

2010 Passes APC to become one of the first chartered surveyors in Indonesia 2015 Promoted to deputy director, Arcadis Indonesia

Q3 2017_MODUS A SI A 45

NO WORKPLACE LIKE HOME

FIVE-POINT PRIMER

Ask anyone to picture a typical workplace and their mind will probably conjure an image they have seen in countless films: a run-of-the-mill office, replete with water cooler, potted plant and dull carpet tiles. The surroundings in which we work are an inextricable part of our employment culture. But, like many aspects of life in the past decade, this is changing rapidly. Dell and Intel’s 2016 Future Workforce Study Global Report found that half of the nearly 4,000 people it surveyed across 10 developed and emerging markets currently work remotely at least a few times a week. And this new way of working is not just confined to the home. Hotdesking, where people pay a flat fee for a desk, internet connection and printing services, and co-working, where people from a whole range of backgrounds share an office, are increasingly part of the mix of workplace options. For surveyors like Darren Foy FRICS, who recently set up his own business after time in a partnership, the options for where and when to work are vastly different to a decade ago. “All my files are electronic and backed up to the cloud. I have a laptop and a mobile phone, and if I need to be in a client’s offices then that’s fine. If I don’t, then I can work wherever.” And, Foy adds: “The overheads are low.” Electing to eschew a traditional office is not only a low-cost option; it can also make you more productive.

Smooth operator Doing your job without an office is now easier than ever. Job satisfaction Research has found that home workers are happier and more productive. Flexible friend Make use of a variety of spaces depending on the situation, from coffee shops to business lounges. Sharing’s caring If home working isn’t for you, plenty of serviced office providers offer hotdesking and co-working space. Come together Consider setting up your own co-working space with people in your business network. 46 RICS.ORG/MODUS

LONELY PLANET But what if you would rather not work from home? Although some employees in the Stanford research prospered in such an environment, half of those in the group asked to transfer back to the office at the end of the nine months because they were lonely. Kirsty Harvey MRICS, director of KTD Surveying in Hertfordshire, UK, admits to missing the “office banter” when she started working from home. She is now forging a path down which a few others in the profession are also turning: co-working.

WORDS TIM STAFFORD

BUSINESS Running an office is a big expense. So what if you didn’t need one at all?

A 2014 study of call-centre employees, half of whom worked from home for nine months and the other half from the office, backs this up. Nicholas Bloom, professor of economics at Stanford University, was co-author of the research, which was published in the Quarterly Journal of Economics. “We found that people working from home completed 13.5% more calls than the staff in the office did – meaning that [the company] got almost an extra workday a week out of them,” says Bloom. “They also quit at half the rate of people in the office – way beyond what we anticipated. And predictably, at-home workers reported much higher job satisfaction.” It is far easier these days to schedule and hold remote meetings, share and manage work, and interact with people remotely. And not only because of technology: big changes in working culture make it easier too. Employees and clients are far happier meeting for the first time in a coffee shop or by video-conference than they would have been five or 10 years ago. Foy says: “A lot of my clients are more than happy to catch up over a coffee, and my bank account enables me to use lounges in certain branches.” He also looked into using the business space provided by some private members’ clubs, but decided against the cost for now. There are other, less hard-edged benefits to leaving the office behind. You can see your loved ones more easily, it is simpler to fit in exercise, you can set up your workspace the way you like it, and your journey to work is shorter or non-existent. Cutting out the commute is one of the best advantages to home working, says Chris Heginbotham FRICS, assistant government valuer at the Treasury in the Isle of Man government. Not using his car to get to work saves him money, as the costs of travelling between home and an office are not tax deductable. He is also more in control of his own time.

Foundations

LEGAL 101

After a period hotdesking within a serviced office, Harvey set up a co-working space with friends from a range of professions – including a building surveyor – in her network. She did this by renting a serviced office but agreeing with the landlord that they could run multiple businesses from the room. Harvey recommends her route into coworking, particularly because she has found it to be cheaper than the serviced office

“Our study found that home workers quit at half the rate of people in the office – way beyond what we anticipated. They also reported much higher job satisfaction” NICHOLAS BLOOM Stanford University option – quoting monthly costs of around £250 versus £400 for a serviced office in her area. And if you lack a ready-made network such as Harvey’s, fear not. Contrary to the stereotype of co-working spaces catering only to creative types in fringe locations, the rise in their popularity means that even established serviced office operators such as Regus are opening shared workspaces, in addition to the independently run outfits that already exist in many cities. Shazia Mustafa runs Third Door, a coworking space in suburban west London that also provides an on-site nursery for the children of the space’s users. She sums up the benefits of this flexible approach well: “You can get a lot more done in less time.” And that’s a formula that will never lose its appeal in the world of work.

READ MORE ON THE MODERN WORKPLACE The Middle East has seen a significant influx of multi-national companies over recent years which, when coupled with the requirements of local companies, has created a wide variety of occupation

styles across commercial office space in the region. RICS, in partnership with the Middle East Council for Offices, spoke to more than 500 office workers to explore productivity in office environments and challenge preconceptions and understanding of why “one size does not fit all”. To read the report of their findings: Office environments and productivity in the Middle East, go to rics.org/ menaoffices

Shopping around Asia’s retail rules DAVID TIANG Partner, Tiang & Co, Hong Kong Foreign retailers operating in Asia are often subject to some quirky rules. While starting up an operation in Hong Kong, Japan and Singapore requires nothing more than money, some jurisdictions have very specific requirements. China Regulations for foreign-owned retail were lifted when China joined the World Trade Organization in 2001. It is now only necessary to register with regulators to set up a foreign-invested commercial enterprise, which can be 100% foreign owned. E-commerce is another matter. Beijing’s strict hold over internet operations means foreign companies can own only up to 50% of a Chinese e-commerce operation. Instead, retailers are advised to use a variable interest entity, which allows a foreign company to enter into contracts with one in China that holds an e-commerce license. The contracts can give the foreign company operational and managerial control over a local partner. If you are not operating an e-commerce platform such as Amazon or Taobao, you are free to run your own online business. So retailers such as H&M can sell their own goods in China via their websites, but no-one else’s. Indonesia Foreign retailers can directly own subsidiaries in Indonesia, but foreignowned stores must be at least 2,000 m2 in size. There is also an unwritten rule that it is smart to build at least 2,300 m2 to avoid any

questions. It is therefore only practical for global brands to enter the market, which protects small businesses. Foreign retailers that take on an Indonesian partner in a “PT,” or perseroan terbatas – a limited liability company – have no such minimum-size requirement. Vietnam A foreign company can only open a single outlet at first. Its operations then fall under an economic needs test before the retailer can open additional sites. The test looks at the viability of the original store but also its use of local suppliers. It effectively leaves any expansion at the Vietnamese authorities’ discretion. Thailand The country has long been attempting to update its Foreign Business Act of 1999. But the proposed Retail and Wholesale Business Act keeps stalling. For now, foreign retailers must invest more than B|100m ($2.95m) for retail or wholesale operations, or B|20m ($590,000) per store. Malaysia Foreign retailers must satisfy the country’s bumiputra laws, favouring people of Malay ethnic background. Those require 30% of any foreign entity to be owned by a Malay partner. Local companies have no such requirement. Alibaba’s acquisition of online retailer Lazada in April 2016 shows the need for region-wide regulation. Lazada is already the dominant force in many south-east Asian nations, and will now have huge Chinese backing for further expansion plans.

Q3 2017_MODUS A SI A 47

Foundations

EVENTS BOOK RICS EVENTS ONLINE AT rics.org/events For inquiries, call +852 2537 7117

HONG KONG

FIND THAT ‘X’ FACTOR PROFESSIONAL DEVELOPMENT A successful tender is as much about knowing your own strengths as it is your prospective partner’s Don’t get carried away For any organisation considering bidding for work in the private sector, it is imperative to bid only for the projects that you know you can deliver, because you will acquire a reputation based on your results. Bidding for work that you can financially manage is good practice, because you must have an adequate cashflow capability if something goes wrong. Have your say, too When bidding, you should expect to have some advance notice or involvement in shaping the requirement. If it just comes out of the blue, you can assume someone else has helped shape the bid requirement, and that they may be a step further up the ladder. Start by assuming that you might not bid, and if in doubt, do not proceed. Don’t overestimate your chances of winning a tender you weren’t expecting, as you may end up expending a lot of time and energy for nothing.

CPD: ON DEMAND The CPD Foundation offers members a convenient and comprehensive way to meet their CPD goals for one annual payment. For more information go to cpdfoundation.com 48 RICS.ORG/MODUS

Make some friends People buy from people they like, know and trust. You need to take every opportunity to make contact with, and enter into dialogue with your client. Ideally, you need to do this across their

whole organisation, because there may be some areas of resistance, and you need to have the whole company on board. It is not a winning strategy to just stay in your office and price the bid. No second-guessing Identify the key decision-makers, and bear in mind they may change during the procurement. Get a detailed specification of the requirement, never try to guess what your client wants. First, your guess might be incorrect, and second, when you bid for something, this is the basis of a contract – whatever you say you will do has to be what they want. Quality over quantity Assume that your competitors will submit a “bare bones” offer, only pricing for the essentials. Unless you follow suit, you can very well be beaten unfairly. Work out the minimum your client requires, and price it accordingly – it is important to not “over-engineer” your offer. Always look for innovative lower-cost alternatives, while maintaining a reasonable quality. Make sure you fully review your bid before submission, and thoroughly read the terms and conditions – don’t leave it until when or if you win the work. JO MANN is an independent consultant specialising in procurement

››RICS Awards, Hong Kong and Annual Dinner March 2018 Now in its eighth year, the RICS Awards, Hong Kong celebrates excellence, professionalism, achievement and overall contribution of projects, teams and development to our built environment. The awards are open to everyone working within the property profession. A presentation ceremony will be held at the RICS Hong Kong Annual Dinner. Nominations open in September 2017. rics.org/hkawards

JAPAN

››Annual Dinner 2018 March 2018, Tokyo In celebration of 150th anniversary of RICS, we will host the first annual dinner in Tokyo in March 2018. Members and senior leaders of the built environment will gather to celebrate their achievements and successes. More details to be announced closer to the date.

TAIWAN

››Annual Dinner 2018 March 2018, Taipei Built environment professionals are cordially invited to this annual gathering to celebrate their achievements and successes. This dinner also celebrates 150th anniversary of RICS. More details to be announced closer to the date.

Not at all

21%

15%

Not very

Very

VOTE OF CONFIDENCE

61%

This year’s RICS and Macdonald & Company Asia Salary and Benefits Survey found that, while global economic uncertainty has had a minor impact on salary and bonus levels, sentiment remains broadly positive

57%

The average value of bonus awarded was

Most participants (82%) are fairly or very satisfied with their job, a 2% change on last year. The 3% who are not at all satisfied is the same total as last year

$21,072

HOW MUCH IS RICS MEMBERSHIP WORTH?

CHANGE IN PAY

2016 2017 Hong Kong

$90,138

$101,273

$95,480

$97,155

$113,001

$106,627

2016 2017 Average all

7.8%

was the average increase in salary among respondents, down 1.8% on last year.

-20% change in value of bonus payments from last year.

ECONOMIC ACTIVITY IN THE NEXT YEAR WILL … Overall, positive sentiment has increased to 30%, up from 23% last year. Those surveyed in China are generally more optimistic

$30,844

Decrease

Remain unchanged

Malaysia

China

48% 38% 37%

25% 19%

27% 35%

38%

38% 35%

26%

57%

Increase

Fund/investment management $128,051

Asset/portfolio management $111,657

$14,606 Property/facility management $87,999

Commercial $108,483

$15,107 Occupier services/advisory/ leasing/agency $84,951

$14,397 Project/construction management $81,943

$12,198 Quantity surveying $77,985

$29,012 Architecture $70,057

$13,636 Valuation & consultancy $67,682

Bonus

$14,914

As this sample shows, the largest bonuses continue to be paid within the fund/ investment management sector

$6,861

2016 2017 Singapore

$73,678

SALARY SNAPSHOT

Engineering $61,176

$112,069

$91,393

$111,517

$93,923

$105,125

$85,480

$84,275

$96,797

$81,331

2016 2017 China

2016 2017 Malaysia

Salary

of respondents received a base salary increase, down from 63% last year.

Non-member

$48,024

$60,003

$52,558

$70,023

RICS member

62%

$167,395

RICS members take home, on average, a base salary of $101,273, which is a 12.4% premium over their non-qualified counterparts.

30% 22%

is the average salary of a property professional in Asia, down from $95,480 in 2016 – a fall of 5.6%.

OVERALL JOB SATISFACTION

of respondents received a bonus – no change on the previous year.

25%

$90,138

Fairly

Hong Kong Singapore Average all

FOR A MORE IN-DEPTH LOOK at the results from this year’s Asia Salary & Benefits Survey, go to rics.org/asiasalarysurvey

Q3 2017_MODUS A SI A 49

Mind map

HOW CAN BLOCKCHAIN BENEFIT PROPERTY?

Smart contracts based on blockchain can be programmed to selfexecute and enforce sales terms. Property transactions could follow these specific instructions, becoming more automated and streamlined.

Simon McIlroy, associate, real estate disputes team, Collyer Bristow, London, UK

Blockchain is a database that maintains a live and growing list of records or transactions known as “blocks”. As it is supposedly impenetrable to hackers, it has the potential to make it easier, safer and faster to buy, sell and let property.

Blockchain is highly resistant to fraud – the record cannot be altered without the consent of all parties.

Every “coin” in the blockchain would represent a property, whose digital address would contain all the information needed to quickly exchange contracts. The transfer would happen on payment, speeding up completion times.

ILLUSTRATION GIANMARCO MAGNANI

Some countries have started to work on implementing blockchain land registries. However, the technology still needs to be rigorously tested and regulated for it to enter the mainstream.

RICS.ORG/MODUS

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APC acceleration program: quantity surveying in Asia A quantity surveyor is concerned with the costs and financial management of the building life-cycle. The need for chartered quantity surveyors is significant. By 2020 it is predicted that £18bn will be spent on construction projects across key developing markets, therefore having the skills to meet this global demand is essential. This seven-month program has been designed to develop the technical skills and knowledge of professionals who work in the built environment, to be in line with the competencies defined by the RICS to practise as a chartered quantity surveyor. This program is now available in several territories across Asia. To find out more about this course, contact: China – learning@rics.org Hong Kong – etang@rics.org Singapore – shussin@rics.org

Find out more about APC courses at academy.rics.org

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Online Academy Flexible learning

solutions

Flexible learning solutions

Whether you prefer live and interactive web classes or practical e-learning courses, RICS Online Academy will help you up-skill your technical, management and soft skills.

All courses provide apeople flexible from way to123 gaincountries CPD with no More than 25,000 travel expenses or time out of the office necessary. have chosen the RICS Online Academy as Popular courses: their learning platform in the past three years. • QSextensive in Practice –range blendedof learning The online courses cover Construction in of Project Management – distance learning a •wide variety topics, including technical skills, management and membership, andlearning • Building Surveying: Principles in Practice – distance provide flexible learning solutions that can • Commercial Management in Practice – web classes be studied at any time. • Surveying Safely – e-learning

Popular subjects in Asia include: • Construction Project Management • Building Information Modelling (BIM) • Commercial Management of Infrastructure Projects • Quantity Surveying in Practice • Corporate Real Estate and Facilities Management

view thefull fullrange rangeofofcourses coursesplease pleasevisit: visit:academy.rics.org academy.rics.org ToTo view the