Corporate Real Estate Adapts to Global Challenges
Global market complexities are making strategic real estate planning more critical to business health - and more challenging - than ever.
March 2011
To search for insight about CRE's challenges and opportunities, Jones Lang LaSalle launched its inaugural Global Corporate Real Estate survey. The survey, with responses from more than 500 CRE executives across industries and locations, yielded insights into key trends and issues.
Two themes - growing wisely and increasing productivity - emerged as the biggest challenges for CRE professionals developing long-range strategic programs.
Balancing Growth and Productivity
The financial crisis challenged CRE teams to resolve the competing pressures of growth and improvement with asset productivity. With cost savings in mind, CRE teams initiated short-term, tactical real estate plays to cull direct cost savings from real estate portfolios. This changed the form, function, and value-add of CRE's relationship with company leadership. CRE teams must now deliver a platform that allows for business growth opportunities in markets that lack transparency, and parallel with portfolio right-sizing initiatives in mature markets.
Growth
Most companies anticipate the return of growth, but in select global locales. They will aggressively pursue growth in emerging markets, concentrated in arenas that frequently lack operational maturity and transparency. The emerging market dynamic is reflected in The pursuit of new revenue opportunities in the BRIC nations (Brazil, Russia, India, and China) reveals this emerging market dynamic, which is important considering the absence of strong economic growth forecasts within mature global sub-regions.
The survey shows the most significant growth in the Asia-Pacific region, particularly the North Asian countries of China, Japan, and Korea. Each country will see a more than 50 percent increase in net portfolio size over the next three years. Emerging markets in Central and Eastern Europe and the Middle East should also experience strong portfolio growth. In the Americas, Latin and South American growth reflects the emerging market dynamic.
The relative immaturity of these markets and lesser transparency will challenge corporate occupiers. Compare Figures 2 and 3 of Jones Lang LaSalle's Real Estate Transparency Survey, which illustrates global market transparency. Markets in which respondents are pursuing growth are also markets with low transparency. Speed to market is predictably slower in opaque markets, barriers to entry are higher, and routes to market exit are complex and costly.
The need to deliver a platform for growth in idiosyncratic real estate markets will pressure CRE teams in the medium-term. The pursuit of growth in these markets will expose the organization to opaque real estate markets. The CRE team will be required to inform the business of the practicalities of expanding in an emerging market and how to mitigate risk.
In stark contrast to the emerging markets, survey respondents indicate that the United States and Western Europe will experience a net reduction in overall portfolio size over the next three years. This downsizing is already under way in mature Western markets, where corporate occupiers have sought portfolio consolidation over the last 18-24 months and released surplus space back into the market, driving European and U. S vacancy rates to record highs. Further rationalization and consolidation will characterize portfolio initiatives in these locations for many years.
Project Announcements
Zekelman Industries Expands Blytheville, Arkansas, Operations
04/19/2024
Fibrebond Corporation Expands Webster Parish, Louisiana, Operations
04/19/2024
Master Steel Expands Hardeeville, South Carolina, Operations
04/19/2024
L3Harris Technologies Expands Orange County, Virginia, Operations
04/18/2024
Republic Airways Holdings Plans Tuskegee, Alabama, Training Operations
04/18/2024
South Africa-Based Radel Plans Winston-Salem, North Carolina, Operations
04/18/2024
Most Read
-
2023's Leading Metro Locations: Hotspots of Economic Growth
Q4 2023
-
2023 Top States for Doing Business Meet the Needs of Site Selectors
Q3 2023
-
38th Annual Corporate Survey: Are Unrealized Predictions of an Economic Slump Leading Small to Mid-Size Companies to Put Off Expansion Plans?
Q1 2024
-
Manufacturing Momentum Is Building
Q1 2024
-
Making Hybrid More Human in 2024
Q1 2024
-
20th Annual Consultants Survey: Clients Prioritize Access to Skilled Labor, Responsive State & Local Government
Q1 2024
-
Public-Private Partnerships Incentivize Industrial Development
Q1 2024