Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
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www.REBusinessOnline.com Western Real Estate Business • October 2016 • 41 THE FUTURE OF CORPORATE REAL ESTATE IN THE GLOBAL ECONOMY Corporate real estate professionals must keep a close eye on the market cycle, as well as both local and global events, to provide the best solutions for their clients. By Tim Venable O ne factor now taken for grant- ed in the era of rapid change is the globalization of work, culture and the economy. The world is increasingly interconnected, with news circulating from San Francisco to Sydney in milliseconds and reams of information instantly available to anyone with a phone. This creates endless opportunities for business. Nearly every market in the world is open to everyone regardless of where the home base is, often with nothing standing in the way of growth. But as anyone who has ever tried to open a satellite office knows, it is rarely that simple. For every oppor- tunity, there is a challenge to be over- come. Issues of globalization can lead to questions of local significance, as the governmental regulations and cul- tural norms in Seattle are very differ- ent than they are in Tempe, Ariz. And if most markets are open to competi- tion, the rules governing that competi- tion are not always the same. Finally, the openness of global markets means problems in one city or nation are very likely to impact every other in some form. The temptation for growing small and large corporations to enter mar- kets outside their original home can be overwhelming. This will seem even more so in the future due to increasing global connectedness. Corporate real estate executives will need new skills to master the changing dynamics of the global economy as companies de- fine themselves as multinational while maintaining physical operations in regions around the globe, according to a new report released by CoreNet Global. These dynamics are, by definition, unpredictable, though there are road- maps for success. Many of these roadmaps can be found in CoreNet's "The Bigger Pic- ture: The Future of Corporate Real Es- tate" report: • Effects of Automation Corporate real estate executives got an up close and personal look at the next evolution of robotics at the 2015 CoreNet Global Summit in Los Ange- les. Robotics and software are gradu- ally replacing people for the kinds of tasks that do not require human interaction. These developments will usher in new opportunities for com- panies to operate complex networks of production, distribution and sales across multiple geographic locations, leveraging the power of data to drive value creation. • Flexible Corporate Culture Balancing local cultural norms and global corporate culture is a challeng- ing aspect of opening and maintain- ing a new office. Having a "one size fits all" global strategy is not a recipe for success, but a country, or market- based approach is important. There has to be a balance between company culture and local sensitivities. Offices may look different in each country, with hours, workspaces and even dress codes impacted by local cultural norms. • Planning Conditions may change rapidly due to a variety of unforeseen cir- cumstances. These may include local economies, financial markets, natural disasters, and political or security cri- ses. Preparedness initiatives enable the company to respond to changing market dynamics by adding or re- moving capacity based on customer needs, currency fluctuations and oth- er factors. Karen Ellzey, executive manag- ing director of consulting for global workplace solutions at CBRE believes corporate real estate executives must lead in the area of scenario planning. Ellzey emphasizes a need to plan for multiple possible scenarios and that those plans must be updated regu- larly. While corporate real estate profes- sionals traditionally tried to predict what will be needed next, Ellzey believes scenario modeling provides organiza- tions with a range of ready options for maximum flexibility. Corporate real estate professionals can also add value by being "cycle aware" — paying attention to economic, business and real estate cycles. They should also be able to of- fer a point of view about where con- ditions are headed to help executive decision-makers prepare for nearly any outcome. • Emerging Markets Companies learned a few decades ago that they could reduce the cost of talent and real estate by putting sup- port teams in less expensive markets. But emerging markets are just that -- emerging — and as they become more attractive as customer markets, they lose some of their desirability as labor markets. It is not yet completely clear how all of these changes in the global econo- my will impact business in general or corporate real estate specifically, but it is evident that events that change the way business is conducted will occur on a global stage. Corporate real estate executives need to watch these chang- ing dynamics carefully to be prepared for a changing profession on an evolv- ing global stage. Tim Venable, Senior Vice President, CoreNet Global Venable A Growing City is Not Without Tight Spaces, However The Portland industrial market experienced a 4.3 percent industrial vacancy rate in the second quarter of 2016, compared to the 6.1 percent national average. The city's vacancy rate has also been in decline for the third consecutive quarter. The com- bination of growing demand and limited space has resulted in a 3.7 percent increase in quoted rental rates over the previous quarter in the Portland market area. Developers in the Area are Already Answering the Call of Portland's Future The low vacancy rate is spurring trends of historic speculative devel- opment in the Portland market. De- velopers and owners are seeing the declining vacancy rate as an indica- tion of future demand and are moti- vated to supply the region's deficit. A partnership between Portland- based Specht Development and New York Life Real Estate Investors LLC commenced construction on 732,824 square feet of speculative industrial space in three buildings on a 37-acre site in Gresham this past August. The site will be home to Vista Logistics Park, a regional logistics park created to serve the needs of distribution and industrial businesses. The project's additional amenities include above- standard truck courts, trailer and passenger car parking and access to Portland's interstate system. The project will be completed in fall 2017. Vista Logistics Park is the largest single-phase speculative develop- ment in Portland history. The park is also likely the first of many massive distribution parks to break ground in the coming years. Trammell Crow Company, Panattoni Development Group, Dermody Properties and Pro- logis are all active in the Portland de- velopment game. Though the future tenants of these under-construction parks are tempo- rarily unknown, Portland remains confident major e-commerce distrib- utors will continue to join the Rose City rush. Don Ossey and Dave Ellis, Principals, Capacity Commercial Group continued from page 7 Corporate real estate executives will need new skills to master the changing dynamics of the global economy as companies define themselves as multinational while maintaining physical operations in regions around the globe.