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News Release

MIPIM, Cannes & London

Corporations Move from Cost Concerns to Higher Demands on Productivity and Smart Growth as Key Real Estate Drivers in 2011

Outsourcing real estate goes mainstream with 70% of global companies surveyed expected to adopt hybrid delivery models by 2014

London, March 7th - As the corporate operating environment around the globe hardened over the last 36 months, companies have moved from a focus on cost control to a higher demand for maximum productivity and smart growth, according to the inaugural Jones Lang LaSalle and Thomson Reuters’ Corporate Real Estate Global Survey.  According to the report, as companies emerge from the global financial crisis they are seeking to restructure and plan for a new economic era, which is placing more pressure and scrutiny on the productive use of Corporate Real Estate.
This presents a powerful opportunity for CRE teams to drive strategic change and bring added value to their wider businesses. CRE teams will be required to respond with greater agility, expediency and productivity, increasing their reliance on outsourced service providers.
The first-ever survey drew responses from more than 500 CRE executives across the globe, including Germany, France, UK, China, India, Australia, and North America and across a variety of industries, including banking and finance, pharmaceutical, government and IT. This is the firm’s first global effort to formally identify the future challenges facing the CRE industry and the likely consequences over the next three years. 
“This survey gives us an unprecedented window into the mind of the CRE community, as well as the global business marketplace as a whole,” said Stuart Hicks, CEO of Corporate Solutions at Jones Lang LaSalle. “Corporations have clearly shifted from short-term, survival motivated tactics towards medium term, strategic initiatives aimed at driving productivity enhancements.”
“Driving improved productivity by implementing more strategic real estate initiatives can release tremendous value given that real estate typically accounts for 7 to 12 percent of a corporation’s total operating costs,” said Mr. Hicks.
“These survey results should also be of interest to the investor community as they point at important cyclical and structural shifts in demand for space, as well as operational priorities for the tenants,” said Robert Ciemniak, Global Head of Real Estate Markets at Thomson Reuters.”
As corporations globally responded to tightening financial conditions and shrinking revenues, attention predictably turned quickly towards real estate. This pressure was firmly felt by CRE teams across the world with 97percent of survey respondents supporting their business with one or more tactical real estate plays to reduce cost.
Now that corporate health is improving, firms are turning to growth strategies that balance the dual forces of growth and cost control.  When asked what will be the most influential factor in shaping real estate strategy in the next three years, growth was the standout response (35%), followed by cost pressures (11%).
“CRE teams will be challenged to drive increased productivity through real estate while pursuing portfolio growth alongside continued right-sizing,” added Vincent Lottefier, Jones Lang LaSalle CEO Europe Middle East and Africa (EMEA) Corporate Solutions.”  Many will need to progress their journey along the outsourcing curve and partner with specialist real estate service providers in order to effectively meet these challenges. For those already at the head of the curve, re-evaluating existing relationships will ensure full value and benefit is being extracted.
Among the top influences on future real estate strategies, seventy-seven percent of survey respondents identified the need to attract talent, the quest for enhanced productivity, right-sizing the portfolio for a new organisational reality or a desire to change the culture and nature of work. Creating more efficient workspace that is conducive to modern work styles and receptive to the demands of knowledge workers will assist CRE leaders in meeting these demands and building additional value for their businesses. 
Portfolio growth predicted, but geographically focused
The survey reveals that respondents are seeing a return to growth in select geographies. Thirty-nine percent of respondents anticipate an increase in the total size of their global real estate portfolio over the next three years, while 31 percent predict a reduction.
·       Net growth is strongest in the Asia-Pacific region and in particular North Asia (60%), South Asia (primarily India) (43%), and South East Asia (37%).
·       In the Europe, Middle East and Africa (EMEA) region this same Eastwards and Southwards shift is evident. Strong portfolio growth is predicted for Central and Eastern Europe (34%) and the Middle East (24%). 
·       In the Americas the growth dynamic is Southwards, in the Latin America region (34%). 
Respondents suggest that in the United States and Western Europe overall portfolio size will reduce over the next three as consolidation continues to drive utilisation rate improvements.
Among the most active industry sectors, the finance sector is forecast to grow most notably in North Asia with 63 percent of respondents predicting portfolio growth. The technology sector is also predicting portfolio growth in North Asia (67%), Latin America (44%) and Southeast Asia (44%).
Acting with conviction in an uncertain business environment
While most corporations today are in a stronger cash position, there are still hurdles inhibiting broad real estate moves.  Forty-three percent of respondents cited “uncertainty around future shape/size of business” as the obstacle preventing them from executing desired strategies during the financial crisis. Twenty-nine percent cited “economic uncertainty.”  
Contrary to most expectations, more respondents listed “uncertainty and risk minimisation” as a factor shaping their real estate strategy three years from now than today (22% vs. 25%).
Companies can reduce these levels of uncertainty by enhancing their ability to predict demand using improved forecasting models, more comprehensive demographics information, and more sophisticated risk management techniques.
Global crisis causes lasting change and gives CRE a seat in the C-Suite
When asked for legacies of the global financial crisis, 92 percent of the respondents cited “greater visibility and engagement with senior business leaders” with 90 percent stating they had gained “greater visibility and ability to influence business decisions.”  Eighty-one percent of respondents maintained that the CRE function had been placed under greater scrutiny by the wider business since the onset of the global financial crisis.
Outlook: Re-Shaping CRE Structures and Skills
When asked which scenarios were most likely within the next three years, 77percent stated “CRE leaders to be more actively involved in developing and implementing organisations’ strategic direction.”
Respondents firmly believe that transformations in the role and structure of the CRE function are underway and will intensify over the next three years. The challenges facing CRE are significant and demanding. CRE leaders who address these challenges head on and invest in recruiting and developing key CRE talent, from the industry or from outside traditional boundaries, will be operating at the vanguard of the industry.   
 “There is a clear opportunity for CRE leaders to redefine their organisations and drive a more strategic real estate agenda as the importance of this role continues to broaden in board room across the globe,” said Hicks. “We expect to see fundamental and sustained changes in the structure and remit of CRE teams across the world and stronger engagement with outsourced service providers as they progress toward partnership with 80 percent of respondents planning to either fully or partially outsource their CRE functions within the next three years.”
Jones Lang LaSalle and Thomson Reuters’ Corporate Real Estate Global Survey is designed to capture the insights into: CRE trends and concerns in emerging and developed economies; how the global financial crisis has changed the CRE landscape and reshaped its function and strategy; short-term and long-term CRE priorities and developments and practices among industry peers.