In pursuit of ‘smart’ growth Corporate confidence and wealth are on the up across the globe. In Asia Pacific this has driven further expansionary demand. In the Americas and EMEA more cautious behaviour is evident as corporates guard against further economic shocks; focus on right-sizing their existing portfolios; or prepare for large-scale strategic investments such as mergers and acquisitions. Our recent Global Corporate Real Estate survey highlights a changing operational context for corporate real estate (CRE) teams, where greater scrutiny and pressure from corporate leaders is becoming the norm. CRE teams are being asked to pay close attention to continued cost management while contributing to improved organisational productivity via space upgrading and the stronger utilisation of the real estate portfolio.  They are doing so at a time when the world’s real estate markets are turning in favour of the landlord and when corporate caution is creating a slower, more stringent appraisal of cases for corporate investment.  CRE teams are therefore aiming to deliver ‘smart’ growth.  This involves corporate expansion but does so in a way which minimises exposure to rising costs by stress-testing the need for taking new space; the necessity to be in certain locations; and the capability of the existing portfolio, albeit with further investment, to accommodate growth. Examples are emerging.  In Asia Pacific, some corporate occupiers are preparing alternative ‘locational’ strategies (decentralisation and country moves) as they look at reaching cost ‘ceilings’ following large-scale rental increases in markets such as Hong Kong.  Corporate occupier attention is being drawn to alternative markets, such as Singapore, where rental profiles and projections are softer and the real estate stock is better placed to serve their needs. We have witnessed a similar pressure in terms of offshoring locations. Many secondary offshore locations are coming onto the corporate radar and being assessed for viability for back-office functionality.  In the mature markets of Europe and North America, close attention is being paid to the existing working environment, and investment cases for workspace upgrades are being made by corporate occupiers across all sectors.  Crucially, cases are made not just on the basis of reducing cost but also on the basis of brand reinforcement, sustainability credentials and the ability of the workplace to support talent attraction and retention.  Global Office Market Conditions Matrix, 2011-2013

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* Relates to conditions in the overall office market of a city.  Conditions for prime CBD space may differ from the above.
Source: Jones Lang LaSalle, April 2011


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