The Challenges Facing Corporate Real Estate

For corporate real estate executives, three challenges are front and center in today's business climate, regardless of business type, size or location: skilled labor shortages, cost escalation and economic uncertainty.

That was the main takeaway from CBRE’s most recent Occupier Survey, which was conducted among 229 CRE executives and provides a unique look into the strategies, priorities and practices among leaders across multiple markets and industries. These challenges are reshaping the role of corporate real estate—and establishing key areas of focus for CRE leaders.

Our partner CBRE is at the cutting-edge of providing occupiers with a work environment that speaks to today's needs.

Enabling Talent

Companies are constantly in need of highly talented employees, which means CRE executives are focused on delivering an environment that serves as an effective tool for attracting, engaging and retaining high-performance workers. Above is CBRE's Chicago office. 

It's a challenge. Demographic shifts have introduced a workforce that is more generationally, culturally and ethnically diverse than ever before. As a result, the industry must plan for the unique needs and preferences of a workforce that includes a rising generation that hasn't spent years waiting for the corner office.

Rather, the new worker strives to connect, integrate and find community among peers in a world that is increasingly online. Their ideal environment breaks down the walls previous generations spent years putting up.

Among survey respondents, 57% see employee attraction and retention as a main driver of workplace strategy. This includes linking CRE, HR and IT missions to deliver distinctive environments that emphasize brand, deliver true functionality, provide freedom of work style and promote connectivity among employees. Also, talent can drive a decision to relocate—half of respondents make location decisions based on talent availability.

Pictured below: CBRE's Glendale, CA, office.

Managing Cost and Economic Uncertainty

Cost emerges as a leading decision-driver at the building level and is used effectively to position companies within the market. Where possible, companies benefit by “saving in place.” With low availability in play across established markets, creatively restructuring leases and floorplates can optimize occupancy scenarios, both functionally and financially.

In the past year, a whopping 85% of survey respondents employed space restructuring as a lever to impact cost and improve efficiencies. Worries about cost vary by industry sector. The survey found cost pressures in the banking and finance sector are widespread, and managing these pressures in the face of economic uncertainty is top-of-mind for those executives.

Tech and telecom sector respondents echoed the sentiment that “skilled labor shortages” remains a top area of concern, tied with “cost escalation” as the two most prevalent challenges for this sector (55% of respondents each).

Respondents also were concerned about the economic uncertainty that could impact their businesses—but again, it worries some sectors more than others. Only one in four tech and telecom executives ranked “economic uncertainty” as a high priority among the external challenges they face. Instead, their concerns focused on “talent” and “cost escalation,” which comes as no surprise given the health of gateway cities—the areas most likely to be targeted by tech companies.

One can certainly wonder whether potential overconfidence within the tech sector represents risk as 2016 goes forward. With market commentators frequently discussing a possible tech bubble, observant economists are closely watching an unprecedented herd of tech “unicorns”—private companies valued at $1B or more—that are introducing disruptive technologies.

As growth in this area is known to be largely driven by investor funds, the long-term viability of many of these unicorns should be closely watched as investors demand invested capital convert to recurring and long-term customer revenues. This is important not only for the tech industry, but also for the many industries relying on the products and services tech firms create.

Pictured below: CBRE's San Diego office.

Finally, according to the survey, 51% of respondents are seeking to improve C-suite sponsorship to support corporate real estate strategy. CRE management teams have evolved into lean, strategic teams that recognize the value of better analytics and leveraging internal and external partnerships as they focus on enterprise goals.

Whether it’s retaining and recruiting talent, promoting workplace culture or realizing greater efficiencies, these challenges call for a strategic partner that understands how real estate can influence workplace environment, the bottom line and everyday operations. Real estate isn’t simply “a space to work”—it’s room to create the competitive advantage that businesses need to realize greater success.