Dublin,
03
April
2019
|
09:00
Europe/Dublin

Human Capital Overrides Cost In Driving Corporate Real Estate Strategy Says CBRE

Summary
  • Labour and skills shortages increasingly seen as a key strategic challenge

  • Corporate appetite for flexible space continues to grow

  • 70% of companies intend to raise their level of real estate technology investment

London, 03 April 2019 –Around two-thirds of occupiers rank employee engagement (68%) and talent attraction & development (65%) as being two of the three most important drivers of corporate real estate (CRE) strategy, even ahead of cost-reduction. This is according to the 2019 EMEA Occupier Survey published today by global real estate advisor CBRE.

The report demonstrates that people are becoming more important than ever as drivers of real estate decisions. In last year’s survey cost-reduction was the single most important driver of CRE strategy and employee engagement was fourth but this year, cost reduction has dropped to fourth, employee engagement is second and talent attraction & development is third. In this context, optimising human capital is becoming the overriding aim of occupiers’ property decisions.

Over a third of companies see labour and skills shortages as a key strategic challenge, double last year’s result. In line with last year’s survey, technology disruption (36%) economic uncertainty (43%) and cost escalation (31%) all feature highly as key challenges for occupiers.

 

Paddy Conlon, Executive Director
The challenge faced by occupiers is how to procure, design and manage real estate across different locations, functions and formats in a way that truly optimises human capital. These challenges are particularly acute for certain business functions – notably those that need to attract digital or data scientist talent, which is already scarce and in growing demand across all industry types”
Paddy Conlon, Executive Director

The survey identifies four major levers through which companies are seeking to use real estate as a way of influencing and enhancing their appeal to skilled labour, these include:

Procurement and fit-out strategy: While traditional procurement and fit-out approaches are still favoured when taking large leases in a new building, the survey found that occupiers are increasingly influenced by internal building characteristics. Nearly 60% of occupiers would be willing to pay a premium of at least 10% over typical prime rents for a curated high amenity offer under a service agreement, compared with 46% who would pay a similar premium for a fully-tech enabled smart building.

Flexible space strategy: Corporate appetite for flexible space continues to grow, with the proportion of companies expecting to make significant use of flexible space over the next three years twenty percent higher than those who currently do so. The use of flexible space as a means of attracting and retaining talent is up ten percent from last year. While a rising number of companies are also using flexible space as part of a wider attempt to experiment with different workplace and occupancy models.

User Experience strategy: Formal User Experience (UX) programmes aimed at curating the full range of workforce needs across workplace, amenity and service are still not being widely used. Only around a third of companies have a formal UX programme, or plan to introduce one. However, a third of companies have plans to hire a UX lead and two-thirds would be willing to pay a premium for a building in which the landlord had provided an enhanced UX offer.

Technology strategy: Technology disruption, particularly AI and machine learning is becoming a key driver of technology strategy. 70% of companies intend to raise their level of real estate technology investment in the next few years towards a more people-focussed direction. The methods of acquiring the skills needed to deliver these aims, such as data scientists, are becoming more sophisticated with corporates pursuing a variety of approaches, including outsourcing to specialists.

Sarah Ward, Director
There are clear links between all these different areas of strategy. The challenge for companies is to establish an effective approach to each element as well as identifying the synergies available from combining elements of all four. There may be an experimental element to this process since the best solutions are not always obvious, but in general every effort is being made to invest in the best possible environments to make the existing workforce both more efficient and, where possible, more productive. In an environment where occupiers identify labour and skills shortages as a key strategic challenge, decision-making across a range of issues is increasingly dominated by the need to optimise human capital.”
Sarah Ward, Director

Paddy Conlon adds: “The survey makes it clear that strategies for skills, space and service are converging and should be viewed holistically. This implies the need for much closer collaboration between CRE teams and other business support functions, but does not suggest a one size fits all approach. On the contrary, it is likely to call for highly flexible and adaptable approaches underpinned by a coherent and dynamic data strategy”.

About CBRE

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

CBRE U.C., (CBRE Ireland) registered in Ireland, no. 316570. PSRA Licence No. 001528 is the country’s largest commercial real estate services company with offices in Dublin and Cork. Currently employing over 150 employees, we work with occupiers, investors and developers of office, industrial and logistics, retail, hotel and healthcare property, providing strategic advice and execution for property sales and leasing; tenant representation, corporate services; property and project management; appraisal and valuation; development services; investment management and debt advisory; business rates and compulsory purchase and research and consulting. Please visit our website at www.cbre.ie