Opportunity Emerges from Crisis

Global Corporate Real Estate Survey 2011

Welcome to Jones Lang LaSalle's inaugural Global Corporate Real Estate Survey, undertaken in partnership with
Thomson Reuters. This is the first global report designed to provide insight into the future path, challenges
and opportunities facing CRE. With over 500 CRE executive respondents globally from 36 countries, this survey
has captured data not previously presented in any of our research. The survey pointed to four overarching
global trends impacting the future state for CRE teams and these are highlighted below. We hope you find
this information valuable and welcome any feedback.

Stuart Hicks
Americas

John Forrest
Asia Pacific

Vincent Lottefier
Europe, Middle East
and Africa

Balancing the dual force of growth and right-sizing. Podcast by Vincent Lottefier

Progessing towards partnerships Podcast by John Forrest

Reshaping CRE structures and skills Podcast by Lee Elliot

Higher demands on productivity

CRE teams are required to be more relevant and resourceful, enabling CRE leaders to further enhance productivity and efficiency

Having been placed in the eye of the storm during the global financial crisis (GFC), CRE teams now experience more scrutiny from internal stakeholders, increased demand for real-time reporting, and tougher performance targets. This should help CRE teams be better prepared to address returning growth, as well as the continued uncertainty in the financial sector.

Driving improved productivity via the implementation of more strategic real estate initiatives will define best-in-class CRE organizations. A shift from short-term, survival motivated tactics towards medium-term, strategic initiatives aimed at driving productivity enhancements is both possible and required.

Scenario	Has not and will not happen	Has not happened but will in the next 3 years	Has partly happened	Has happened to a large extent
The likelihood of transformation scenarios in the CRE function post GFC
CRE function gains greater visibility and ability to influence business decisions	7%	8%	42%	43%
CRE function is placed under greater scrutiny by the wider business	10%	9%	45%	36%
CRE function has far greater visibility and engagement with senior business leaders	4%	4%	40%	51%
CRE function has greater and earlier insight into potential changes to the wider business	6%	12%	48%	34%
CRE function is given more difficult targets / key performance indicators	6%	12%	38%	43%
CRE function is called upon to report more frequently on portfolio status / issues	11%	14%	36%	39%
CRE function is charged with reworking the CRE strategy	10%	15%	34%	40%
CRE function is tasked with enhancing portfolio data and understanding	8%	11%	34%	47%
CRE function is required to be able to articulate the true costs of the real estate portfolio to the wider business on demand	5%	17%	34%	44%

Balancing the dual forces of growth and right-sizing

CRE organizations are exposed to complex targets, such as dealing with the contrary pressures of growth and right-sizing
Summary

Key statistics

CRE implications

Charts
Charged by corporate leadership to deliver sizeable cost savings, CRE teams embarked on a series of short-term tactical real estate plays focused exclusively on driving direct cost savings from real estate portfolios. This forced a step change in the form, function and structure of the CRE organization’s engagement with leadership.

A key challenge for CRE teams will be to deliver a platform that enables the business to pursue select growth opportunities, often in markets that lack transparency, while simultaneously right-sizing CRE portfolios within mature markets.
39% forecast global real estate portfolio growth over the next three years; 31% predict a reduction

Net growth projections are strongest in North Asia (60%), Latin America (34%) and Central & Eastern Europe (34%)

63% of finance sector respondents are forecasting growth in North Asia

The technology sector is also predicting portfolio growth in North Asia (67%), Latin America (44%) and SE Asia (44%)
The varied global growth trajectory does not lend itself to a ‘one size fits all’ approach and CRE leaders will need to be selective, innovative and run a number of strategies in parallel.

CRE leaders will need to ensure teams are effectively structured and skilled to tackle the twin requirements of driving growth and right-sizing.

Emerging and opaque markets will challenge CRE teams to build a knowledge base quickly. Understanding of market practice, orthodoxies, and conditions will be essential for CRE teams to present deliverable options to their business, be able to communicate risks and give guidance on realistic lead times.
Note: Respondents provided views on likely portfolio growth at a sub-regional level. Results therefore mask clear differentials within subregions and are often influenced by the presence of a strong emerging market. Projected growth in North Asia, for example, will be influenced by the rise of China and does not suggest similar levels of portfolio growth in Japan.
Progressing towards partnerships

CRE teams are moving towards more sophisticated partnership models
Summary

Key statistics

CRE implications

Charts
To meet the challenges of the next three years, CRE leaders will need help from outside. Evolution along the outsourcing curve will be necessary to provide capacity for CRE leaders to elevate within the organization.

For those already engaged with the market, a re-evaluation of existing partnerships with key service providers may be undertaken to ensure value and benefits are being extracted to the satisfaction of higher levels of the organization.
23% cannot articulate their likely model of CRE services three years from now

67% currently deliver CRE services via a hybrid model – this will rise to 70% over the next three years

24% deliver CRE services entirely in-house ― this will reduce to less than a fifth over the next three years

9% currently adopt a fully outsourced model of service provision, rising to 11% by 2014 ― 70% will do so via an exclusive partnership arrangement

41% of those adopting a hybrid delivery model outsource property management; 34% also outsource transactional services

72% of those adopting a hybrid delivery model retain portfolio strategy work in-house
Undertake a skills audit of your existing real estate team. Identify gaps in your capability to respond to tasks given by your stakeholders.

Consider relationships that share goals and risks as well as rewards where you can achieve a true alignment of interests. Be clear on what you need from your service provider both now and in the future and undertake a thorough review of what the market can offer.

Evaluate current relationships in terms of the value delivered to ensure that the relationship remains relevant to immediate circumstances and future strategy.
Reshaping CRE structures and skills

A new talent requirement is emerging, resulting from a tougher operational environment, forcing CRE leaders to rethink team structures and skills
Summary

Key statistics

CRE implications

Charts
CRE teams were exposed during the economic uncertainty as the C-suite gained a better appreciation of real estate fundamentals and the costs associated with real estate portfolios. While this presents new, tougher challenges for CRE teams, it also creates an opportunity for greater engagement.

CRE leaders should consider re-evaluating their existing teams and skills. They must be prepared to redesign team structures in order to reduce focus on tactical (more easily outsourced) activities. Greater attention on driving sustained relationships with business leaders will facilitate better long-term alignment between business and CRE strategies. Either by up-skilling existing staff or acquiring fresh talent CRE leaders should broaden the set of skills residing in their organizations today.
63% now have a direct reporting line into the C-suite

73% say the CRE function will become highly centralised, driven by a core regional or global team within three years

31% have seen no further investment in the CRE function since the GFC and do not anticipate this to change

41% saw no reduction in CRE headcount during the GFC and do not expect future cuts

24% anticipate their teams will undergo talent upgrades within the next three years

74% have turned to service providers for innovative solutions to challenges emerging out of the GFC; a further 15% expect to do so within three years.
Identify other sectors outside of real estate that have a need for the types of engagement and relationship management skills required – bring in new thinking and methods to elevate the existing team.

Generate a long-term plan for the evolution of the CRE team that supports and facilitates broader business growth strategy, anticipates needs and delivery constraints, and ensures that capability is aligned with changing needs. Post a skills audit to identify skills and capability gaps, and drive required change within your team so that core requirements are prioritized.

As non-real estate professionals take the helm, there is a need to raise their understanding to ensure that CRE is accurately represented at board level. Be able to summarize issues facing your portfolio, your team and your ability to deliver.