Despite Economy, Sustainability, Workplace Alternatives Still Focuses for Corporations

While the poor economy is a necessary consideration for every strategy today, corporate real estate’s recent big initiatives continue to progress. Thus, not only the economy but sustainability issues and workplace advances permeated CoreNet Global’s Fall Meeting in Orlando this week.The United States is in for a severe downturn, according to Jim Costello, principal & director of investment strategy at Torto Wheaton Research, during the economic outlook mega session moderated by CoreNet Global CEO Prentice Knight. Jobs are now being cut at a faster pace than during the early ‘90s recession, Costello noted, and while commercial property actually remains fairly stable, with third-quarter office vacancies still within long-run natural rates and industrial and retail rates not much above their natural rates, he noted that the loss of workers has not yet impacted use of space. As that takes effect, he predicted negative office absorption in 2009 and 2010 that will push vacancies to the 18 percent range. (For more of Costello’s thoughts, log on to CPN Radio’s “Extras” programming.)That said, “when there are changes, it gives you an opportunity to think about things in a new way,” Costello noted, and Jones Lang LaSalle Inc. managing director Kenneth Rudy agreed, pointing out that occupiers can take advantage of the “dislocation” that is now occurring in the marketplace and investors will be able to acquire assets at a deep discount.For the market to recover, though, he emphasized the need for banks to begin lending again, for fuller disclosure and writedowns, for opportunity funds and other new capital, for re-rating securities, for tighter underwriting and for a new regulatory framework.While companies seek their way through this maze, they continue to pursue alternative workplace initiatives, as a joint survey between CoreNet Global and Microsoft Corp. determined. And while cost savings are a consideration when offering employees flexible work plans, attracting and retaining talent and helping to achieve a good work-life balance are much more important, according to Katherine Randolph, director of customer campaigns in Microsoft’s unified communications group. That was despite the fact that the survey of registrants for the Fall Summit was undertaken after many of the recent failures and sales of major financial firms had been announced. Furthermore, the survey found that about half of those offering flexible work plans let their employees decide whether or not to pursue them and 39 percent customize those plans, while just 11 percent take a cookie-cutter approach. Microsoft, which itself began evolving its approach to its workplaces after chairman Bill Gates wrote on the subject in 2006 and then realized its customers were going through the same issues, has found its own greatest success in its Amsterdam office, according to Randolph, who noted that in the three years it has been pursuing the strategy, it has changed the whole culture of working there. It is now looking at expanding the program to Paris and also plans to conduct its survey at each CoreNet Global summit around the world. (For more on the survey’s results, click here.) Susan Mitchell-Ketzes, senior vice president at HOK, offered further thoughts on workplace change management during the Fall Summit. Among them, she recommended taking failed efforts into consideration when determining the next effort, investing enough resources to achieve success long term (and therefore better productivity results) and most of all, remembering that “these projects are not about buildings and places—they are about people.” That means considering cultural issues, communicating repeatedly, addressing what’s in it for the employee, creating realistic expectations and other people-focused steps.Sustainability is also still a strategy despite tougher times, in part due to municipal mandates and companies’ own cost-cutting needs but also because it is now well entrenched, according to green real estate authority & consultant Charles Lockwood. Green will also attract talent, which will be necessary even if unemployment reaches 10 percent, pointed out Peter Miscovich, managing director of strategic consulting for Jones Lang LaSalle, because the retiring of baby boomers will result in a talent shortage. And there will be room in the budget, Lockwood noted, since “you’re going to have regularly scheduled upgrade money in your budget. Use it wisely.”At the same time, there are challenges, including a tendency for companies to cut their newly hired sustainability staffs. Even the European Union is now talking about rolling back some of its policies, Lockwood noted. (For more on this and other sustainability thoughts, log on to CPN Radio’s “Extras” programming.)But Miscovich quoted Intel Corp. co-founder Andrew Grove, noting that recessions are the best time for innoviation and the best time to develop new customers. “Be innovative. Be bold,” he affirmed.