July 16, 2013
Corporate Real Estate executives predict strong global economic outlook
The global economic outlook is strong for the second half of 2013, while the prospects for corporate growth and expansion are also increasing, according to the views of corporate executives surveyed in June for the new CoreNet Global Confidence Index. Nearly two-thirds (62.5%) rated their outlook on the global economy for the coming six months as optimistic to very optimistic, compared to a year ago. Most (72.4%) reported the likelihood that flexible, open workplace strategies will increase, while space per work setting and/or work settings per supported worker will be reduced.
The first index rating is 4.65, based on a scale of 7 with 7 representing an extremely optimistic environment. Professor Black, who led the design of the Confidence Index model, characterized its first outcome as “a classic case of corporate economic resiliency following the challenging overhang of 2009.”
Executives in the CoreNet Global survey ascribed high confidence levels to the likelihood of their companies’ growth for the second half of 2013. A strong majority rated their confidence levels in the prospects for business expansion as optimistic (54.2%), very optimistic (14.6%), and extremely optimistic (4.2%). One-fifth (20.8%) were neutral on the question, while less than a tenth (6.3%) expressed pessimism.
Internal corporate business factors relating directly to the size, cost and location of massive real estate and workplace portfolios provide the basis for the rating of confidence levels of the executives who directly influence the growth and contraction of corporate property holdings.
“As a leading professional association for CRE executives, CoreNet Global is projecting the demand for office, industrial and other types of corporate real estate and correlating those internal business conditions to prospects for economic and business growth that, in turn, have direct impact on the wider economy,” said CoreNet Global CEO Angela Cain.
Key findings of the first CRE confidence measure include:
- As part of the trend reflected by the index, almost three quarters (72.4%) indicated that market entry, new products, mergers and acquisitions, and on-shoring will drive growth. Opportunities to improve cost performance by relocating are also viewed as likely growth drivers by over half of the executives responding (52.4%).
- The availability of capital to fund real estate portfolio growth is not regarded as a limiting factor with almost two-thirds (62.6%) expecting sufficient levels of financial capacity and affordability for changing the size of the portfolio.
- A move to higher-quality work spaces could occur (40.4%) because of poor-quality spaces that do not support contemporary work practices.
- Many CRE executives (62.5%) have increased the flexibility of their lease-hold strategies, saying it’s unlikely that tenure constraints will prevent changes. One outcome is they now have the ability to trade off under-performing assets for more productive facilities on an on-demand basis.
- Respondents also identified two limiting factors. One is surplus space, with half (50%) indicating some degree of misalignment between employment levels, unoccupied space and the growth rate of the company. Another limiting factor is continuing cost management pressure (35.5%).
The index is a new macro-economic measure based on the viewpoints of corporate real estate (CRE) executives and has been developed in conjunction with Dr. Roy Black, Director of the Real Estate program at Emory University’s Goizueta Business School in Atlanta. The index methodology is informed quarterly by the direct polling of nearly 90 CoreNet Global Corporate Partners, comprised of an economically-diverse mix of multinational companies. Corporate Partners manage real estate portfolios that typically range between 2-million square feet and 110-million square feet globally.