Creating Resilience

Aligning Macro Trends, Enterprise Priorities and CRE Strategy in a Dynamic Market

By: Mary O’Connor

August 15, 2024 3 Minute Read

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Corporate real estate (CRE) executives often say their best advice for their peers is to align CRE strategy to corporate goals.

They can do this by addressing questions like:

  • Is the company in a growth cycle? The CRE department can support business lines with setting up operations in new markets.
  • Is the company in need of cash for M&A? The CRE department can monetize owned assets.
  • Is there a tight labor market? The CRE department can create a workplace environment that acts as a magnet for talent.

The challenge is to be proactive in getting ahead of the ask. The world of business is ever-changing, extremely dynamic and in need of fast solutions. Unfortunately, real estate is a function that has not been known for speed: leases represent multi-year commitments and capital projects require long lead times.

At our recent EMEA Symposium, CBRE Institute explored connecting the dots between the macro trends that impact corporate goals, and the subsequent demands on the CRE department.

Macro Trends

Let’s start with a view of what’s going on in the world today.

Economy: Interest Rates, Inflation, Growth

Global Trade: Deglobalization, Supply Chain, Tariffs

World Conflicts: Israel, Palestine, Ukraine, Russia

Geopolitics: Elections, Regulation, Allies, Environment

Artificial Intelligence (AI): Machine Learning, Generative AI, Data

The need to tame inflation has resulted in high interest rates, slowing growth and increasing difficulty in securing capital.

Economic uncertainty is coupled with a geopolitical environment of deglobalization, growing trade conflicts and continued world unrest.

Meanwhile, artificial intelligence (AI) is promising to transform the world as we know it.

These macro trends are influencing strategic decisions of global companies.

Whether it be changes to supply chain strategy, increased cost of raw materials or even deglobalization, these considerations are pondered in boardrooms around the world.

Enterprise Priorities

The C-suite’s focus includes key priorities shared by virtually every corporation: financials, talent, differentiation for success and risk.

Financials: Growth, Cost Savings, Cash Flow, M&A, Access to Capital

Talent: Attract, Retain, Inspire

Brand and Differentiation: Culture, Image, Workplace, Innovation

Risk: Financial, Talent, Brand, Operations

Financial success is certainly necessary for endurance. Companies are balancing the need for cost savings with the desire for organic growth and M&A, which is ever more complicated when interest rates are high, limiting access to capital.

A tight labor market and shrinking pool of workers make it difficult to attract and retain top talent. At the same time, we have more generations in the work force than ever, and companies must foster a culture that motivates and inspires all.

Companies are optimistic about AI’s promise and are making investments to capitalize on this innovation.

And they must do all of this while balancing risk. The threat to cargo ships in the Red Sea is just one example of global unrest. Potential risk exists everywhere: the fear of a recession, the loss of top talent, a tarnished company brand, downed operations.

Companies must balance key priorities and need all departments focused on enabling overall success.

CRE Strategy

So how can CRE not only enable company success, but be proactive in anticipating the needs of the business?

Occupancy Cost Reductions: Portfolio Optimization, Rent, OpEx, Capital

Workplace Vibrancy: Location, Amenities (e.g. Electric Vehicle Charging), Size, Design

Operations: Data Centers, Labor, Location, Suppliers

Sustainability: Commitments, Roadmap, Compliance & Reporting

Reflect on today’s macro trends and think carefully about each, relative to your company needs.

Be proactive in sharing your future-focused ideas with the C-suite.

For example:

  • Access to capital remains difficult—study the real estate balance sheet for monetization opportunities.
  • Deglobalization is resulting in the need for new workplaces, manufacturing and logistics in home countries—begin scenario planning.
  • Culture, brand and employee engagement all converge in the workplace—prepare workplace strategies for all facility types, and enhance multi-generational inclusion.
  • AI is requiring more and better data centers—explore both established and emerging markets and required natural resources. Consider how these decisions will impact the company’s decarbonization commitments.

Summary

These are just a few examples to spark ideas for proactive strategic planning. Consider all the ways to further align CRE strategy to enable optimal company success.

 

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