So today’s the day. After spending yesterday rediscovering the sheer sense of awe that the Golden Gate Bridge brings whenever it comes into view, I am in the (time) zone. I am now ready to give my read on the current state and future prospects of the EMEA occupational markets to more than 250 CRE leaders as a panel speaker at the CoreNet NorCal (Northern California to the uninitiated) Global Market Review.
Before I take the stage, my first challenge is to find my way, unaccompanied and unscathed to the venue for today’s event. I have hired a car. I have to confess that the notion of driving on the wrong (or if you prefer right) side of the road is making me anxious. Common sense prevailed as the Avis representative tried to up-sell me a 5 litre Mustang. More fun he said. I’m sure it is. Call me unadventurous, but I will sacrifice fun to reduce fear. My 1.4 litre Kia Box (it’s not called a Box, but that is a far stronger reflection of what it is than the actual model name) will suffice. Next stop, Electronic Arts in Redwood City. Sat Nav estimates a 25 minute trip.
As I enter downtown Redwood City I drive through an archway complete with the slogan “Climate Best By Government Test.” It is a reflection of the findings of research undertaken by the US and German governments prior to WWI which saw the city tied with the Canary Islands and North Africa’s Med coast as having the world’s best climate. Today is certainly pleasant and a lot warmer than a snow-bound London, but is by no means tropical.
Much of this markets heat I suspect derives from its roll-call of tech-companies who have made Redwood home. As well as Electronic Arts, the city also boosts Oracle, EverNote, BroadVision and PDI/Dreamworks as resident powerhouses. Back in the late 1990s, this place was also home to games giant SEGA before they relocated to San Francisco. Both EA and SEGA are at the media or content end of the TMT spectrum. It’s a space that is both competitive and fast moving. As if to prove the point, this very week Atari (well known to anyone reading this aged over 30) filed for bankruptcy here in the US.
This connection with climate and change is pertinent. A year from my debut at this event, the central thrust of my argument is that EMEA, whilst no means basking in pure sunlight, has started to emerge from the dark clouds of recent years. My argument in simple bullets goes as follows:
- Confidence remains fragile and has held back occupiers in the market
- The economic situation is equally fragile but is showing encouraging signs of improvement given strong intervention from European institutions during H2 2012
- Conditions are set for improving corporate confidence and activity with momentum gathering from H2 2013.
- This activity will increasingly be focused on driving occupational and portfolio transformation
- This will quickly erode limited quality supply in EMEA’s real estate markets and this will be accentuated by a slower supply side response than witnessed during traditional cycles
- This in turn will lead occupiers to be exposed to increased costs – either rising headline rents associated with the dearth of quality supply or the run costs of taking compromised space
- All of this will focus ever more attention on investing in and implementing new workplace programmes and strategies
Most in the audience acknowledged the evidence and welcomed the outlook. One fellow panel-member however took a more bearish view into their regional overview arguing that event risk in EMEA was at least as twice as high as a year ago. It led to a good debate. But I remain convinced that while there are some further grey clouds that need to dissipate, a positive change in climate is upcoming and will drive corporate occupiers to new strategies and activities.