Bob Dylan was 70 last week. I have to confess I was never bitten by the Dylan bug even as a destitute (some might even say desperate) student. But those of you who have listened to my quarterly market updates will know that I do have a penchant for describing market conditions via song titles or lyrics and that’s where Dylan comes in – for The Times They Are a-Changin.
Our latest view of the occupier markets across EMEA presents the greatest shift in mood and metrics for 18 months:
- Corporate confidence is high and is now converting into real activity across the regions real estate markets
- After a prolonged hiatus, the word ‘expansion’ has returned to the CRE lexicon and is shaping demand notably, but not exclusively, in Germany and the Nordics
- Coupled with efforts to upgrade to high quality space, this expansionary demand is placing tremendous pressure on a development pipeline that will deliver 30% less space than the 5 year average
- Pre-letting has emerged as a strategy of necessity for many occupiers.
- Rents are at a tipping point with 35 of the 60 markets covered in our report positioned at or beyond 6 o’clock on the office property clock and therefore bringing rental increases to occupiers
- As markets exit the bottom of their cycle landlords are, unsurprisingly, toughening their stance by reining in incentives and driving a harder deal
But of course Dylan’s song was not about cyclical change. It was about significant, radical and lasting change. It was about the arrival of a new era. It was about thinking differently for the future. Such a seminal change is occurring in corporate real estate right now and as a direct consequence of the global financial crisis. It is change that drives a rethinking of the modus operandi, structure and status of CRE teams and changes the nature of requirements in the market place. It is change that leads CRE teams to
- Seek more productive workplace solutions
- Strike a difficult balancing act between supporting (but challenging) growth plans whilst managing the pressures and mitigating the costs of rightsizing
- Increasingly call upon the support of outsourced service providers to add capacity or capability or both
- Reshape and refocus the team itself towards strategic engagement rather than reactive service delivery
So heed the call. The markets will present real challenges for corporate occupiers as the trends of the first half of the year intensify. But there are bigger challenges facing the CRE community and it is these, rather than market dynamics, that will most shape behaviour and requirements in the market.