Momentum is building among corporate occupiers at both the global and European levels.
Confidence accross Europe is now at long-run averages and this is beginning to translate into more real estate activity.
There is an on-going desire to upgrade the quality of occupied space, combined with either consolidation strategies or lease events. Since corporate cash balances remain strong, investment is available to follow through. In Q1 2011, the first whisperings of that all important word - expansion - energed in select markets accross the region. This attunes fully with the findings of our recent Global CRE survey, which illustrated the dual pressures of pursuing growth and right sizing.
Corporate occupiers looking to expand their operations in the MENA region are finding that real estate market conditions continue to move in their favour. Across various regional markets, increasing supply is changing attitudes of owners, who now recognise that the balance of power has shifted in favour of occupiers.
Although the position varies between markets, the level of choice available to corporate occupiers is generally increasing. This is providing opportunities for companies to consolidate and expand into new, higher quality premises without increasing their real estate occupancy costs.
Quality remains an issue. Although overall choice is increasing in many markets, the availability of high quality completed space remains limited, leading some occupiers to pre-commit in new developments. The most striking example of this trend is the decision by Standard Chartered bank to pre-commit to a new headquarters built to their precise specifications in Dubai, a market characterised by overall vacancy levels in excess of 40%.
The challenges facing Corporate Real Estate
Securing more attractive space on more attractive terms remains the over arching objective of corporate real estate teams. There were four key trends identified in Jones Lang LaSalle's survey of 500 global CRE leaders, the first ever Global Corporate Real Estate Survey for MENA.
1. Higher demands on productivity: CRE teams are required to be resourceful, enabling CRE leaders to further enhance productivity and efficiency.
2. Balancing the dual forces of growth and right-sizing: CRE organisations are exposed to complex targets, such as dealing with the contrary pressures of growth and right-sizing.
3. Progressing towards partnerships: CRE teams are moving towards sophisticated partnership models with real estate service providers.
4. Reshaping CRE structures and sizing: A new talent requirement is emerging, resulting from a tougher operational environment, forcing CRE leaders to rethink team structures and skills.