Corporate real estate (CRE) typically ranks among the top operating expenses for businesses. However, companies often neglect to fully optimise their CRE portfolios.
A well-known Latin aphorism – “seize the day, trusting as little as possible in the future” – comes to mind, which may be astute advice indeed for the year ahead.
Drawing upon JLL’s Top 10 Global CRE Trends for 2016 report, here are four reasons why 2016 will be a pivotal year for CRE, and how you can start super-charging your company’s real estate portfolio today:
1. 2016 is likely to witness record levels of M&A activity globally.
Last year, not one, but two consecutive quarters surpassed US$1 trillion in deal volume – a feat not seen since 2000. Following in those footsteps, 2016 looks ready to be an exceptional year for deal-makers as well, with 59% of senior executives expecting to pursue acquisitions. This deluge of expansionary activity will continue to be matched by high levels of corporate restructuring and divestments, presenting an opportunity for corporations to overhaul their operational real estate portfolios.
2. 2016 marks the start of the global lease accounting rat race.
Earlier this year, the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) finalised critical new regulations governing the accounting treatment of leases. These new standards stipulate that all leases with a term exceeding one year must be included on companies’ balance sheets. JLL has predicted that this could result in changes to own versus lease considerations, lease tenure, as well as lease structuring (e.g. moving from fixed to variable rents). Although the effective date is in 2019, all corporations should begin reviewing their real estate portfolios as soon as possible given the momentous undertaking ahead.
3. 2016 is the year “co-working” captures the corporate imagination.
Co-working is well on its way to becoming a real estate buzzword, having just topped Google Trends’ worldwide interest over time charts in April this year. Its allure stems from its promise of a more efficient real estate footprint, as well as heightened innovation through closer collaboration and interaction. This workplace option looks set to revitalise office leasing markets globally, with the number of members utilising co-working space predicted to reach 1 million by 2018. Although typically associated with start-ups and freelancers, larger corporations are increasingly exploring co-working as a way to meet strategic goals as well.
4. 2016 is the year emerging world cities take you by surprise.
And by 2025, they will have transformed your corporate real estate portfolio strategy. According to JLL’s Cities Research Centre, cities of the future are challenging traditional strongholds, potentially housing up to 50% of the world’s billion-dollar revenue firms.
Key ones to watch out for are:
- Bangalore and its flourishing entrepreneurial landscape
- Shenzhen with its attractive liveability amidst China’s environmental degradation
- Hanoi’s outstanding economic momentum against a muted global outlook
In summary, our advice is simply – carpe annum! Seize the year ahead and future-proof your company’s real estate strategy today, by learning more about global CRE trends here.
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