NEW DELHI: India remains a top expansion destination for corporate real estate occupiers, along with South East Asia and China, reveals the newly launched Asia Pacific Occupier Survey by property consultancy CBRE.
It also points out that cost management and employee engagement are key issues for multinational corporations today.
“Asia Pacific remains a key growth market for multinational companies but the economic slowdown in China is ushering in a period of more cautious business expansion. This is necessitating the formulation of more complex and sophisticated corporate real estate strategies,” said the survey.
Dr Henry Chin, head of research at CBRE Asia Pacific says Asia Pacific’s economic growth still outpaces EMEA and the Americas.
“Despite the short-term volatility and softening business sentiment, the medium to long-term outlook looks positive for the region, and still provides opportunities for multinational companies. Southeast Asia and India will be the main focus of portfolio growth driven by solid economic growth and rapid demographic changes in these markets. Companies remain positive towards expansion in China but it will be relatively moderate in the coming years,” he said
In spite of current challenges, multinational companies still retain strong hiring intentions. According to the survey, 42% of CRE (commercial real estate) executives reveal they plan to increase their regional headcount over the next three years.
Anshuman Magazine, managing director of CBRE, South Asia said, “The latest CRE trend noted among multinational corporations is the re-distribution of headcount from other regions to Asia Pacific for cost saving. Many occupiers have been seen downsizing operations in high cost locations, while expanding back offices in Asia Pacific. Markets benefitting from this trend include popular Business Process Outsourcing (BPO) hubs such as India and the Philippines, where operating costs are low and availability of talent is high.”
Among the main factors driving location and building selection decisions, around 70% of respondents of the survey said real estate costs were the top priority, and this, along with the more cautious approach to expansion, is informing portfolio strategies and location choice.
“In light of the ongoing economic slowdown and financial market instability, occupiers will need to manage short-term economic volatility when formulating their CRE strategies. And with a more cautious approach to business expansion, we expect multinationals to focus more on optimizing their existing portfolios, for example through cost control and talent management, rather than expanding their footprint,” said Dr Chin.
Space efficiency was identified as the most popular initiative to reduce occupancy costs (55% of respondents), closely followed by lease negotiation (40%). Increased scrutiny of CAPEX and fit out costs means that the previously popular strategy of relocation to decentralized or emerging areas may have lost some of its appeal as a cost-saving measure, and was highlighted by only 23% of respondents.
The survey found that drivers of workplace strategy are changing. It found that better collaboration with customers, colleagues and coworkers is now the key reason behind implementing workplace strategy (58%), closely followed by cost savings (53%). The emphasis on increasing employee productivity (47%) is also driving the development of workplace strategy.
“Many multinationals initially implemented workplace strategy as a means to improve space utilization with the aim of reducing costs. However, this way of thinking is now changing, as more companies look to strike a balance between reducing costs, improving productivity and enhancing the overall work experience for employees,” said Phil Rowland, Chief Executive Officer, Global Workplace Solutions, CBRE Asia Pacific.
With employee satisfaction as one of the key factors for evaluating business performance, workplaces are increasingly offering a wide range of amenities to enhance performance and improve employee retention, said the survey. “Accessibility, provision of facilities and services, indoor environmental quality and flexible working are rated as some of the most important factors to employees.”
Credits ET Realty