Week of April 1, 2002
Snapshot from the Field
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E&Y Global Survey:
42% of Firms to Expand in Next Year
NEW YORK A strong surge in business expansion, along with greater emphasis on corporate facility security:
That's a big slice of the post-Sept.-11 real estate universe that's limned in a new Ernst & Young (E&Y at www.ey.com/us/realestate) survey released at March's MIPIM show in Cannes, France.
Conducted in February, E&Y's survey depicts a real estate universe often strikingly at odds with many of the doomsday predictions made in the aftermath of 9/11's terrorist attacks.
Consider the sluggish post-9/11 business expansion pace that many analysts predicted. Instead, many companies are bullish on expansion, according to the results of the study, Trends in Global Real Estate Survey: The Latest in Technology, Security and Corporate Real Estate Strategy.
Specifically, 42 percent of survey respondents said that they planned to expand their businesses and acquire or invest in additional real estate during the next year. And almost 40 percent plan to maintain the amount of real estate they currently occupy - twice the number who said they expected to vacate real estate they currently occupy.
"It's clear that facility expansion is on the minds of many global corporations," said Mark Smith, managing partner of E&Y's New York-based Global Real Estate Advisory Services practice. "What remains uncertain is how robust this next stage of expansion will be."
33% Expanding Globally
E&Y's results counter the post-9/11 global location freeze that some predicted. Instead, some 33 percent of respondents indicated that they plan to move ahead with expansion into new countries "in the next few quarters."
"Overall, the survey reveals a far more positive attitude toward many aspects of the global economy than most corporations were showing in the immediate post-9/11 period, and there are some positive indicators revealed here for the real estate sector," said Smith.
On one hand, the survey found significant aversion to locating in a high-profile building like the World Trade Center. Approximately one-third of corporations responding to the survey indicated that they would be less likely to lease space in such high-profile structures "as a direct result of the Sept. 11th attacks."
On the other hand, the survey found little evidence of the widespread employee diffusion frequently predicted in 9/11's wake. Eighty-five percent of responding companies said that their employee concentrations would not be affected by Sept. 11's events. That result, in turn, indicates that most companies are not currently planning an exodus from central business districts.
"All this suggests that real estate investors around the world - many of whom also participated in the survey - may be on point when they unanimously indicate that they have made little or no change in their investment strategy as a result of 9/11," said Dale Anne Reiss, E&Y global industry leader, real estate.
"While high-profile buildings around the world may have slipped in some tenants' eyes," she added, "at least for the time being, real estate investors in the world's biggest cities seem to be confident that the overall impact on their investment strategy will be minimal."
Security Gets 'Board-Level Interest'Minimal, however, is not the word for senior management's post-9/11 interest in security, the survey found. Some 65 percent of respondents reported "board-level interest" in security issues at their firms. So far, however, that interest has translated into little actual action. Only 4 percent of respondents said that their companies had "committed additional expenditure to physical security."
That, however, doesn't mean that Sept. 11 won't spur increased security spending.
Almost 50 percent of respondents, for example, said that they believed that additional security spending was necessary. And about 50 percent said that their firms were in the process of evaluating where new security funding would be spent.
Technology: Slow Industry UptakeTechnology adoption was another focus of the E&Y survey. What the survey found was a continuing lag in embracing new technologies in much of the real estate industry. "Several technology applications - such as enterprise-wide technology solutions, handheld devices and even Computer-Aided Design Systems (CAD) - have failed so far to penetrate most corporations," the study said.
Online procurement is another technology that hasn't made a huge dent in real estate, the study found. Only 31 percent of survey respondents reported that they were utilizing Web-based systems to procure commodity items for their facilities.
The survey found an even more feeble pulse in the adoption of technology for executing real estate transactions. Only 15 percent of respondents reported that they had used the Web to pursue such transactions.
In other words, the Internet-powered disintermediation of brokers that many predicted simply hasn't yet come to pass, the survey indicates.
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