The Leader - January/February 2009 - (Page 8)

message from the Ceo by prentice knight, iii adapt and succeed together in a Challenging economy survive and thrive together in 2009 What many of us have felt for months is now official: The National Bureau of Economic Research recently announced that the United States has been in an economic recession since December 2007. The economic downturn is spreading rapidly around the world. As I write this article in early December 2008 the consensus among economists and the business world is that the recession will be wide (across most sectors and all global regions), deep (more economic decline before we reach the bottom of the cycle) and long (at least into 2010). Although there is consensus that this is a significant recession, there is huge uncertainty about just how bad it will get. As a result companies are very cautious and risk averse in planning for the next 12 – 18 months. The key questions for us now are how the economic downturn will influence our industry and how we should respond. At the CoreNet Global Orlando Summit in early November we surveyed attendees on these questions. At that time 44 percent of the end users said their corporate real estate (CRE) operating budget would be cut for 2009 compared 2008. Most of the other end users expect their 2009 budget to be about the same as 2008, but many reported that the outlook within their companies is changing almost daily. Most end users also reported a slowdown in capital projects already underway and essentially a freeze on new capital projects. In talking with CRE professionals around the world, I hear three types of responses by end users to the economic environment. Cost Reduction / Management: Travel reduction and hiring freezes have already been put in place by the majority of CRE departments. Many CRE organizations are also taking a fresh look at their real estate portfolio to find new opportunities for cutting space and cost. CRE service providers report a large number of inquiries and RFP’s from companies investigating greater outsourcing. Risk Management: I am now finding more CRE executives addressing risk and risk mitigation strategies for a highly uncertain economic environment that has the potential for getting much worse. What happens if a landlord goes bankrupt or out of business – particularly if the tenant is an important business unit activity? Service providers large and small are under a huge amount of stress. What is the risk to end users if their service provider goes out of business or is acquired during very unstable economic times? Opportunities: The adage that threat creates opportunity may be overused but is fundamentally true. Many CRE executives are proactively searching for the opportunities created during a period of economic stress. This includes getting approval for key initiatives – such as mobile work and integrated workplace strategies – that may reduce cost and mitigate risk, acquiring key property assets at wholesale prices, restructuring lease terms, hiring talent that would not normally be available, and taking a fundamental look at the CRE organization to improve efficiency and effectiveness and to position for growth when the turnaround comes. On the supply side of CRE property and services, might a deep and long recession cause a fundamental restructuring of the provider industry? Most CRE real estate portfolios are made up of leased space, and most CRE services work is now done by providers. Understanding the stresses and potential changes within the property and service provider industry is an important part of assessing risks and opportunities for real estate end users. What role should CoreNet Global play during this period? Sharing knowledge and experiences, collaborating, networking, and supporting one another are particularly important during times of threat and uncertainty. For this reason CoreNet Global is aligning its programs, activities and communication around a theme of “Adapt and Succeed Together in a Challenging Economy.” We will convene our industry around this theme to address challenges and opportunities as a community of professionals. Stay tuned for more. Together we can survive and thrive through the downturn and position ourselves for growth on the other end. 1 2 3 2 0 0 9 th e le ade r 8 January / february

Table of Contents Feed for the Digital Edition of The Leader - January/February 2009

The Leader - January/February 2009 Contents Leadership Message from the CEO Real Estate in the News Mergers and Aquisitions Assessing Green Building Performance Measuring Space You Actually Use Global Trends in Sustainable Real Estate Whirlpool’s Lee Utke Northmarq’s Kevin Farrell Plastics: Hoping for Resiliency in Resins Regional Profile: Heartland Holding Strong Industry Profile: Ascendas Brings New Age Business Space to Asia-Pac Industry Tracker From the Applied Research Center Discovery Forum Findings Capital Corner Career Development Young Leader Economic Development in the News Learning Spotlight Connect With CoreNet Global Index of Advertisers A Look Ahead In our Next Issue Calendar of Seminars

The Leader - January/February 2009

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