The Leader - July/August 2008 - (Page 8)

Message froM the ceo by prentice knight, iii economic downturn: challeNges aNd opportuNItIes It is clear that the United States is now in an economic downturn. Debate continues, however, about how long and deep the U.S. downturn will be, as well as the economic outlook for the rest of the world. I recently attended a program that included a presentation by Dr. Ray Torto, Global Chief Economist for CB Richard Ellis. Dr. Torto went through his typically rigorous economic analysis and concluded that “while the global economy has slowed dramatically from 2006/07 rates, this is not and will not be a deep contraction in 2008.” He believes that the economic slowdown – both in the U.S. and globally – is likely to be short and shallow. The audience – made up of senior corporate real estate and investor executives – had a robust debate about Dr. Torto’s conclusion. The majority generally agreed with the “short and shallow” projection, but a significant portion of the audience argued strongly for “long and shallow” and a smaller group said “long and deep.” As I write this I note a recent quote by Warren Buffet saying that the U.S. is in a recession that “… will be deeper and longer than what many think.” Thus, as is typical in times of economic change, different views abound regarding the economic outlook. In response to this uncertainty many corporations have started cutting costs and delaying investments. Corporate real estate (CRE) management is feeling that pressure. Cost cutting is nothing new for CRE management, but another round of deep cost cutting is a challenge for those groups that picked the low hanging fruit long ago. Traditional cost reduction measures – such as restricting travel, reducing service levels, putting the squeeze on service providers – are being applied with newfound vigor, but diminishing returns have set in. While we work on cost cutting, we also must remind ourselves that threats often create opportunities. Some opportunities arise from the softening of the real estate and labor markets. Asset prices are dropping and more good talent is becoming available due to job displacements. Some CRE executives report success in getting approval of strategic business cases for investments in good assets and talent that are now available and more affordable. Other opportunities are created by the strategic use of staff time that may have opened up due to the slowdown in project activity. I have talked to a number of CRE executives who are carving out time now to do a fundamental assessment and redesign of organizational and portfolio strategies. They want to be positioned for longterm success when the economy turns upward again. But the greatest opportunity may come from a greater willingness of some senior business executives to try different approaches during periods of economic stress. CRE management has a huge opportunity to influence company success more profoundly that ever before, by helping reduce costs, increase flexibility, attract and retain talent, reduce energy use, reduce environment impacts and promote productivity. The opportunity is to combine alternative workplace strategies, sustainability initiatives and strategic portfolio strategies in a much more fundamental, holistic and integrated way. This opportunity will require changes in how companies think and work, but this may be just the time to press the opportunity. One final point: Peer-to-peer networking about ideas, innovations, experiments and successes/failures are particularly important during times of economic stress. I encourage you to take maximum advantage of the learning and content networking opportunities available to CoreNet Global members during this time of economic change. the le ade r 8 J u ly / a u g u s t

Table of Contents Feed for the Digital Edition of The Leader - July/August 2008

The Leader - July/August 2008 Leadership Contents Message from the CEO Real Estate in the News Organizational Design Accommodating Growth Responding to the Challenge EMEA's Building Energy Rating TVA's Shortcut to Success ANZ Banking Group’s Jane Hamilton Tractus Asia’s Dennis Messeroll Arizona’s Greg Weiner Workplace Design Workplace Directory The Texas Report Industry Tracker Discovery Forum Findings Career Development Congratulations to 2008 Corenet Global Award Winners! Young Leader Economic Development in the News Connect with Corenet Global A Look Ahead

The Leader - July/August 2008

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