What Today’s Corporate Leaders are Focusing On
It’s not an easy time for C-suite executives. They must contend with continued fallout from the COVID-19 pandemic, destabilization from international conflicts, major economic pressures, and political volatility. How are these concerns influencing business strategies and real estate decisions? Several experts offered insights based on their recent interactions with corporate leaders:
HUMAN CAPITAL AND SPACE UTILIZATION
Long after the lockdowns, C-suite executives are still struggling to strike the right balance between employee flexibility and business productivity. “The vast majority of executives I talk to want their people back in the office,” says Peter Billmeyer, SIOR, co-founder and CEO of Bespoke Commercial Real Estate in Chicago. But he notes that many executives are striving to sweeten the deal for reluctant employees by offering appealing workspaces. As he suggests, “Businesses are atoning for the pre-COVID-19 mistakes of density and treating teams as if they were numbers on a spreadsheet versus human beings.”
“For many executives, the question is no longer how much space they need but what kind of space will attract and retain top talent,” reports Arnaud Syoën, SIOR, director of real estate at Eight Advisory in Paris, France. He views the growing popularity of hotel-like services in office buildings as a reflection of efforts to make offices more desirable and, in a sense, competitive with the home.
Cory LaDuke, SIOR, an associate real estate broker at CBRE in Syracuse, N.Y., is observing similar trends in Upstate New York, such as attempts to make offices feel more “homey.”
At the same time, executives are keeping a close eye on their real estate expenditures. “All executives are focused on maximizing space utilization, whether that be in the office or industrial sector,” says Street Jones, SIOR, principal of Rich Commercial Realty in Raleigh, N.C. On the office side, LaDuke is seeing companies that wish to expand their footprint try to take advantage of the soft market to secure favorable terms.
Few industrial tenants are so fortunate. As Jones reports, “Companies have been getting hit with new lease rental rates that are double, triple, or even more than what they have been paying and are having trouble stomaching these market changes.” He says that such increases are prompting some industrial occupiers to explore the possibilities of buying real estate, including the facilities they presently occupy as tenants.
For many executives, the question is no longer how much space they need but what kind of space will attract and retain top talent.
ECONOMIC AND POLITICAL ISSUES
Economic challenges are also weighing heavily on the minds of C-suite executives. According to Syoën, executives in France are “deeply concerned about the potential for economic stagnation or recession,” and that such concerns have created an “urgent need for agility in financial planning and risk management.”
Executives in the U.S., meanwhile, are trying to cope with a less-than-ideal environment for financing. Billmeyer points out that interest rates have made corporate borrowing “painful” for many companies. LaDuke is observing the direct effects of high interest rates on decisions surrounding property investments. He finds, for example, that many investors evaluating purchases hope to assume the owners’ existing mortgages, which typically have lower interest rates and better loan terms than those of mortgages available today.
The recent elections in the U.S. made it easier to predict future economic policies, but there are still some unknowns. For example, both domestic and overseas executives are waiting to see whether President Donald Trump will follow through on his pledges for tariffs and to what extent those tariffs will affect trade. Billmeyer expects leaders of manufacturing firms to build some strong contingency plans. He also notes that uncertainty surrounding tax policy is creating hesitancy among investors, many of whom are hitting the pause button.
THE GLOBAL SUPPLY CHAIN
Supply chains have rebounded substantially since the pandemic, but the recent disruptions are strongly influencing strategies of today. Jones says that many industries impacted in 2021 through early 2023 are now focusing on operational security by expanding domestic operations. Such expansions have increased demand for industrial space and contributed to the rise in rents mentioned earlier.
But extra security may justify extra expenses, especially given the potential for future disruptions stemming from international conflicts in places like Ukraine and the Middle East. Syoën observes that in response to perceived vulnerabilities in global supply chains, leaders are “increasingly focused on building more resilient, localized, and flexible supply-chain networks.” Industrial brokers may very well play an important role in this process.
AI AND TECHNOLOGY
C-suite executives can add AI to the list of topics that intensify insomnia. “I’m seeing even technological laggards really working hard to get up to speed on AI,” Billmeyer says. “They’re asking, ‘What is this AI development? How can it help my business? And ‘How can it help me do more with less?’”
According to Syoën, executives are eager to explore ways that AI and machine learning can enhance predictive analytics, automate complex processes, and improve decision-making. But such exploration brings concerns about privacy and bias to the forefront. “With respect to privacy, AI creates new re-identification risks, not only because of its analytic power across disparate datasets, but also because of potential data leakage from model training,” warns Katerina Megas of the National Institute of Standards and Technology. And Scientific American cites studies suggesting that “biased AI can harm people in already marginalized groups.” Worry-inducing indeed.
Stay the course and just keep your head down and chop wood, because if you’re struggling while doing all the right things and still creating great outputs, the market will recognize that.
On a more practical level, the more business responsibilities that AI can assume, the greater the likelihood of streamlined staffing and the more efficient use of space. Brokers will again have a role to play: AI cannot serve as a knowledgeable consultant on such issues – at least, not yet. And, as LaDuke points out, brokers are most valued anytime there is a change in the market. That is when clients need insight and guidance the most.
BROKER RESPONSE
Savvy brokers are adjusting to the ever-shifting business environment, just as the best C-suite executives are doing. Syoën has developed tailored solutions for optimizing real estate portfolios and is focusing more extensively on aligning his clients’ real estate decisions with broader corporate objectives, including talent attraction, operational efficiency, and sustainability goals. He has also added scenario-planning and risk mitigation strategies to his services and deepened his focus on international markets.m
Billmeyer recommends that brokers who are worried about the market should adopt a steady approach: “Stay the course and just keep your head down and chop wood, because if you’re struggling while doing all the right things and still creating great outputs, the market will recognize that.”
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