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Manufacturing Risk Index
Occupier Strategy Drivers: Global Survey
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Download Occupier Strategy Drivers: Global Survey pdf here.
Importanceof rail station< 10minswalk
53% NORTH AMERICA
85% ASIAPACIFIC (increased)
AsiaPacific continues to demonstrate itsdiversity as a locationof choice formanufacturers, occupying almosthalfof the positionswithin the top 15ofor EstablishedManufacturing Index. Given the varyingmaturity levelof technology adoption andpriorities acrossAsiaPacific, each country in the regionhas a specific focus on areasof innovation topromote sectorgrowth – such as smart manufacturing in the formof automation inChinadue towage inflationor theofferof a connected society and strong conditions fordoingbusiness inSingapore, despite ahigher costprofile.
Index leaderMalaysiahas retained itsfirstplaced ranking.Malaysia’s infrastructure services are conducive toproductivitywith thequalityof infrastructure relativelyhigh,despite some concerns surroundingwater availability andpoweroutagesof late.Whileothermiddle-income countriesmaybe catchingupwith Malaysia in termsof infrastructure standards, a recent reportby theWorldBank* indicated that Malaysia stillhas ahigher rank thanmanyof thesepeers in terms ofoverall logisticsperformance
URBANCREATIVE 40% 32% 56%
SURBURBANPARK 40% 32% 56%
40% 32% 56%
ESTABLISHED INDEX FINDINGS
CRE & STRATEGY ALIGNMENT
in relation toqualityof trade and transport infrastructure.
CBD locations are preferred across sectors
IndustrialTMToccupiers favour suburban businessparks
Creativeurban environments arepopularwithBusiness services and construction and architecture sectors
(40% respondents) mainly real estate companies
*TheWorldBank’s 15thMalaysiaEconomicMonitor report titled “TheQuest forProductivity”
COST-DRIVENDECISIONSOVER STRATEGICPRIORITIES How successful areCREexecutives in translating theirwiderorganization strategy intoday-to-day decisionmaking? Basedon responses toquestionson their perceptionofbusiness challenges,we learn that they’rehaving adicult time transitioning from traditional cost center models tomore strategic resourcemodels that supportorganizationalobjectives. Thedepthof the challengebecomes evidentwhenwe compare theCushman& Wakefield/CoreNetGlobal survey results with thoseof theConferenceBoardCEO Challenges survey.Talentmanagement and innovation are at the topofCEOs’ agenda, so it’snatural to suppose thatCRE strategieswouldbe alignedwith those goals. Instead,occupancy cost tops the list ofCREpriorities, as cost concernsdrive the potential forportfoliooptimisation.
> ForconsecutiveyearsMalaysia topsourEstablished Index rankingas anattractivemarket for locatingmanufacturing facilities > AsiaPacificcountriesoccupy sevenplaceswithin the tophalfofour Established Index > InChina,policieseitherencouragingordirectly funding investments in scienceand technology, technology transfer, sustainability,and infrastructuredevelopmentappear tobehelpingChinese-based companies tocreatea significantcompetitiveadvantage through criticalmass,although the regiondoes face somecompetition from neighboringmarkets > India risesfiveplaceson lastyear -Given thepresentGovernment’s focuson ‘Make in India’ India iswitnessing increasing investmentsby globalmanufacturers. It isanticipated that this increase in investment will further support infrastructure improvementprojects,especiallyas furtherpoliciesand regulationsactually take shape
Similarly, variations in locationpreference are found indifferent industry sectors. InEMEA,67%offinancial servicesfirmsmaymoveoffice functionsback to urban environments,while45%ofTMT sectorfirms are considering the same strategy. InNorthAmerica, thepossibilityofmoving from suburban tourban locationshasoccurred to45%offinancial services firms and50%ofTMToccupiers,while67%of life scienceoperators continue to favour suburban areas. 28% IDENTIFYCOSTASTHEKEYLOCATIONDRIVER
Locationdecisionsoften illustrate the tensions amongdifferentdrivers andobjectives, as companies seek the rightbalanceof cost reduction, talent access, visibility to customers, andflexibility.Most respondents, especially inEMEA andNorthAmerica, view these conflictingobjectives asdifficult to reconcileoutsideof coreurban areas,whichprovide access to talent,offerbrandingopportunities, and enhanceflexibility.Approximately43%of respondents said theirorganizationsplan to relocate suburban sites tomore central locations, and this trend has increased yearon year.Tomeet cost targets, companies relocating tourban areas increasingly adopt agileworkplace strategies,makingbetteruse ofmore expensive space.
ASIAPACIFIC CONTINUESTO DOMINATE TOP 10
Manufacturingcontinues tobeone of themost importantbellwethers ofUSeconomichealth.While certain factorshavehampered manufacturinggrowthover thepast twoyears - includinga strongU.S. dollar, lowcommoditypricesand economicandpoliticaluncertainties – the longer termprospects for manufacturing in theUSarebright. (NAM)TheUnitedStates is seen increasinglyasaviable location forglobalmanufacturers,with foreigndirect investment in the sectorexceeding$1.2 trillion in 2015,anall-timehigh.And, in recent announcements theUSmayalso becomeabeneficiaryofSouth Koreanorganizationswishing to invest in theUSand reduce its large scaledependencyonChina. According to theNational AssociationofManufacturers
Inaddition,new technologies have theability to radicallyalter thewaymanufacturers innovate, produce,marketanddistribute their products, improvingefficiencyand competitiveness.Over thepast25 years,American-madeexportshave quadrupledasa result.Unfortunately for theUS labor force,modernday productiondoesn’t requirequiteas manyworkersas itused to. Technologicaladvancementsdocarry other implications forUSemployment prospects,amarketalreadyhaving lost nearly5millionmanufacturing jobs in the last twodecades.According to NationalAssociationofManufacturers (NAM),of themore than threemillion manufacturing jobs thatwillopenup over thenextdecade,about twomillion areexpected togounfilledbecausenot enoughworkersare trained for these highly skilled, technical roles.
> BothTheUnitedStatesofAmerica andCanada secureplacementwithin the top 10 > Strong and supportivepolicies and investment surrounding research&development and innovation reinforce the attractionof theUS -offsetting the higher costs > Evenprior to the 2016 electionofPresidentElect Trump,figure 1 identifies the startof a resurgence inmanufacturing in theUS – inpartdue to some re-shoring initiativesbut also via a shift in focus to thehigher value endof theproductionprocess. While thenewpresident is committed tobringing manufacturing jobsback to theUS,how this can bemanagedon any significant scalewithout increasing the costsofproduction and as such negatively impacting the competitivenessof theUS manufacturers is yet tobe seen > Canada retains a low-riskprofiledespiteheightened risk exposure surroundingPresidentElectTrump’s decisions surrounding theNorthAmericanFreeTrade Agreement (NAFTA)
MANUFACTURING RISK INDEX 2017
UNITEDSTATES ANDCANADA SECUREPOSITION INTOP 10
“Thedwindlingsupplyofsuitable labourtocarryoutbusinessoperations remainsafundamentalchallenge.”
OCCUPIER STRATEGY DRIVERS: GLOBAL SURVEY
“Talentmanagementand innovationareatthetop ofCEOs’agenda,soit’s naturaltosupposethat CREstrategieswould bealignedwiththose goals.Instead,occupancy costtopsthelistofCRE priorities,ascostconcerns drivethepotentialfor portfoliooptimisation.”
Figure 1:USMANUFACTURING JOBSANDFORECAST
10 / CUSHMAN&WAKEFIELD
4 / CUSHMAN&WAKEFIELD
APAC BFSI Outlook
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