Occupier_News_Q1_EMEA_FINAL3

HAVE YOU READ THIS? FIND A ROUND-UP OF THOUGHT-LEADERSHIP AND RESEARCH FROM CUSHMAN & WAKEFIELD’S PROFESSIONALS IN Q1

Manufacturing Risk Index

Occupier Strategy Drivers: Global Survey

Download Manufacturing Risk Index pdf here.

Download Occupier Strategy Drivers: Global Survey pdf here.

DESPITEASPIRATIONSCOSTREMAINSAKEYDRIVER INPRACTICE

Importanceof rail station< 10minswalk

INDIVIDUALMARKETS -THEDETAIL

53% NORTH AMERICA

75% EMEA

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

ASIAPACIFIC

Preferred location

CBD

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 adi‚cult 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.

UNITEDSTATES

> 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

WHATOCCUPIERSWANTSERIES

UNITEDSTATES ANDCANADA SECUREPOSITION INTOP 10

“Thedwindlingsupplyofsuitable labourtocarryoutbusinessoperations remainsafundamentalchallenge.”

OCCUPIER STRATEGY DRIVERS: GLOBAL SURVEY

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“Talentmanagementand innovationareatthetop ofCEOs’agenda,soit’s naturaltosupposethat CREstrategieswould bealignedwiththose goals.Instead,occupancy costtopsthelistofCRE priorities,ascostconcerns drivethepotentialfor portfoliooptimisation.”

Figure 1:USMANUFACTURING JOBSANDFORECAST

19,000,000

18,000,000

10 / CUSHMAN&WAKEFIELD

17,000,000

2016

16,000,000

15,000,000

14,000,000

13,000,000

FORECAST

12,000,000

11,000,000

10,000,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source:OxfordEconomics

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4 / CUSHMAN&WAKEFIELD

APAC BFSI Outlook

Download APAC Banking Report pdf here.

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