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CBRE Study: Talent More Than Cost Now Driving Real Estate Decisions

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Incentives, Puget Sound, Seattle, Amazon, Expedia, Google

By Neil Gonzales

Rather than bringing the talent to corporate headquarters, Ten-X (formerly Auction.com) has opened offices where the talent is.

For instance, the company established a team in Atlanta that focuses on the hospitality market. A concentration of hospitality talent “happens to be there, and it’s easier to open a satellite there instead of moving everybody to headquarters,” said Rick Sharga, chief marketing officer for the online real estate marketplace based in Silicon Valley and Irvine.

“Connectivity to the people and places needed to get the job done and freedom of choice in choosing when and how to work are the primary preferences of today’s labor force.”

That workplace strategy reflects what has increasingly become a prominent factor in the real estate decisions of companies these days – a major shift from a singular focus on cost.

According to a new study by commercial real estate services firm CBRE, 50 percent of executives identified talent availability as the leading factor in their real estate decision-making while 31 percent named cost as the top consideration. The Americas Occupier Survey 2015/16 involved 229 executives, primarily in the technology and finance industries.

Managing cost certainly remains important, but even with that, employees and workplace experience are big drivers. For example, 85 percent of executives cited space restructuring and efficiency as a key way to reduce occupancy expenses, according to the survey.

Because talent retention and cost management can come into conflict when pursued through traditional means, “it is more important than ever to explore new and innovative solutions,” said Julie Whelan, head of CBRE’s Americas occupier research. “What’s clear from this survey is that today’s corporate real estate executives must balance the new workforce desires with a realistic workplace strategy that brings talent and expense management into simultaneous focus.”

The survey pointed out that the labor force – which is more generationally and ethnically diverse than it has ever been in the past – puts the greatest importance on finding a satisfying employment experience, of which the ingredients include office functionality, freedom of work style and a sense of community.

“Connectivity to the people and places needed to get the job done and freedom of choice in choosing when and how to work are the primary preferences of today’s labor force,” Karen Ellzey, executive managing director for CBRE’s Global Workplace Solutions division, said in the release. “Corporate executives are taking notice and prioritizing the workplace experience when making real estate decisions today.”

Sharga agreed that employees “are driving a lot of changes.” This paradigm is “particularly prevalent with technology companies,” he said. “There are a lot more telecommuting and open-office plans in which teams form and reform.”

Today’s companies are also making sure to put in workplace amenities to help attract talent, he said. For example, Ten-X installed “a ping-pong room in our Silicon Valley office. We have snack areas and bring lunch trucks to our Southern California offices a couple times a month. We see other companies have buildings with basketball courts or bowling alleys. It depends on where you are and how competitive the local market is” when it comes to recruiting highly skilled workers.

Other workplace attributes cited in the survey as top concerns are flexible workspace (39 percent); indoor environmental quality (33 percent); and access to public transportation (24 percent).

Ellzey pointed out that moving forward updating HR policies, integrating IT advancements, and adapting to modern cultural and managerial practices are all needed to ensure workplace change is both effective and financially sustainable for a company’s long-term success.

The acceleration of technology should also make it easier than before for companies to expand where the talent is located, Sharga added. “It might be even more cost-effective.”

Plano, Texas, where Ten-X has an office that focuses on customers in the mortgage industry, “is a lot less expensive than Silicon Valley,” he said as an example. “It becomes a win for everybody because the employer can get the skill at a lower real estate cost while employees are happy with their work environment.”