Fall 2013 Knowledge Leader

Knowledge Leader TM

co ll iers i n ternatio nal propert y mag azine

Waste Not

The Zero Waste Challenge is a win for the environment

Activity-based Space

Office design adapts to a changing workforce

Maximize Your Mileage Flying smarter can save you money

FA LL 2 0 1 3

Energy Tower at

City Center A symbol of a new dawn for the oil industry

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contents 4 Outlook 20/20

The blurring line between the online and the in-store shopping experiences is reshaping retail real estate.

BY Alexa Stanard

6 Spotlight

MYOB’s new collaborative office design; New River Point anchor; Q&A with Craig Robbins

10 B2B

Is your social media profile costing you new business?

BY LEX PERRY

12 Bank Notes

Are cap rates too low, too high or just right?

BY KC Conway

14 Follow the Leader

Onshoring is fueling a resurgence in U.S. manufacturing.

16 Hospitality

Lodging is up, but does that mean profits are, too?

By Robert Mandelbaum

www.knowledge-leader.com

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by Teresa Kenney

22 Activity-based Space

Office design adapts to a changing workforce.

BY Heidi Tretheway

26 A Tale of Two Cities

A look at successful economic development efforts in two very different markets.

by Teresa Kenney

36 Personal Biz

Manage your frequent flier miles.

by Molly Abel

38 CSR

The Waste Management Phoenix Open’s Zero Waste Challenge.

Avoid these five sales presentation mistakes.

by Gerald Clerx

18 Energy Power

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by Teresa Kenney

40 In Focus

Nice guys do finish first. by dOUG FRYE

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Colliers international Spring 2009

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Volume 7 u Number 2

From the Editors’ Desk

Knowledge Leader TM

co ll i ers i n t er n at i o n al propert y m ag a z i n e

Dylan Taylor

David Bowden

IN BETWEEN THE LINES

Executive Managing Editors

Dylan Taylor and David Bowden Editor

Teresa Kenney

The energy industry is central to this issue’s cover story, and it got us thinking

about the idea of energy in a variety of ways.

We talk about the energy, the feeling and emotion, in a sports stadium when something big is about to happen. Sometimes it means an attitude that we want to capture and harness. Energy can mean motivation, the attitude of a team, an enterprise or a generation.

Energy, in the most basic sense of the power that runs our everyday lives—our devices, computers, refrigerators, etc.—requires a grid, a way to distribute that energy to homes and offices and factories. Energy is useless if it doesn’t flow, if it can’t circulate.

So there is no energy without connection.

Whether knocking down the walls in our workplace to enable better collaboration, connecting with your audience during a pitch or giving more than you get in daily life, the articles in this issue of Knowledge Leader point out the ways in which coming together gives us the energy to excel.

New ideas give us energy, too, and allow us to make connections we might not have seen before. The ideas that made the Phoenix Open a zero-waste event could inspire you to reduce the carbon footprint of your workplace. Or how retailers are rethinking the way they connect their online customers with the brick-and-mortar experience.

The Summer 2013 issue’s cover feature is on the new Energy Tower in Midland, Texas. This iconic project is a landmark in the growing renaissance of U.S. oil production that’s changing the face of the Gulf Coast.

Other topics include: • Economic development agencies: two models for success • Outlook 20/20: In-store fulfillment and its impact on retail real estate • Bank Notes: What’s behind the unprecedentedly low capitalization rates?

As always, we hope you’ll find in the pages of this magazine the means to get energized and connected, whether in business or in life.

Dylan Taylor Chief Executive Officer | Americas Colliers International

David Bowden Chief Executive Officer | Canada Colliers International

Associate Editors

Christine Schultz, Lex Perry, Aaron Finkelstein Art Director

Heidi Page Contributing writers

Molly Abel, Gerald Clerx, KC Conway, Doug Frye, Teresa Kenney, Robert Mandelbaum, Lex Perry, Alexa Stanard, Heidi Tretheway Proofreader

Sunny Parsons advertising sales

Jenna Badu-Antwi This magazine is published by Colliers International.

To order more copies, learn about advertising options or subscribe to Knowledge Leader, visit www.knowledge-leader.com.

Tiger Oak Publications 1518 First Ave. S, Suite 500 Seattle, WA 98134

Knowledge Leader is published three times annually by Tiger Oak Media, Inc., with offices at 1518 First Ave. S., Suite 500, Seattle, WA 98134; 206.284.1750. © Tiger Oak Media, Inc. All rights reserved. POSTMASTER: Send address changes to: Knowledge Leader, Colliers International, 601 Union St., Suite 4800, Seattle, WA 98101. Publications Mail Agreement No. 40064408. Return Undeliverable Canadian Addresses to: Express Messenger International, P.O. Box 25058, London, ON N6C 6A8. Printed in USA.

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Outlook 20/20

h ot to pics m akin g h e a d lin es to day

To create a seamless shopping experience between their online and brick-and-mortar stores, some retailers, such as Nordstrom, are setting up mini-distribution centers in their stores.

Stocking Up

Buying online or in-store? The blurring line between the two for consumers is reshaping retail real estate.

by Alexa Stanard

Five years ago, a consumer who tried to return an online purchase to a company’s brick-andmortar store would likely be turned away and told the operations were separate.

Today, that consumer expects—and likely gets—a seamless experience if the brand has been paying any attention to retail trends. Still, although companies may know they need multiple channels to compete in today’s market, successfully integrating those channels presents a growth curve for retailers.

“E-commerce has been growing for the past four or five years as more and more retailers figure out how to run multichannel operations,” says Ann Natunewicz, Vice President of Retail Services for Colliers International in San Francisco. “You’ve got Internet sales, mobile phone sales and in-store sales. They’ve built a platform for consumers to buy things, but then they have to figure out how to actually get the merchandise to them.”

From the public’s perspective, it sounds easy enough: If a company has an item in stock—anywhere in

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its system—the consumer should be able to have it in hand, quickly. Charles H. Turner, senior executive vice president and chief financial officer of Pier 1 Imports, noted in a call regarding 2012 fourth-quarter earnings results that “the percent of the total online business being picked up at the store is around 30 percent, 35 percent.”

That same item should be able to be returned to any point in the system, as well.

For retailers, however, this evolving set of expectations for in-store fulfillment poses numerous challenges, from site selection to staffing levels to accurate data collection. Successful navigation of those challenges is key as e-commerce continues to grow at a rapid pace.

Reimagining retail space

Companies looking to grow their e-commerce are reevaluating their business models, including how they use their existing real estate. knowledge-leader.com

Some, like Macy’s and Nordstrom, are setting up mini-distribution centers in their stores. A Nordstrom customer in Atlanta who wants a size 12, for example, could expect to have the item shipped from a store in another state.

“What’s driving this is customers want things faster and faster,” Natunewicz says.

To meet that demand, in February, Macy’s announced it was expanding the number of stores equipped for in-store fulfillment from 292 to 500 this year.

“We’re finding that customers don’t really care from where we pull the goods, as long as we fill the order accurately and the delivery is timely,” said Karen Hoguet, Macy’s chief financial officer, during the company’s fourth-quarter conference call. “We expect these fulfillment locations will be key to offering faster (and even same-day) delivery, and also will enable the customer to buy online and pick up in-store.”

And it’s not just department stores. In September 2012, Internetretailer.com reported that office supply powerhouse Staples is working toward better integrating its online business with stores, while conversely, online jeweler Ritani allows shoppers to custom design a ring online and then preview it in person at a partner store prior to purchasing.

knowledge-leader.com

Initially, Natunewicz says, most brick-andmortar stores didn’t have the space to provide a fulfillment center along with a storefront. Now, however, companies are converting existing sales space to fulfillment space. Larger retailers that may have considered downsizing are instead reallocating space internally to save costs and meet consumer demand.

“In the omni-channel era, many big-box stores are looking a little too roomy,” wrote retail consultant James Tenser on RetailWire. “Retailers are tightening assortments and reducing facings in an attempt to lower inventory carrying costs. This presents somewhat paradoxical consequences. First, it creates an opportunity to condense the selling area in some larger stores and allocate more space to the back room. Even if some of this space lies empty, it ties up much less capital compared with excess item facings on the shop floor.”

“As people want items faster and faster, it means more trucks, more distribution centers,” Natunewicz says. “But there are only so many trucks that can fit on a road. At some point, they don’t move quickly enough. Retailers are realizing they can’t control the capacity of major delivery channels. What they can control is how they use their real estate.”

Who gets the credit?

In-store fulfillment raises a complicated question for a company: Which store gets credit for the sale? Which gets dinged for the return?

How companies resolve these dilemmas “matters in a big way,” Natunewicz says. “Businesses are becoming so blended internally, they’re becoming one unit. But if you’re negotiating a lease based on sales, if a customer orders something online shipped to you from one store, and it’s picked up in another store, where does the sale go?”

Returns pose a similar quandary. Nonetheless, she says, it’s one that must be resolved: “Easy returns are a huge piece of customer satisfaction. Companies have to accept is as part of the whole customer service piece. I think it will be easier for stores to process returns if they’re doing a lot of in-store fulfillment, because they can just toss the item back in.”

The need for accurate data

Key to a company’s success in integrating its channels is understanding who wants what, and when. Those decisions shape inventory, staffing levels and deployment, and store size and location.

In the joint report by PricewaterhouseCoopers and Kantar Retail, Retailing 2020: Winning in a polarized world, the authors wrote: “[B]est-inclass retailers will find ways to act as a bridge between…real-time consumer data and the rest of the supply chain. The implications of a retailer’s system architecture are significant: Leading retailers of 2020 will, most likely, be known as the fastest ‘data translators.’”

Companies such as Amazon that are attempting same-day shipping from some of its distribution centers have to be “so finely tuned to what types of products are sold in which places,” Natunewicz says. “It starts with getting customers to share information with you— that’s the big piece of it. That’s where companies are spending money: consumer analytics. Customers tell you what they want, and then you have to predict what they want. It goes from a science to an art. It’s trial and error.”

Companies like Macy’s and Nordstrom that used the economic downturn as a time to invest in such analytics “are way ahead of their peers,” she says. “They’ve been very smart with how they’re positioning things.” K L Colliers international fall 2013

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spot l ig h t the people, places

“Neighborhood” zones were created at MYOB’s headquarters to encourage collaboration among employees.

a n d e v e nt s s h a p i n g t h e i n d u s tr y

Each zone contains flexible workstations, social areas, and formal and informal meeting spaces.

Colliers Helps MYOB Mind Its Own Business New office encourages collaboration and fun.

When Australia’s largest provider of business management

solutions, MYOB, decided to relocate its Melbourne head office from Tally Ho Business Park in Burwood East, it was vital that the new premises reflected and fostered the company’s culture of fun, innovation and collaboration.

In response, Colliers International provided design and project management services in the creation of a new 4,900-square-meter (approximately 52,700 square feet) workspace on top of The Glen shopping center in Glen Waverley that reflected the evolution of the MYOB brand. The end result is the largest single-floor workspace in suburban Melbourne.

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“It’s a key focus of ours to continually build upon our dynamic company culture. We are a progressive online company that delivers innovative business solutions that make business life easier for our clients. The new office plays a key role in our ongoing evolution,” says MYOB CEO Tim Reed. “We were looking for a workspace that inspires, that encourages greater collaboration and engagement, and that enables us to be a more connected team. We found it.”

Robert Sloan, Director of Project Management for Colliers in Melbourne, says MYOB’s brand was a catalyst in the transformation of the new head office. “Timing was crucial with this project, and we were able knowledge-leader.com

to deliver…in just 11 weeks. Having the builder on board from the beginning provided MYOB scheduling and price certainty,” Sloan notes.

Drawing on the same design principles used to plan cities, several “neighborhood” zones were created to encourage collaboration among employees, who inspired the design direction of each zone.

“Each zone has a different theme—there is the festival zone, the music studio, the campsite, the laneway and the playing field,” says Sloan.

Design elements include everything from walls decorated with strings and lanterns to tennis-themed workstations and running tracks leading into meeting rooms. Each zone contains flexible workstations, a multitude of creative social areas, and formal and informal meeting spaces. In addition, a video production room and whiteboard walls were incorporated to meet MYOB’s unique business needs.

“Our team worked closely with MYOB to ensure the workspace would support their existing and future business objectives, meeting with representatives from each section of the business to understand their diverse operational needs and ask the question, What’s your idea of fun? ” says Sloan.

Colliers International assisted MYOB with technical aspects of site selection and partnered with the project’s builder, FDC. “MYOB has a unique team and working environment, so they needed the right property for their business,” Sloan says. “This project overall has come in 15 percent below market rates, with less than 3 percent variations. We are thrilled with the end result.”

“To have our Melbourne team all together on one floor—enjoying the new features, designs and amenities they helped build—has created a more collaborative and flexible working environment. We have already witnessed improved team collaboration in the first couple of weeks. We hope our new office further boosts team engagement, supports delivering great outcomes, and continues to foster a fun and dynamic environment,” says Reed.

Sloan says Colliers International is working on accommodation strategies with clients such as MYOB to ensure their work environments support current and future business needs.

“The economic environment has been changing dramatically in recent years, so making any business changes as cost-effective as possible is of paramount importance. So businesses are looking to be smarter— and we now have the technology to support smarter, flexible working environments,” says Sloan. knowledge-leader.com

>leasing News

McDermott Will & Emery LLP to Anchor River Point The international law firm McDermott Will & Emery LLP has announced it will become the anchor tenant of River Point—an office tower under construction in Chicago developed by Hines and Ivanhoe Cambridge, and designed by Pickard Chilton Architects.

Breaking ground in January 2013, River Point is a 45-story office tower located in Chicago’s West Loop along the west bank of the Chicago River. The building will include amenities such as a 1.5-acre park, a river walk, fine dining, retail, a fitness center and onsite conference center. In addition, the property is targeting Leadership in Energy and Environmental Design (LEED) certification.

Represented by David Kahnweiler, Bob Chodos and Steve Levitas of Colliers International’s Chicago office, McDermott Will & Emery will lease approximately 225,000 square feet of Class A office space in the tower.

“River Point will be the first major office building to rise in Chicago since the onset of the financial crisis, and we couldn’t be more excited to be a part of it,” says Jeffrey E. Stone, Co-chair of McDermott Will & Emery. “Our lawyers, staff and clients will be inspired by the building’s unique design and unmatched views of the greater Chicago area. We’re delighted to build upon our 80-year history in Chicago with this bold move into the future.”

“River Point has been designed to meet all the needs of a 21st-century law firm, and we’re very pleased to become its anchor tenant,” adds McDermott Co-chair Peter J. Sacripanti. “We want to thank Hines and Ivanhoe Cambridge for their outstanding cooperation and flexibility throughout this process. We look forward to working with our partners over the next four years to make this building the best it can be.”

Colliers international FAll 2013

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spot l ig h t > Q&A

executive insight with:

Craig Robbins

chief knowledge officer, Colliers International As chief knowledge officer for Colliers International,

Craig Robbins is the architect and leader of Colliers University, a groundbreaking development and training program that is unique in the commercial real estate industry. In more than a decade with Colliers, Robbins has guided the company’s global growth and expansion, including leading the investment services platform and serving as chief operating officer.

What motivates you?

More than anything, it’s the challenge of creating a space for people to go to the next level. I’ve always been excited by next-level ideas, and I’ve been really lucky to have so much opportunity to pursue new thinking and new technologies. When we started Colliers University, the industry preferred to hire senior folks away from other companies, rather than training up new people.

The argument is always about the expense and time it takes to hold a big training conference, pay instructors, travel, etc.

So we introduced Web-based training, which allowed us to share next-level ideas across the globe more quickly and more economically. We continued to work with outside instructors, but also took a “learn-do-teach” approach with our own professionals, growing our people’s expertise and bringing them into our faculty.

What are some trends you see shaping professional development, both in the commercial real estate industry and beyond?

Companies are realizing that they need to help their people figure out what they’re best at, and then design careers around delivering their strengths rather than solely working on their weaknesses. When we started out in the early 2000s, the human behavioral 8

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component was just starting to be considered. We knew we had a competitive advantage in teaching people how to observe their own patterns of behavior and to understand how they think and speak when they work together.

Another trend we’re seeing is everyone wants everything faster and more condensed, and they want it now. By building choice and modularity into development paths, learning is condensed into smaller chunks, with greater impact.

One thing that hasn’t changed is that people want to connect. Even with all the technology available to us, live sessions continue to be a draw; people like to learn with other people. Even the e-learning environment is becoming more interactive. Our need to participate in a community is still very real.

What would you tell someone just getting started in commercial real estate?

My sons and nephews are entering the business right now. I tell them there are three components you need to focus on. First, be really good at what you do. Yes, that starts with technical expertise, which in our business is just simplicity multiplied—getting the right moves in the right order. I tell them that they need to know all the components: writing a proposal, giving a tour, analyzing the market, putting together a lease package, and ultimately understanding the

business needs of our clients. It’s a lot to know. At Colliers, we have a strong commitment to all facets of the business, because we realize that expertise doesn’t just apply to client-facing roles. Expertise runs through the whole enterprise.

Next, get to know yourself—what motivates you, what you’re good at, how you naturally approach tasks and relationships, and what you need to work on improving. Understanding yourself as a person helps you professionally, and helps you select a specialization or business line as you mature in the industry. Make sure that you’re working with an organization that invests in human capital, and can help you to grow.

Once you know your approach and you’re an expert, work with others in your professional community.

Offer to team up on projects, because when you help others grow their identities, yours grows as well.

Finally, become an advisor: Your clients want to talk about their business, not just about the transaction.

For junior people, it can be hard to get comfortable with the broader business conversation; but even if it’s over your head, you’ll likely learn something that will help you in the future. At Colliers, we’re focused on understanding business problems and creating unique partnerships to solve them. We’re always challenging our professionals to consider that their job really is becoming advisors to their clients. That’s a competitive advantage in today’s market. K L knowledge-leader.com

B2B

busin es s to b usin es s tips

Online Vetting Is your social media profile costing you new business?

by Lex Perry Whatever your profession, social media

is having a profound impact on how employers and consumers make business decisions, including whom they do business with. The real estate industry has been quick to adopt these tools, particularly in sales and marketing, where finding good leads is a highly competitive (and lucrative) exercise. As a sales tool, LinkedIn in particular is a powerful online tool for accelerating business connections and finding new leads.

But the social media phenomenon works both ways.

As a consumer of enterprise goods and services, I find social media an incredibly useful tool for conducting due diligence before making a large purchasing decision. Doing some serious homework on an individual before deciding to hire them, or to buy their goods or services is an effective way to help mitigate any inherent risks associated with making an important recruiting or purchasing decision.

Consider this: Google reports that 88 percent of all business-to-business (B2B) purchases are researched online before they reach the final buying stage. In fact, a recent study by Marketo found that 92 percent of all B2B purchases began with an Internet search. So chances are good that the prospect you’re meeting for lunch has done his or her homework on you and your firm before even making contact.

An enterprise-level purchase can be a careerdefining experience, not just for the seller, but also the buyer. So it makes sense to Google your sales representative, find out what LinkedIn contacts you have in common, and/or make calls to obtain feedback on the individual or the company’s past performance.

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Often, I come across an individual’s profile that has old content or messaging that doesn’t match up with what I heard at the sales pitch.

That’s a huge warning sign for me. If they’re not 100 percent honest at this point in the transaction, what hope do I have that the product or service will be delivered as promised?

This trend of online vetting has not only helped purchasers manage their risks, but has also given a leg up to professionals who are exceptional at what they do. While reputation has always been an important component of business success, thanks to social media, more weight is now given to the way a business and its representatives execute on their promises.

Ultimately, greater transparency in business will lead to the best service providers rising to the top. Here are five things you can do today to help pass any online scrutiny: 1. Google yourself.

After all, your clients are Googling you—often before they even meet you. This is a great exercise to perform regularly to see which of your profile pages rank highest. You should also click through to the pages to double-check that your digital profile meets your standards.

Tip: If you have a more common name, such as John Smith, add your company name to your search (e.g., “John Smith ABC Inc.”).

2. Schedule regular updates to your online profiles.

Hopefully, you are continually growing and improving your skill set, so it’s a good idea to schedule a time each month to make relevant updates to your online profile pages to reflect

this. Ensure you’re updating all your pages, be they within your company website, LinkedIn, Twitter or other social media outlets.

Bonus: The more regularly you update your profile, the better ranking score you’ll get from Google and other search engines.

3. Connect with colleagues.

Make sure you connect with colleagues on LinkedIn. Every colleague with whom you connect is also connected to hundreds of potential clients and vendors. If a prospect talks to a colleague of theirs who has had a great experience with you, it will definitely help you move up the interview process.

4. Pull out your last sales proposal or presentation and confirm that your messaging matches what you have online.

As a buyer, I often see highly customized presentations wherein the sales professionals tell me they have specialized experience in my sector, only to check out their profile online to find that what they have told me doesn’t resonate on their LinkedIn page. This makes me very nervous.

5. Systematically measure and manage the satisfaction of all of your clients. You never know who among them will be contacted to provide a future reference.

The days of being able to hand-pick the client references with which you provide your prospects are coming to an end. It’s important to be on top of your clients’ satisfaction levels, so that if a prospect contacts them in the future, they’ll be jumping out of their seats to recommend you. K L knowledge-leader.com

Bank Notes

Co m m erci al Fin a n cin g N e ws

The Goldilocks Effect Are cap rates too low, too high or just right?

by KC Conway, MAI, CRE Has capitalization (cap) rate com-

pression gone too far? That’s the question on many commercial real estate clients’ and investors’ minds today. Since early 2010, cap rates across all income-producing property types have declined to historically low levels. This rate compression has been most pronounced in multifamily and credit-tenant, net-leased properties, where rates have dipped below 4 percent. Cap rate compression has been slower to occur for industrial real estate, although that’s changing quickly as investors rotate out of multifamily and recognize the significance of e-commerce growth and the Panama Canal expansion, both of which are reshaping America’s supply chain.

So, what is behind this cap rate compression trend? And, perhaps more importantly, has it gone too far, risking the development of another commercial real estate asset bubble?

The oldest and most comprehensive data series on U.S. cap rates is maintained by the American Council of Life Insurers. Based on its information, we are in uncharted waters: Between 1965 and 2010, the long-term average cap rate was 9.5 percent. After nearly dropping to a 6 percent average in 2006 (prior to the onset of the 2007–2009 financial crisis) cap rates rose rather sharply to 8.5 percent (approximately 200 basis points) between 2008 and 2010. That 200-basis-point increase in cap rates wiped out approximately 25 per-

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cent of commercial real estate values. During the ensuing recession, increasing vacancy rates and declining rents resulted in another 20 percent loss of value, according to Moody’s Commercial Property Price Index.

So, in aggregate, approximately 45 percent of commercial real estate values were wiped out between 2008 and 2010. Now, less than three years after the recession, commercial real estate values have rebounded. Institutional capital and commercial real estate investors are so in love with income-producing real estate that they’ve bid average cap rates to a new historic low, now south of 6 percent. Why is this happening?

With few places to find both yield and inflation protection, due to investor anxiety over the Federal Reserve’s monetary policy—which is aimed at devaluing the U.S. dollar and reinflating asset prices out of the risk curve— many experts ascribe cap rate compression to a search for yield. With a 10-year U.S. Treasury bond yielding something in the range of 1.8 percent and inflation running approximately 2 percent, commercial real estate certainly seems more attractive, even at an unprecedentedly low 4 to 5 percent cap rate.

And what about equities or stocks? With the rise in most major U.S. stock indices to near-record highs and the volatility in electronic trading that can move equity prices by as much as 5 percent in a single day, commer-

cial real estate seems like a more stable way to attain an attractive cash-on-cash yield north of 4 percent—as high as 7–7.5 percent in secondary markets—without the daily volatility in asset price fluctuation.

A number of questions, however, remain unanswered: Could the cap rate compression trend be driven by more than just a search for yield?

Moreover, how big a role are low interest rates (compliments of the Federal Reserve) playing in this trend? Will cap rates necessarily spike when interest rates rise?

Will the approaching retirement of millions of baby boomers, who need cash flow and dividends more than asset appreciation, factor into the mix?

Would multifamily cap rates be in the 4–5 percent range without cheap Freddie Mac and Fannie Mae debt?

Conventional wisdom suggests that we should overleverage, because equity is expensive and debt is cheap. But with so much capital on the sidelines needing to be invested, could that thinking be turned upside down in the next five years?

Given the Federal Reserve’s monetary policy and the dearth of options for both yield and inflation protection, what’s the “just right” cap rate range for investors?

Unfortunately, we can only speculate on the answers to these questions. Only time will tell if we have a fairy tale ending. K L knowledge-leader.com

follow the leader

Pro file in le a d ers hip

Caption

Perfect Pitch

Making a sales presentation? Be sure to avoid these five mistakes.

By Gerald Clerx Are you wondering why your sales presentations seem to be falling on deaf ears and you haven’t been able to close the deal recently? There are only a handful of reasons why a sales presentation will fail to elicit a favorable buying decision from a qualified prospect of your product or service offering.

When you eliminate these failings from your pitch, you end up with a powerful and compelling presentation that wins business at an 80 percent or higher success rate.

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Here are the top five reasons presentations fail, and what you can do to ensure all future business opportunities are successfully transacted.

1

Failure to understand the client requirement.

Most unsuccessful sales presentations can be traced back to the inconclusive assessment that preceded it. Uncertainty about the client’s current reality situation and/or desired reality outcome is a sales opportunity squandered. In my experience, the average sales professional obtains only 25 percent of the information necessary to deliver a compelling sales message.

A perfect pitch bridges the gap between where your client is and where they want to be. Take the time beforehand to fully diagnose the problem by asking better questions and probing deeper before attempting to prescribe the right product or service solution. A broader and deeper understanding of the client’s need is the key to a successful pitch.

2

Failure to communicate a viable product or service solution.

A second reason why presentations fail is because the sales agent could not effectively convey the merits of a specific product or service offering in a way that demonstrated a solution to the client’s problem. Having the right product or service solution is only half the battle; being able to communicate its capacity to bridge the client gap is another.

A perfect pitch introduces the exact product or service required to solve the client’s problem, and is communicated to the client in a way that proves its effectiveness beyond any doubt.

3

Failure to differentiate your product or service from competitive offerings.

When a client cannot distinguish between your product or service and other competitor’s offerings, they will render a buying decision based on price rather than value. You cannot win in a knowledge-leader.com

price war, so you must be able to clearly articulate a valuable point of difference that you, your product or your organization brings to the relationship that no one else has.

A perfect pitch creates a value distinction about what you have or what you do that prevents your product or service offering from being commoditized. Define exactly what it is that makes you unique and demonstrate to the client how that uniqueness will help achieve a more desirable outcome.

4

Failure to align with your client’s decision-making needs.

Every client is different. They have their own unique decision-making needs. Some require a mountain of information to support a buying decision. Others require next to none. Some will secure your professional services based on

>

decision-making needs and listening preferences, the presentation will fall on deaf ears.

A perfect pitch should be client-centric in that it must account for the unique decision-making needs of the client, and contain the information and stories necessary to convince logically while inspiring emotionally.

5

Failure to overcome client fears.

A client’s buying decision is a reflection of the precarious balance between fear and desire.

When desire for product ownership is stronger than the fear of taking action, the client will buy. When the opposite condition exists, the client will walk away. “Leave it with me,” “I’ll get back to you” or “I think we are going to hold off on our purchasing decision” are all classic responses from a client who is paralyzed by unresolved fears.

A perfect pitch bridges the gap

between where your client is and where they want to be.

their perception of your personal competence; others will base it on the quality of your relationship.

Most sales professionals fail to take these differences into consideration. Instead, they design and deliver sales presentations that are designed and delivered to inspire themselves to take action, not the client. They speak a language that they are most comfortable with.

They point to the features and corresponding benefits that they are most impressed by. They introduce the evidence that supports their own logical decision-making needs and communicate at a pace, tone and volume that are pleasing for them to hear. They are, in essence, pitching to themselves. And unless the client has similar

A perfect pitch eliminates the fear of taking action. Take the time to uncover the source of your client’s buying anxiety and respond with the evidence, action plan or performance guarantee that effectively resolves it.

Know with absolute certainty that when you eliminate these five failures from future sales presentations, you will convert all current qualified prospects into future satisfied clients. K L Gerald Clerx is the author of Bridging the SELLING Gap and the Perfect Pitch training series, which teaches sales professionals how to master the three core skills of selling to achieve an 80 percent or higher pitch win rate. Learn more at www.thegapanalysis.com.

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Hospitality

H ot el N e ws

Room Service

While lodging demand is up, hotels are still facing a decline in other revenue-producing sources.

by Robert Mandelbaum The highlight of the recovery from

the 2008–2009 industry recession has been the strong return of lodging demand. According to Smith Travel Research (STR), occupancy levels at U.S. hotels increased from a low of 54.5 percent in 2009 to 61.4 percent in 2012. With occupancy levels approaching the long-run average, hotel managers have become more aggressive with their pricing policies. Average daily room rates (ADR) rose 4.2 percent in 2012, and are forecast for 2013 to nominally eclipse the pre-recession peak ADR. Gains in both ADR and occupancy resulted in a

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6.8 percent growth in revenue per available rooms (RevPAR) for all U.S. hotels in the STR sample during 2012.

While hoteliers have enjoyed strong growth in rooms revenue, what gains have they experienced from other revenue-generating sources within their hotels?

Other revenue is slow

Based on a sample of operating statements collected from approximately 6,500 hotels in the U.S. for PKF Hospitality Research LLC’s (PKF-

HR) 2013 edition of TrendsÂŽ in the Hotel Industry, rooms revenue increased by a healthy 6.3 percent from 2011 to 2012; however, total hotel revenue grew by just 5 percent. This means that the combined revenue earned from food and beverage, other operated departments, and rentals and other income increased only 2.3 percent per available room (PAR), or a mere 0.5 percent when measured on a dollar per occupied room basis (POR).

This finding is consistent with other research conducted by PKF-HR. According to our annual survey of meeting planners for ConventionSouth

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magazine, as well as discussions with corporate travel planners, these professionals have reconciled that rising occupancy levels have led to limited availability, thus requiring higher room rates. However, to keep control of their meeting and travel budgets, limitations have been placed on the amount their constituents can spend on ancillary services and amenities. We have already seen hotel owners and operators react to this trend by reducing the levels of food and beverage service at their properties, along with an enhanced focus on building select-service hotels.

Variable costs contained

Facing the challenge of boosting their revenue, hotel managers responded once again by controlling costs. Total hotel operating expenses (before deductions for capital reserve, rent, interest, income taxes, depreciation and amortization) for the properties in the Trends® sample increased by 3.3 percent in 2012, compared to the 4.3 percent rise observed in 2011. Because of the high degree of variable costs at hotels, part of the decline in the pace of expense growth can be attributed to the reduced pace of occupancy increases. Nonetheless, when measured on a POR basis, expense growth was able to be limited by operators to just 1.5 percent in 2012.

In 2012, labor-related expenses accounted for 45.3 percent of total operating expenses. Total labor costs increased by 3.6 percent in 2012, down from the 4.1 percent growth rate posted in 2011. This implies that managers monitored employee compensation closely during the year.

That same year, salaries and wages (the more controllable component of labor costs) increased by 2.9 percent, while payroll-related expenses (benefits) rose by 5.4 percent. Many U.S. hoteliers are concerned that this could be a foreshadowing of future escalation in government-mandated taxes and benefits.

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Fixed expense growth explained

In general, undistributed expenses are considered to be more fixed in nature compared to the operated departmental costs. Therefore, at first glance, the 5.3 percent rise in sales and marketing expenses, along with the 5 percent increase in management fees, appear to be a cause for concern. However, it should be noted that changes in revenue and profits influence these two expense categories. Franchise fees (considered a sales and marketing expense), as well as sales personnel bonuses, rose in large part because of the increases in rooms revenue. Management fees are almost exclusively driven by changes in revenues and profits, thus explaining the relatively strong growth in this expense item.

The greatest percentage change in an individual expense category was observed in insurance.

The amount paid by hotels for property and liability insurance grew by 6 percent in 2012.

According to the firm Swiss Re, 2011 saw the second-greatest dollar volume of worldwide insured losses ever. It appears that the insurance companies needed to recoup their 2011 outlays by raising premiums in 2012.

On a positive note, utility costs declined by 3.4 percent from 2011 to 2012. We attribute this reduction to the continued implementation of green and sustainable operating practices, the purchase of energy-efficient equipment, and, according to the Bureau of Labor Statistics, a .9 percent increase in energy costs during the year.

Profits

Net operating income (NOI)—before deductions for capital reserve, rent, interest, income taxes, depreciation and amortization—for the average hotel in our Trends® sample grew by 10.2 percent in 2012. Resort hotels enjoyed

PKF-HR is forecasting doubledigit growth in net operating income for U.S. hotels through 2015.

Operated department expenses increased by just 3.5 percent in 2012. With revenues growing faster than expenses, operated department profits grew by a healthy 6 percent.

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the greatest gain in NOI (10.6 percent), followed by limited-service (10.6 percent) and full-service (9.8 percent) properties. Lagging in profit growth were convention hotels (5.7 per-

cent), suite hotels with food and beverage (7.7 percent), and suite hotels without food and beverage (8.1 percent). Resort hotels benefited from the greatest increase in ADR, while convention hotels were impacted by the lag in the recovery of the group market segment.

Bright future

Based on the June 2013 edition of Hotel Horizons®, PKF-HR is forecasting double-digit growth in NOI for U.S. hotels through 2015.

Strong growth in ADR will be the main catalyst of bottom-line improvement, along with limited growth in expenses. Our outlook for restrained increases in expense growth is driven

by Moody’s Analytics’ forecasts for modest increases in inflation, as well as subdued growth in variable operating costs attributable to the slowdown in the pace of occupancy gains.

Managers will continue to be challenged to grow other revenues sources, especially since travelers will be offered an increasing inventory of select-service properties. Alternatively, owners will benefit from increases in the value of their properties resulting from improving profits.

Internet fees

At this time, PKF-HR does not possess sufficient information to offer an exact explanation, but we believe it is an increase in the monies collected from Internet connections that is driving the growth in telecommunications revenue that has occurred during the past two years. We have heard from our clients that, compared to 2008 and 2009, managers are less likely to concede complimentary use of the Internet when negotiating corporate and group contracts. Furthermore, more hotels are beginning to follow the successful paths of those chains that have always opted to charge for Internet connectivity.

A tiered pricing structure based on connectivity speed is the current trend in hotel Internet charges. While this practice will most likely not restore the profit-producing days of the old telephone, it will most likely curtail the slide in telecommunications revenue until the next wave in communication technology comes along. K L Robert Mandelbaum is director of research information services for PKF Hospitality Research LLC. To purchase a copy the 2013 Trends® in the Hotel Industry report, please visit pkfc.com/ buyannualtrends. This article was originally published in the June 2013 issue of Lodging.

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Scheduled for completion in January 2017, Energy Tower at City Center will feature 58 stories of retail, hotel, residential and office space.

Energy

Power Energy Related Properties’ new Midland development symbolizes a new dawn for U.S. oil production.

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by Teresa KEnney

Approximately eight hours west of Houston, on the southern plains of Texas, a project is under way that will stand as a symbol of the state’s— and the country’s—return to oil production dominance. Rising 58 stories in the air (with an additional four subterranean floors), the high rise—fittingly called Energy Tower at City Center—will showcase Midland, Texas, as the “Oil Capital of America.” It’s being developed by Midland-based Energy Related Properties (ERP) and hedge fund Wexford Capital LP.

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Midland, a growing city of 113,000-plus, is in the geographical center of one of the country’s most booming areas for the oil and gas industry: the Permian Basin. Located in West Texas and southeast New Mexico, the Permian Basin contains some of the highest-producing oil fields in the U.S., including the Spraberry/Wolfcamp shale formation—projected to be the largest oil play in the country and the second largest in the world.

“We’ve analyzed the resources and think that the Permian Basin is the most prolific oil and gas resource in the U.S., and Midland is its intellectual and financial capital. In this sense, Midland is the oil capital of America,” says William Meyer, president of ERP. “Energy Tower will serve as a symbol to the world of Midland’s importance as an energy producer. It will serve as a symbol that it is the oil capital as the U.S. moves toward energy independence.”

Midland’s Rise Midland’s rise as the “Oil Capital of America” is thanks to new technologies in oil and gas drilling over the past five years, namely shale gas and tight oil production. Traditionally overlooked shale formations have a massive potential to make the U.S. a major producer of crude oil.

“In 1978, they thought they had just under 5 billion barrels of oil in the Permian Basin. By 1998, the numbers fell to 3.5 billion. Then came the advent of tight oil drilling, and the numbers rose to 50 billion barrels,” says Pat Duffy, president of Colliers International’s Houston office—the firm representing Energy Tower at City Center. “With the increase of tight oil production, by 2030–2035, we will be producing 7 million more barrels per day than we did in 2011.”

And Midland is at the center of it all.

“Midland currently produces 1.36 million barrels per day—more oil than the Gulf of Mexico, more oil than North Dakota, more than any other play in America and more than Canada. Its production is expected to double over the next 10 years, and if it does, it will surpass Kuwait in terms of daily oil production,” says Meyer.

The economic implications are astounding. According to economist Rick Perryman, one oil field job creates an additional 2.3 support jobs in the economy. And the World Economic Forum’s report Energy for Economic Growth: Energy Vision Update 2012 found that the oil and natural gas industry accounted for 9 percent of all new U.S. jobs in 2011. The report noted that the industry “contributed 37,000 direct jobs in 2011. This

S

drove to the creation of an additional 111,000 indirect jobs during the same period…” According to HHK Associates, an estimated 175,000 jobs will be created between 2013 and 2023 in the Permian Basin alone.

That is nothing compared to future geopolitical repercussions. According to David Bird with The Wall Street Journal, in the first week of June 2013, “U.S. domestic crude oil output inched ahead of imports…for the first time since January 1997.”

“Oil imports are dropping right now, and most of the oil is coming out of Texas. It won’t completely wipe out our imports—the U.S. is still importing 8 million barrels per day,” says Duffy.

But, writes Bird, “By the end of 2014, the current tiny trickle will widen to see domestic crude oil output topping imports by nearly 2.5 million barrels a day. A slow shift, 16 years in the making, is set to become a flood in little more than 16 months.”

And the world is taking notice. Throughout 2012 and 2013, Colliers International has tracked the strength of “ICEE” markets, that is, markets with a strong presence of intellectual capital, energy and education industries. Markets with an ICEE employment profile have had disportionately high absorption and lower vacancy rates than the U.S. average since early 2012.

Houston was recently in the top five of the Association of Foreign Investment in Real Estate’s (AFIRE) list for cities to invest in. The city ranked fourth out of U.S. cities and fifth out of global cities. It was the first time Houston made the top five global list. Of the rankings, James A. Fetgatter, chief executive of AFIRE, notes, “The strong endorsement of both San Francisco and Houston by our members in this year’s survey directly reflects the propensity for real estate investment to follow jobs, in this case, technology and energy, which are thought to be among the top drivers of the next economic wave.”

Energy Tower at City Center Slated to be completed in January 2017, ERP’s new development is in response to the velocity of that economic wave, which has already begun to hit Midland. Energy Tower at City Center is the first ground-up development in the city for ERP. The firm currently owns 1 million square feet of office space in the downtown core.

“We are the largest single owners of office space in Midland. We have an understanding of what corporate clients demand, and the present supply

Specializing in Energy Colliers International has brokers representing energy properties in markets across the U.S. and in Canada through its specialty Energy Services practice group, headed by Charles Herder of Colliers International’s Houston office.

“The Energy Group as a profession is in markets with high concentration of energy companies, like Houston, Denver, Edmonton, Calgary, Los Angeles, Dallas, Pittsburgh, Ohio, the province of Alberta, and Bakersfield and Torrance, Calif.

The group is made up of 35–40 brokers whose careers are focused on properties related to the energy industry. It’s a great reflection of what is happening with energy in the United States,” Herder says.

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doesn’t offer that. Corporate clients want world-class, Class A office space that you could find in Houston, Dallas or New York, and that requires a new building. They want downtown amenities—which are currently nonexistent—to keep their employees happy. They want executive residences so they can house their clients and employees. Right now, there isn’t executive housing available in Midland, and housing in general is very hard to come by,” says Meyer.

“Office space in Midland is already at 99.5 percent occupancy—there is simply no available space. To put it in perspective, a healthy commercial real estate market is at 92 percent occupancy,” adds Duffy.

The tower will include one, lower level of retail, a 200-room hotel and 12 floors of branded residences, all topped by 28 floors of Class A office space and a “sky bar.”

“We chose to place the offices on the top floors because the corporate clients are driving demand and it was important to meet their needs. We felt putting the offices on the top floors would be appealing to the corporate clients for recruiting and retaining employees,” explains Meyer.

The high-rise will include world-class restaurants, spas, bars and a VIP cinema experience in which guests can watch a movie while enjoying cocktails and a meal. “Downtown Midland in general needs more entertainment. At 5 p.m., everyone goes home. The purpose of building the Energy Tower is to create a 24-hour live/work/play environment, and that is very important to the community and the people working in the tower,” notes Meyer.

On the 58th floor, overlooking the plains of West Texas, will be the sky bar with a pool, and on the 28th floor, a striking two-story sky lobby. “It’s extremely dramatic and separates the office from the rest of the tower components,” says Meyer of the lobby.

As an added bonus for office tenants and residents of Energy Tower at City Center, the hotel will offer room service to both.

“All of the different components will enjoy the amenities that the hotel offers and will have special rates at the hotel,” notes Meyer. “We are also giving corporate clients who lease a floor the option to purchase two branded residences. There are simply no luxury residences in this market, so integrating the residential component with the office component makes office leasing very attractive.”

At the base of Energy Tower will be Centennial Plaza, a park that will serve as the social center of downtown Midland. Featuring fountains, vertical gardens and public art, it will also include a green-roofed 400Energy Tower at City Center will include a two-story sky lobby that will separate the office space from the rest of the tower components.

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Alternative Sources While the current energy boom is exciting, it is unlikely to produce enough for the U.S. to ever claim complete energy independence—although Duffy notes that it certainly buys the country time to develop an alternative and more efficient energy infrastructure.

The U.S. consumes more than 12 barrels of oil per person, per year—more than any other country, and more than the entire European Union combined. And as developing countries such as China play catch-up, Duffy notes, the U.S. will need to reduce consumption in order to meet increased demand. “We have to increase the amount of alternative energy we use: nuclear, hydro, bio fuels, wind, solar, geothermal. Green energy is necessary not just to cope with the issues of reducing our carbon footprint but because we can’t produce enough oil to keep up with demand,” Duffy says, adding, “In the U.S., a byproduct of the shale plays is that natural gas prices have been cut in half. Power generation and other users have switched to cheaper natural gas, which has reduced the carbon emissions in the U.S. by 4 percent from 2011 to 2012. We were the only country to exceed the quotas called for by the Kyoto Accord, and natural gas was the primary driver of that success.”

seat amphitheater and event plaza, capable of hosting open-air concerts, festivals and farmers’ markets. “The Centennial Park amenity will also provide a beautiful view for the lower-level tenants,” says Duffy. The tower plans to seek Leadership in Energy and Environmental Design (LEED) Gold certification, and one of its sustainable elements will be a water feature in the park, sourced from the high-rise’s gray water.

The design architect for Energy Tower is Michael Edmonds, principal of Edmonds International Ltd., and named one of the top 15 architects in the world by Real Estate Market & Lifestyle. “He is working on mixed-use projects all over the world, and we are extremely honored to be working with someone so talented and gifted as him. The residents of Midland will be so proud when they see the tower go up. They’ve been extremely supportive of the project,” says Meyer.

In addition to investing in Midland, Meyer calls the city home. Originally from San Francisco, he came to Midland by way of New York. “I first came to Midland in 2007 and moved here permanently in 2012. My family has been investing in Midland since 2007.”

ERP is also currently developing a hospitality portfolio in Ohio in response to the economic impact derived from the drilling in the Utica shale wells.

While its investment strategy focusing on properties in energy-driven markets is relatively new, its relationship with Colliers is not.

“My family has been investing in real estate for 30 years, and we’ve been using Colliers forever. We started with them in San Francisco. It’s always been the individual people that we have met at that specific time. We just like them; we thought they were first class and coincidentally, they always happen to be with Colliers,” says Meyer. K L Colliers international FALL 2013

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The activity-based workplace model allows employees to choose the type of environment—collaborative or private— that best suits the task at hand.

Activitybased Space Office design adapts to a changing workforce.

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>> by

Heidi Tretheway

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The world of work is changing. For many, work is no longer a place you go to—it’s an activity you do. With advances in mobile and cloud computing, and 24/7 connectivity, workers can be productive and collaborative anywhere and anytime.

So how can commercial real estate adapt to these trends and enhance productivity for the workforce while reducing operational costs?

Worldwide, many enterprising companies are adopting activity-based workplace design, or ABW. This model seeks to maximize the use of commercial office space by allowing people to choose the type of environment best suited to their tasks. Holding a meeting? A meeting room, café-style table layout or casual lounge area could work. Need quiet time free from distractions? Pick a flexible desk, a “hush room” with other quiet-seeking employees, or a private office for a few hours. And once it’s time to come out of the quiet and collaborate with your team, there’s space for that, too.

Colliers International’s experts are increasingly advising companies on how to maximize the use of space through ABW. In Colliers’ 2012 survey of 300 corporate office tenants, 32 percent said they have either implemented ABW or were planning to. Financial services and property industry firms have already implemented ABW, and information, communications and technology industry companies express strong interest.

As a result, no longer is your office space requirement a simple calculation in which one person equals one desk. There is increased awareness that employees perform multiple functions throughout a workday—from focused computer activities to brainstorming meetings to casual conversations—and rows of cubicles are not a one-size-fits-all solution.

“We are starting to see an increasing number of organizations consider ABW and what it means for their business,” says Simon Hunt, managing director of office leasing for Colliers in Australia. “The biggest thing to remember is that ABW is not about the building—it’s a paradigm shift and it’s a way of working, organizing and thinking.”

But much of the research supporting ABW from a cost and operational efficiency point of view is about the building—specifically, building vacancy during office hours. Office furniture maker Herman Miller conducted a two-year study using chair sensors, and found that the average private office is unoccupied 77 percent of the workday and is in use just 1.84 knowledge-leader.com

hours. Workstations fare a bit better, yet they are still unoccupied two-thirds of the workday.

Similarly, a Microsoft study found that 40 percent of its staff was out of the building during office hours, 20 percent of workers were away from their desks, and only 40 percent of people were actively engaged in tasks at their desks during an average workday.

One commercial real estate expert commented wryly, “Most employers would be pretty upset [about me working only 1.84 hours per day, as the Herman Miller study showed], as I’d basically be taking advantage of them. But according to the numbers, it seems like your office space is taking advantage of you.”

Creating a better-fitting office environment >> Some key considerations in ABW design include creating more social spaces—research found that people typically prefer to work in this environment, likening it to the appeal of the neighborhood coffee shop.

While the Herman Miller study showed that conference room seating was very rarely used, smaller meeting spaces were found to be more useful than larger spaces, and those equipped with technology (such as video conferencing and large display monitors) were used much more than those without. In fact, such equipment was the primary driver for smaller groups to choose to meet in larger conference rooms.

Therefore, fitting out two small rooms with solid technology rather than one large room can make the same amount of square footage work that much more efficiently.

Outside of dedicated meeting rooms, ABW’s heavy emphasis on collaborative spaces that invite unscheduled interaction creates a more open, less formal channel for feedback. This supports faster-paced projects and delivery, which can deliver major value to a company when turnaround time is critical.

“Activity-based workplace design generally works best in larger organizations where there is a significant proportion of knowledge workers to facilitate collaboration,” says Colliers Research Director Felice Spark, who focuses on corporate solutions in Australia.

Getting ahead of the Millennial curve >> The next generation of office workers—known as Generation Y or millennials—is estimated to be 75 million strong and will make up 75

percent of the workforce by 2025. They are typically willing to work outside office hours and expect the workplace to not be solely about work, but also about social interaction and shared learning.

According to Forbes magazine, “This new generation of employee not only thrives in highly collaborative workplaces, but is now making this a key requirement in selecting where to work.”

Enter employer branding. Activity-based workplaces with a “cool” factor that encourages collaboration can support recruiting efforts.

The design of commercial office space also sends a subtle message that engages employees in the culture and strategic vision of the company.

The manufacturing company W.L. Gore— featured on Fortune’s “100 Best Companies to Work For” list—used its office design to highlight the democratic, nonhierarchical culture of the company, where every employee is an associate. It found that about 20 percent of employees didn’t need an assigned space, so its office design allows them to choose where they work, be it a couch, a quiet desk or a table in a busier area.

Tackling vacancy— wasted time and space >> Just as the Herman Miller and Microsoft studies revealed, GlaxoSmithKline realized that much of its 2 million square feet of office and lab space sat empty each day—even during working hours. In the CoreNet special report Flexible Workplace: Before, During, After Change, Senior Program Manager Robert Maynard explained that a 1997 study by the company found that 35 percent of space was vacant during the workday. “The higher the pay grade, the higher the vacancy,” Maynard said.

To capture greater value from its real estate, GlaxoSmithKline eliminated managers’ offices and shrunk the footprint of directors’ offices, reducing space per employee from 200 square feet per person to 125 square feet, according to Commercial Property Executive magazine.

Lowered partitions, quiet spaces and small meeting rooms were part of this transformation, which spanned 250,000 square feet. But it wasn’t perfect—in the report, Maynard admitted that directors and vice presidents still tended to work within their office walls rather than in the collaborative space.

So, with executive support, in the next round of renovations (which included 1,800 staff and Colliers international fall 2013

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1.37 million square feet), all the new office walls were made of glass, and the space was reduced to 108 square feet per person, with about eight desks for every 10 workers.

One way Maynard measured the success of these efforts was more seamless communication among employees: GlaxoSmithKline found that use of internal e-mail dropped 45 percent after its office transformation.

Collaboration now critical in the majority of projects >> When Microsoft implemented ABW in its Sydney, Australia, office, it had these key goals in mind: • Workplace designs must be aligned with business unit goals to enhance innovation and productivity; • Various types of active collaboration spaces would be created for both formal and informal interaction; • ABW would support group identity, community and culture, and showcase Microsoft’s technology; and, • Factors such as daylight, access to nature, color, material variety, sustainability and personal control would be incorporated into the space design.

Some of the results of its transformation included a 10 percent increase in overall workplace satisfaction among employees, a 34 percent improvement in its impression on customers, 23 percent improvement in formal collaboration and a 15 percent improvement in informal collaboration.

Considering that Microsoft estimates the percentage of work product that depends on group input rose from 25 percent in 2000 to 70 percent in 2010, gains in collaboration can be strongly correlated to project success.

Cost savings: A secondary—but significant—outcome >> Horizon Blue Cross Blue Shield of New Jersey is planning to redesign its workplace, shrinking from 1.9 million square feet to 1.3 million square feet over the next five years, and leasing out six floors of vacated space. The company’s goal is to have 60 percent of staff in the office full-time, 20 percent at home full-time, and the balance split between both locations.

“The plan will reduce the total footprint and cost, but that is not the primary goal,” Joe 24

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Flock, director of real estate development and facilities of Horizon BCBS, told attendees at the CoreNet Global Summit. “The primary goal is to transform the workplace so that it allows for increased collaboration and productivity.”

But the potential cost savings is also substantial—Horizon BCBS could realize a projected $6 million in savings if the vacated space is 100 percent leased.

While some estimates price the tenant improvements for ABW at a higher rate than traditional office space due to increased technology requirements, ABW generally shows long-term cost savings due to an overall reduction in total leased space.

“When building out from shell space, the cost for ABW can be equivalent to traditional office space,” explains Coy Davidson, senior vice president for Colliers in Houston. “However, development can be more costly if it requires major reconfiguration of the existing build-out.

It also tends to work better for larger tenants for economies of scale, with more options for collaborative space.”

Davidson worked with one ABW client whose 7,500-square-foot build-out was capable of accommodating 100 employees, even though it currently housed fewer than 40. This degree of flexibility would not have been possible in a more traditional configuration.

Regardless of potential cost savings from real estate, Hunt advises clients to focus on what matters most to a company’s success: employee satisfaction and productivity.

“ABW should only be implemented with the employee in mind, not the [facility’s expense] bottom line. It facilitates collaboration and can help boost productivity while promoting self-leadership and a high-performance culture,” Hunt says. “It gives people choice, and this helps foster satisfaction and retention—in other words, a win for the employee and a win for the employer.”

From the office/ cubicle to the open/ closed and independent/ group model >>

Throughout Colliers’ experience with a variety of activity-based workplace designs, five key environmental themes emerge. The traditional office typically has three environments: private offices, individual workstations (such as cubicles) and conference spaces. The following areas define ABW offices:

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•

•

•

•

Open, individual workspaces: These may include docking stations, unassigned desk or cubicle space, desks on wheels that may be pushed together to help teams collaborate, or casual spaces such as couches or even hammocks.

Enclosed, individual workspaces: In addition to by-reservation or open offices, these can include phone booths or “fishbowls”—small workspaces enclosed by glass, but still visually connected to the larger office environment.

Open, group workspaces: Ranging from café-style rooms to open lobby areas with bench or lounge seating, these are informal collaboration spaces that invite drop-ins and don’t require advance reservations or privacy.

Enclosed, group workspaces: Quiet spaces or “hush rooms” can be the antidote to the hubbub that might be cause for concern in open-plan offices. This shared space is not intended for collaboration, but simply as an alternative to working independently in an open environment. Other group workspaces may be the hub for brainstorming, meetings, video conferencing and activities that could disrupt the open office. Some enclosed group workspaces encourage a project team to take over the room— using it as their regular workstation—for a short period of time until the project is complete.

Individual expression and personal needs: One of the things ABW-designed spaces lack is the place for individual expression, such as hanging family pictures or work-related awards, even a project board. Well-planned workplaces recognize this and provide space such as employee lockers (Microsoft covered the front of these with chalkboard paint to allow for greater self-expression), rolling file cabinets and dedicated walls or rolling boards for posting important items.

Cultural factors and change management for ABW >> A key reason many companies choose not to undertake ABW design in their offices is the significant cultural and organizational changes required to implement it effectively. Similar to the GlaxoSmithKline case study, where culture challenged the new work model, one-third of knowledge-leader.com

companies in the Colliers International survey said ABW would require too much cultural change.

In fact, Davidson can point to an instance in which one conservative company attempted ABW in early 2000, found it didn’t work for its workplace, and converted back to traditional offices and cubicles. “Typically, it’s the most progressive industries—management consulting, technology, accounting—where this kind of change can be embraced, because it’s already part of the corporate culture,” he says.

Many companies hesitant to make a full-scale change to ABW are instead dipping their toes in the water, adding small portions of collaborative space to their floor plans, lowering the height of cubicle walls and adding couches or more lounge-like furniture to informal meeting areas.

“You’ve got to get buy-in from employees and work through the change management process,” Davidson says, “otherwise, you could have mutiny. A lot of it has to do with the workforce demographics—I think once Gen Y dominates the office, ABW will be an easier proposition.”

“The change management process is very critical and requires a lot of investment to be successful,” Spark adds. “Some employees are reporting higher levels of social and cognitive stress going to work every day. As creatures of habit, many people still tend to gravitate toward the same seat, despite the objectives of ABW. And if they’re unable to find the same seat, they look for one close by. It can be stressful finding a new place to sit each day and having to sit next to people you may not know.”

Flexibility, technology relieves the space squeeze >> For many companies, the antidote to overcrowding might be found in ABW design. When Capital One’s office space shrank with the recession, the company allowed its 143-office, 10.5 million-square-foot portfolio footprint to shrink as well. But in 2010, the company began increasing its workforce, causing major pressure on its limited space.

Capital One simply had insufficient office space to provide one desk per person, so it used ABW design targeting a desk-share ratio of 1.3 people per desk, and movable furniture allowed employees to reconfigure desks based on project requirements.

Capital One also created “quiet zones” to compensate for the open-plan design that some knowledge-leader.com

Group workspaces are the hub of brainstorming.

workers find distracting. Handling the distraction problem another way, GlaxoSmithKline implemented a sound-masking system that makes it difficult for an employee to hear a conversation happening a few feet away. This enables employees to be more focused, because if they cannot understand the conversation, they are less likely to become distracted.

Other technology supporting ABW includes key-swipe cards that provide access to everything from office space to printers, and unified messaging systems that integrate voicemail, mobile phones, instant messenging and e-mail.

Some companies have invested in more robust WiFi and mobile signals to ensure the best connectivity, and many are moving their data from physical storage in office space to cloud-based systems.

From a construction perspective, in-floor wiring (as opposed to overhead wiring common in many office buildings) provides greater flexibility in reconfiguring office space as needs change or as companies gradually redesign their spaces to accommodate more activity-based work.

The sea change brought

by ABW space >> For office space users, the so-called “rules” of

the office environment are always changing.

Libraries and hard-copy file storage have given way to technical equipment and team space.

Formal offices are being transformed into small-group meeting rooms. The key question guiding workplace design is how productivity and collaboration can be enhanced by the built environment.

“Based on all of the experts and the studies, ABW is the way of the future for companies with a strong knowledge worker base and need to collaborate,” says Spark. “The new ‘desk’ will be the tablet or iPad, allowing employees to work wherever they want, whenever they want, with greater mobility and flexibility.”

Real estate space remains the secondmost-costly business expense after employee compensation, but ABW’s potential cost savings—reducing wasted or vacant space during the workday and shrinking a company’s overall footprint—takes a backseat to the real driver: productivity.

“It’s all about being productive,” Davidson says. “Not everyone can work from home or work from a cubicle effectively, and not everyone needs 200 square feet to do their work. But for companies that are about collaboration and results, ABW could be the best way to make workers and workplaces more effective.” K L Colliers international fall 2013

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Downtown Midland (shown here) and downtown Atlanta (opposite page).

A Tale of

by Teresa Kenney

John Quincy Adams once said, “If your actions inspire others to dream more, learn more, do more and become more, you are a leader.”

In that same vein, it may also be said that if your actions inspire companies to build more, hire more, collaborate more and produce more, you are an economic development officer.

As the economy continues to deal with the repercussions of the Great Recession, you’d be hard-pressed to find a time when the role of an economic development organization (EDO) has been more critical. According to the Kauffman Foundation—one of the largest foundations in the U.S. focused, in part, on entrepreneurship—the “2007–2009 recession ranks worst in terms of the number of jobs lost (over 8 million), and secondworst in the percentage of decline (6 percent).”

Every state and nearly every region and metropolitan area has an EDO, although their structures vary. According to a survey by the International Economic Development Council (IEDC)—the world’s largest membership organization serving the economic development industry—for many years, the majority of EDOs were publicly funded.

That is no longer true, however. As public funds for economic development have dwindled, the number of public-private EDOs—and to a 26

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smaller extent, completely private EDOs—has increased. In its 2013 report, New Realities for Funding Economic Development Organizations, the IEDC noted, “Public-private partnerships (PPP) have ascended in the wake of declining public funds for economic development. Budgetary flexibility is one of the main reasons why communities have utilized the PPP model for economic development purposes.”

Specifically, IEDC’s report found that: • EDOs, on average, collect public funding from nine different public sources, ranging from grants to tax revenues and loans from federal, state and local sources.

• Nationally, over 80 percent of public-private partnerships receive local funding, which represents their second-largest source of revenue after private funding.

• Less than 20 percent [of PPPs] receive state or federal dollars. Most of the local funding comes in the form of allocations from local governments and allied agencies.

• [A] few decades ago, 70 percent of EDO funding came from public knowledge-leader.com

2 Two Cities sources and 30 percent from private sources; the opposite is now true. In-kind contributions and fee-for-service contracts are two revenue streams that are more commonly used by EDOs now.

• Among private funding streams, membership dues and in-kind contributions are the largest funding sources.

Knowledge Leader took a look at two different economic development models—one a PPP; the other, privately funded—in two different markets, with one overwhelming commonality: success.

1Midland, Texas

Located halfway between Dallas/Fort Worth and El Paso, Midland is the fastest-growing metropolitan area in the country. Hometown of former President George W. and first lady Laura Bush, the city is home to approximately 113,000 residents—or nearly 250,000 if you include nearby Odessa. Thanks to its prime location in the Permian Basin, the petroleum-producing region estimated to contain approximately 20 percent of the country’s oil and gas reserves, Midland is the second-richest economy in the country (first is Bridgeport, Connecticut) and unemployment is at a low 3 percent.

Clearly, these are the best of times in Midland. But that doesn’t mean the knowledge-leader.com

community is satisfied with the status quo. Last year, the Midland Development Corporation—which offers incentives to qualified employers that create jobs for the community—announced that XCOR Aerospace will be relocating its Commercial Space Research and Development Center Headquarters to Midland. And earlier this year, the city announced the addition of the mixed-use, 58-story Energy Tower to its downtown skyline (see related story, page 18). The tower is part of a huge effort to revitalize the downtown core.

While the Midland Development Corporation has been around since 2001, economic development efforts specific to its downtown core are fledgling, just a little more than a year old, and were created in response to Midland’s rapid growth. The efforts are financed by the city, the Midland Development Corporation and tax revenue raised through a Tax Increment Reinvestment Zone in downtown Midland’s Business Improvement District (BID).

“There has been interest in revitalizing downtown Midland over the past 20 years, but until the boom in oil, the downtown area was really only considered a business sector with office buildings and limited retail.

Now there is a real opportunity to see the concept of live/work/play— a 24-hour development. We are reaching that urban point,” says Genora Young, Downtown Development Director for the city. “Our geography is still remote, but because of the Midland International Airport and our Colliers international Fall 2013

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proximity to Interstate 20 and Interstate 10, we are a very accessible community.”

Colliers International worked with the city while considering options for Energy Tower.

“We needed to understand our project in relation to the downtown area, so we set up a meeting with the city manager and the city’s planning, traffic and utilities departments,” says Pat Duffy, President of Colliers International’s Houston office. “In one day they got us up to speed with everything that is going on downtown—how it’s being redeveloped and reenergized—and provided us with information on the infrastructure, including the newly completed T-Bar Ranch Water pipeline, which is projected to support 50 to 60 years of growth.”

The agency’s focus goes beyond attracting new businesses in the community. It also helps to grow existing businesses. Take for example Susie’s South Forty Confections. A homegrown brand founded by Susie Hitchcock-Hall (the original factory was located just south of Midland, behind 40 acres of pecan trees, inspiring its name), South Forty is now making a move to downtown Midland. “The efforts to get her to move her operations downtown probably started about two years ago. Her new, 15,000-square-foot factory will include glass walls to allow tourists to watch the candymaking process, a visitor tasting area and a retail store,” explains Young.

To streamline the revitalization efforts and reinforce its development-friendly environment, the City of Midland holds weekly 25-minute meetings with developers.

“Generally we have a full morning of appointments each week,” says Young. The developers—whose projects range from multimillion-dollar developments to small, mom-and-pop businesses—are able to present their proposed plans to representatives from each city department.

“In attendance are engineers, planners, the fire marshal—anyone who has anything to do with development. We walk through the project in 25 minutes and if we see any red flags or anything that may be a hurdle, we can note it at that time and set up a more detailed meeting later if needed. We’ve had very positive response to the meetings. They have helped us to be more efficient. Every department hears the same presentation, and it helps us to understand how each department works together. The developers appreciate it as well and they can schedule as many as they like,” she says.

The city’s economic strategies are clearly working.

One year ago, Midland City Council member John James stated, “During the next three years, public and private partners will invest more than $100 million in creating a downtown where Midlanders and visitors can live, work and play.” One year later, approximately $99 million has already been committed.

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Powering Economic Development

One of the tremendous economic development resources available to Atlanta-area EDOs and businesses, such as the Metro Atlanta Chamber and Colliers International, is the Georgia Resource Center at Technology Square at Georgia Tech. This state-of-theart site selection meeting facility was created

by Georgia Power, the largest subsidiary of Southern Company, one of the nation’s leading generators of electricity.

“Georgia Power is the principal producer of electricity in the state. At the center, a corporation can look for space anywhere in the state. They take a video tour of the state and talk with experts. Their center is an easy way to look at places across Georgia, particularly those more rural areas where you might locate a manufacturing facility. It’s one-stop shopping,” says Bob Mathews, president and CEO of Colliers in Atlanta.

In 2010, the utility company was named by Site Selection magazine as one of the “Top Utilities of the Year” that helped “jobs come home.”

“They are willing to spend millions of dollars to help support growing the market place with new employers and new jobs—everything that drives economic development—knowing that they may not sell the businesses 1 kilowatt of power. They have project managers who specialize in specific industries, such as data centers, technology or manufacturing. And they are oftentimes conduits for new business to commercial real estate companies,” says Mathews. knowledge-leader.com

2Atlanta, Georgia Home to nearly 5.5 million people, the Atlanta metropolitan area covers 29 counties, 8,000 square miles and four area codes. Helping to coordinate the economic development efforts of all its local jurisdictions is the Metro Atlanta Chamber—the only business organization of its kind in the area. While chiefly privately funded, the chamber does partner with other EDOs on specific projects.

Hans Gant, senior vice president of economic development for the chamber, says the organization’s top priority is “selling Atlanta around the world.”

The organization focuses on very specific industries, clusters and sub-clusters, including advanced manufacturing, such as aerospace, pharmaceutical and automotive industries; technology sectors, such as mobile technologies, network security and financial transaction processing; biosciences, including pharmaceutical and medical devices; and health care information technology (IT). “We lead the nation in health care IT jobs,” Gant notes.

The Metro Atlanta Chamber also assists existing Atlanta companies, whether by helping them to expand at home or connect to opportunities abroad. “Traditionally, our role was the recruitment of new companies, and now we have more resources to help existing companies with their growth plans,” says Gant. “We are also focused on helping technology start-ups, working with business incubators and the Atlanta Tech Village,” a 103,000-square-foot campus that provides office space for, and promotes connections among, technology and technology-related companies.

Another area that the chamber has begun putting its resources into is strengthening the relationships between businesses and higher education. “We think there are tremendous opportunities to develop businesses from the research done at the Georgia Institute of Technology, as well as opportunities for collaboration between the two to spur economic development. We inform the business community of opportunities in research, cooperative programs and

internships,” Gant says.

To further facilitate its economic development efforts, the Metro Atlanta Chamber provides commercial real estate brokers with information on available resources, such as workforce training opportunities, university connections, potential suppliers and available state or local incentives. It also collaborates with local economic development agencies, introducing brokers to the appropriate organizations.

“There is a very close working relationship between Colliers and the Metro Atlanta Chamber, the state Department of Industry and Trade, and Georgia Economic Development and Trade, as well as individual political entities in this particular area. Members of our firm serve on committees at the chamber—I am one of several people who serve on the economic group that works as a subset of the chamber. The purpose of the group is to get feedback from the major commercial real estate firms on how the chamber can best sell Atlanta,” says Bob Mathews, SIOR, President and CEO of Colliers’ Atlanta office.

On average, companies take six to eight months, from introduction to relocation, although some deals have taken as long as five years. The average size of the company relocating to the area is 100– 120 employees. In 2011 and 2012, the chamber recruited more than 160 new companies to the Atlanta metropolitan area and created more than 20,000 new jobs. In 2013, through the end of June, the organization had already recruited nearly 50 new companies, creating 6,000 new jobs.

“AirWatch, which offers software solutions for mobile systems, just announced that it is adding 800 new jobs in Atlanta. In addition, Ernst and Young is locating their shared services center for the Americas here, creating nearly 500 jobs,” says Gant, adding, “We don’t do this in a vacuum; we work with a lot of partners, including the Georgia Department of Economic Development, Georgia Power Economic Development and the Technology Association of Georgia.” K L

Bonus Checks (and Balances)

When it comes to helping its clients obtain incentives, Colliers International has partnered with ADP—the company perhaps best known for its payroll and human resource services. ADP consults with Colliers clients interested in pursuing tax credits, infrastructure improvements and other incentive packages, as well as on the subsequent required reporting.

ADP will also work with the client to ensure the company capitalizes on the credits awarded to it and that all of the mandatory reporting is completed and the stipulated requirements to receive the incentives are met.

“ADP will make sure they get all the after-credits when they are due, long after the deal is done,” says Mathews. knowledge-leader.com

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Investment/Leasing Opportunities A SELECTION OF COLLIERS INTERNATIONAL AVAILABLE PROPERTIES

North Rhett Commerce Center

FOR lease

Industrial Facility

• 8.60-acre development site fronting major highway • Combination of small-bay industrial, office and retail space for lease, offering flexible terms

Light Industrial Fee Simple Lots for Sale, ½ Acre and Up

Mort Fetterolf mort.fetterolf@colliers.com Erin Dee erin.dee@colliers.com

Hagood Morrison, SIOR +1 843 723 42650 hagood.morrison@colliers.com FOR sale

5421 US Hwy 25 North Hodges (Greenwood), South Carolina

• Premier manufacturing and distribution facility • 528,456 SF warehouse and corporate offices • 184 +/- acres • 3 floors – 80,000 SF office space • 24 dock-high and 4 drive-in doors – all electric • All utilities • Sale price: $10,500,000

Megacenter Palmetto 8600 S River Drive Miami, Florida

5801 North Rhett Avenue Charleston, South Carolina • Take advantage of Charleston’s 48’ draft and post Panamax vessel readiness • Superior logistics location proximate to container terminals and the new Boeing 787 plant with multiple routes to the interstate.

• Rail, truck scale and abundant outside storage • 100,000–300,000 SF available

FOR lease

+1 305 446 0011

Riverfront Plaza (Bldgs. 1, 2 and 3)

FOR lease

1 allied drive Little Rock, Arkansas

Givens Stewart, SIOR +1 864 527 5430 givens.stewart@colliers.com for Sale

• Building 1 and Building 2 are 7-story at 90,247 SF per building • Includes a 70-seat A/V equipped auditorium and on-site fitness center • Building 3 consists of grand entryway and 8,000 SF, fully equipped restaurant space and large al fresco dining area • Locate on the banks of the Arkansas River with beautiful views of the surrounding bluffs

Plaza Five Fifty-Five

isaac smith, ccim, sior +1 501 372 6161 x 736 isaac.smith@colliers.com www.colliers.com/littlerock FOR lease

555 Capitol Mall Sacramento, California

Kahului, Maui Hawaii www.mauibusinesspark.com • 65 fee simple light industrial lots (includes retail, warehouse and office uses) • ½ acre and up • Starting at $38/PSF • Private dual water system supply • Underground utilities • Near airport and harbor

Marty Kenney (B) +1 808 214 1914 marty.kenney@colliers.com Chris Millen (S) (CCIM) +1 808 298 4676 chris.millen@colliers.com Bill Froelich (JD) (CCIM) (SIOR) +1 808 636 3999 william.froelich@colliers.com

• On-site property management • On-site gym with showers • Tenant conference center with video conferencing available • Wi-Fi (wireless internet) • On-site concierge services • On-site high-end restaurant and café cart • Close walk to Capitol Building

Jason Rutherford +1 916 563 3059 jason.rutherford@colliers.com www.colliers.com/sacramento

Investment/Leasing Opportunities A SELECTION OF COLLIERS INTERNATIONAL AVAILABLE PROPERTIES FOR lease

Cross-load Logistics Center Airport Gateway Center – 1030 Runway Drive Stockton, California

• Building Size: ±443,640 SF • Office Area: ±6,000 SF of general office space and ±400 SF shipping office • Minimum clear height: ±30’ • Power: 4000 Amps, 277/480 Volt, 3-Phase • Loading: 79 (±9' x ±10’) dock-high doors with 35,000 lb. pit levelers/ shelters • 8 (±12’ x ±14’) grade-level doors

New LEED Gold Office Building

988 West Broadway Vancouver, British Columbia

Mike Goldstein, SIOR +1 209 475 5106 michael.goldstein@colliers.com Gregory O’Leary, SIOR +1 209 475 5108 g.oleary@colliers.com

• 90,000 SF of LEED® Gold commercial space • Building naming rights available • Decks on most floors • Efficient floor plates and latest building systems • Views • Penthouse amenity room with fitness facility, meeting room and large landscaped deck

www.colliers.com FOR sale & Lease

Burlington Outlet Village

First Canadian Centre

Jim Anthony, Jr., SIOR +1 919 832 1110 jim.anthony@colliers.com

• Unique contiguous, 7-floor sublease opportunity with internal stairwell centrally located in Calgary’s downtown core • Ample concealed file storage built in on every floor • Furniture available • Large conference room available free of charge – first come basis

FOR Lease

Tri-State International Office Center

Freestanding Building with Freezer Space

25-300 Tri-State International Lincolnshire, Illinois

20 Guthrie Avenue Dorval, Québec

• 5-building, 558,000 SF office complex • Conveniently situated at the fourway I-94 / Route 22 interchange in Chicago’s north suburbs • Owned by Principal Real Estate Investors • Ownership is renovating the complex’s amenities and common areas.

Marco DiPaolo* +1 604 661 0838 marco.dipaolo@colliers.com Doug LePatourel* +1 604 661 0841 doug.lepatourel@colliers.com www.broadwayandoak.com *Personal Real Estate Corporation FOR SUBlease

350 – 7th Avenue SW Calgary, Alberta

Corporation Parkway and Plaza Drive Burlington, North Carolina

· Re-invention opportunity · 9 Buildings, ± 250,853 SF · Visibility from highly traveled I-40/I-85 · Excellent Central NC location · Flexible zoning and uses · Can be purchased in whole or in part · Contact broker for pricing

FOR lease

®

Steve Kling +1 847 698 8256 steve.kling@colliers.com Chris Cummins +1 847 698 8255 chris.cummins@colliers.com

• 1,252,224 cubic feet of freezer volume • 5,375 SF of dry storage space • Fully racked 4,200 pallet positions • Fenced yard • Additional land for expansion • Clear height of 32 feet (freezer area) and 24 feet (shipping area) • Building and equipment in pristine condition

Sharma Christie sharma.christie@collierscalgary. com David Harvey david.harvey@collierscalgary. com +1 403 266 5544 for Sale & lease

Norman S Laff +1 514 764 2824 norm.laff@colliers.com Jean-Marc Dube +1 514 764 2829 marc.dube@colliers.com www.collierscanada. com/10203

Investment/Leasing Opportunities A SELECTION OF COLLIERS INTERNATIONAL AVAILABLE PROPERTIES

Flagship Industrial Park

FOR SALE OR BUILD-TO-SUIT

I-69 & State Roads 9 & 67 Anderson, Indiana

Okanagan Highway Retail 2486 Highway 97 Kelowna, British Columbia

• 100,000 SF–2,500,000 SF build-to-suit opportunity • Up to 365 acres available • 10 year tax abatement available • Immediate access with dedicated on-ramp to Interstate 69 W. Dustin Looper +1 317 663 6557 dustin.looper@colliers.com

• 2.78 acres at Hwy 97 & Hwy 33 intersection • Maximum traffic exposure, frontage on Hwy 97 & Hwy 33 • Near Walmart, Costco, Canadian Tire, Safeway, Orchard Park Mall, Home Depot, Tim Hortons • High Density - C4 Urban Centre Commercial

http://bit.ly/flagshipindy

Minneapolis Corporate Campus

FOR lease

4800 East River Road Fridley, MN

• Infill new development within the I-494/I-694 Loop • Build-to-suit and multi-tenant availabilities from 50,000 SF–450,000 SF • 24' – 32' clear height, energy-efficient construction • 122-acre site with fiber, rail, and access to a large local labor force and the Minneapolis CBD • Corporate Campus opportunity

Olive Branch Distribution Center

Robert Gauley +1 250 861 8109 robert.gauley@colliers.com Philip Hare +1 250 861 8119 philip.hare@colliers.com FOR lease

Prologis Park Meadowvale 3255 & 3275 Argentia Road Mississauga, Ontario

Jason Simek +1 952 897 7898 jason.simek@colliers.com Eric Batiza +1 952 837 3007 eric.batiza@colliers.com for lease

11244 Distribution Cove Olive Branch, Mississippi • 371,590 SF available with back-up generator • 32' clear height • 48 dock-high (with levelers, shelters & restraints) & 2 drive-in doors • T-5 energy-efficient lighting • 130' fenced truck court with guard house • 91 striped trailer spaces in 180’ multiple trailer locations

FOR sale

• 378,245 SF & 531,395 SF • Construction underway • Occupancy Fall 2013 • Substantial trailer parking available • Close proximity to Highway 401 interchange • Adjacent to Lisgar GO station • Facilities to be registered for LEED® certification with the CaGBC

Gord Cook gord.cook@colliers.com Ian GRAGTMANS

ian.gragtmans@colliers.com

+1 416 777 2200 www.collierscanada.com/6832 www.collierscanada.com/6834

Mississauga Executive Centre (MEC)

FOR lease

Robert Speck Parkway Mississauga, Ontario Brad Kornegay +1 901 312 5751 brad.kornegay@colliers.com Al Andrews +1 901 312 5788 al.andrews@colliers.com Tim Mashburn +1 901 312 5771 tim.mashburn@colliers.com www.colliers.com/memphis

• First LEED® EB Gold Certified buildings in Mississauga • Various sizes and model suites available • Multi-million dollar renovations provide spacious and contemporary entrances • Less traffic congestion due to vast network of public transportation and proximity to highways • Amenities and lunch options within walking distance

Domenic Galati +1 416 620 2834 domenic.galati@colliers.com Ron Jasinski +1 416 620 2801 ron.jasinski@colliers.com www.collierscanada.com/6304

Investment/Leasing Opportunities A SELECTION OF COLLIERS INTERNATIONAL AVAILABLE PROPERTIES FOR Lease

Fairfax Square 8045, 8065, 8075 Leesburg Pike Vienna, Virginia

• 525,000-square-foot trophy office and retail complex • High-end retail and restaurants on-site: Tiffany & Company, Hermès Paris, Elizabeth Arden Red Door Spa and Equinox • State-of-the-art fitness center • On-site property management and security • Convenient access to Beltway

South Fraser Industrial Centre 7831-7979 Vantage Way Delta, British Columbia

Andy Klaff +1 703 394 4848 andy.klaff@colliers.com Chad Arnold +1 703 394 4833 chad.arnold@colliers.com Jeff Tarae +1 703 394 4850 jeff.tarae@colliers.com FOR lease

Wells Fargo Tower

• Convenient location on the only South Fraser Perimeter Road interchange servicing Tilbury • Quick, easy access to Deltaport, Highways 99, 91 & 1 via the new SFPR • 30' and 31' ceiling heights • Energy-efficient T5 HO lighting on motion sensors • From 600A, 600V, 3-phase electrical service up to 10MVA electrical service • ESFR sprinklers

Darren Cannon* 1 604 662 2637 darren.cannon@colliers.com *Personal Real Estate Corporation FOR lease

Yellowhead Crossing II

Joe Sandner, IV +1 205 949 5981 joe4.sandner@colliers.com John Hennessy +1 205 949 5982 john.hennessy@colliers.com

• Premier distribution campus development • Multiple buildings with state-of-the-art features • Situated within the heart of Edmonton’s northwest industrial district • Quick access to Edmonton’s major ring road & Trans-Canada Highway • Yard storage/trailer parking available • 24,200 – 323,125 SF available

FOR lease

200 Public Square

Class A Industrial Building

200 Public Square Cleveland, Ohio

• 45-story, 1.2 million SF Class A office building • Spectacular 360 degree views of downtown Cleveland and Lake Erie • On-site fitness center, attached parking garage, dining options, banking facilities, 24/7 security, and conference rooms • Close to all downtown attractions

Stuart Morrison * +1 604 662 2676 stuart.morrison@colliers.com

186 STREET & 116 AVENUE Edmonton, Alberta

420 North 20th Street Birmingham, Alabama

• Premium Class A office • State of the art building systems • Up to 70,000 SF of contiguous space available • On-site leasing and management • Beautiful views overlooking downtown • Walking distance to an abundance of restaurants • Seven-level parking deck • On-site banking • 24-hour security

FOR lease

ROD CONNOP +1 780 969 2994 rod.connop@colliers.com EVELYN STOLK +1 780 969 3002 evelyn.stolk@colliers.com www.collierscanada.com/10061 FOR sale & lease

5565 Broadmoor Avenue SE (M-37) Grand Rapids, Michigan Brian A. Hurtuk, SIOR brian.hurtuk@colliers.com Russell Rogers, SIOR russell.rogers@colliers.com Bill Stevens bill.stevens@colliers.com Ryan Fisher ryan.fisher@colliers.com 216-239-5060 www.200psq.com

• Quality 885,781 SF manufacturing facility • 25’ ceiling height • 8” reinforced floors • 26 dock doors/3 grade doors • Heavy power capacity and distribution • Robust infrastructure • 10–20 ton crane capacity • Excellent highway and airport accessibility

Duke Suwyn SIOR, CCIM duke.suwyn@colliers.com John Kuiper SIOR, CCIM john.kuiper@colliers.com +1 616 774 3500

$

personal biz

En ha n cin g t h e e x ecu tiv e lifest y le

Maximize Your Mileage Flying smarter can save you money.

by Molly Abel

”follow the money” may originally have referred to political intrigue,

but the phrase could also describe the current convoluted world of frequent flier miles. The state of the economy has had a significant effect on the value of travel award points and your freedom to cash them in: Points that would once get you halfway around the world now may barely get you across the state. Here are some tips, best practices and tools to make the most of your miles.

Wait for me!

Redeeming your frequent traveler points can be a headache, but following a few tips can greatly ease the pain. One of the simplest techniques—similar

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to booking a cheap flight—is to reserve seats at the last minute. In 2012, the Airlines Reporting Corporation reported that six weeks had become the “sweet spot” for getting the best fare, and in May 2013, The Wall Street Journal’s study of frequent-flyer redemption rates found that you were more likely to get an award seat 1–2 weeks ahead than if you booked months in advance. Of course, this isn’t always possible for business travelers, or if you absolutely need a definite departure and arrival time. In addition, be aware that this tip is well known, so expect a lot more difficulty getting a seat during holidays. Some airlines charge a fee for booking too close to a departure time, but this may still cost far less in total than reserving months in advance.

knowledge-leader.com

Earn 'em to burn 'em

There are more ways to earn miles than simply flying. One of the easiest ways to accrue miles without flying is to use a credit card affiliated with your preferred airline. Southwest Airlines partners with Visa, for example, and Frontier Airlines partners with MasterCard. Creditnet ranked Capital One’s Venture® Rewards card as best overall, owing to the flexibility of its redemption policies. Sign up for one of these branded cards, and your purchases will automatically begin translating to mileage points.

Choose wisely

The grudgingly slow economy has meant a much more homogenous offering in airlines miles programs. However, competition still exists for customers, so your choice of airline has a large effect on when and how you can earn miles. The New York Times reported that Southwest had the best availability for using frequent flier miles, followed by United and JetBlue. American Airlines, US Airways and Delta had the least availability.

Money over miles

United Airlines’ MileagePlus® program and Delta’s SkyMiles® program both recently changed their requirements for elite-flier status to a system based on dollars spent, not just miles flown, in order to more fairly reward customers who spend the most rather than those who simply fly often. Travelers may or may not find this change favorable, but if you often need to book high-cost trips, the change can certainly be beneficial.

>

China Airlines, KLM Royal Dutch Airlines and others. Points can also be spent at specific hotel chains; Delta has a partnership with Starwood Hotels, and United partners with several brands, including Radisson and Sofitel.

The fine print

Keep in mind that taxes and fees are often not included in redeemed points. Most airlines charge about $20 for each piece of checked luggage, but some can charge as much as $50, especially if you don’t have VIP status with the airline (through using its credit card, for example). These can still add up to lower total flight costs than booking with cash, however.

Extra excursions

It’s also a good idea to take advantage of stopovers. Unlike layovers, which last a few hours and are generally a waste of time for travelers going on to other destinations, stopovers leave enough time to explore a location or conduct a business meeting. Many flights to Europe and the Middle East stop in Ireland or Germany, and many routes to South America stop in Miami. Planning your agenda to include these stops can save you thousands in additional flights.

Close enough

As in many aspects of life, it pays to be flexible.

Off-peak times can sometimes require fewer points for the same travel during busier times.

For example, flying to Orlando during winter can cost more than twice as much as flying in the fall when many families are starting the school year. If you must fly during busy times,

Letting miles expire

is like throwing away money.

Friends with benefits

Many airlines (again, due in part to the economy) have partnered with each other so passengers can transfer points from one carrier to another. For example, Delta’s points can be spent with Alaska Airlines, Air France, knowledge-leader.com

try altering your destination to a smaller airport: Low-cost regional carriers can fill the gap between your landing and your destination.

The plane may be smaller, but that means less time waiting for row after row of passengers to board and deplane.

Resources

The world of managing and using frequent flier miles is surprisingly large, reflecting the demand for services to help consumers make the most of their rewards. Here are a few to keep in mind: • MileValue is an information-packed blog offering free advice on gaining and using award points, and offers an award booking service through which travelers can obtain better deals than if they were to book on their own. www.milevalue.com • Third-party sites like ExpertFlyer keep track of open award seats for all major carriers. Depending on your subscription ($5 or $10 a month), you can access its database of awards and upgrades, and receive email alerts about seat availability or even preferred flights. The site is extremely user-friendly and can be accessed via Android or iOS app. www. expertflyer.com • Letting miles expire is like throwing away money—so services such as Points. com allow members to use points for gift cards from major retailers, such as Target and Macy’s, for varying points on the dollar. Currently, the company also can consolidate point totals for more than 100 different loyalty programs, giving you a convenient place to keep track of miles, credit card reward points, hotel rewards and more. www.points.com • Organizing and consolidating your points is fast becoming a full-time job, so many sites exist to help you track miles from multiple programs, including Award Wallet, which tracks more than 500 programs (www.awardwallet.com), Mileage Manager, the oldest tracking service available (www.mileagemanager.com) and Mile Tracker, affiliated with USA Today (www.miletracker.com).

Finally, don’t forget you can also donate your miles to charity. Most major carriers, including United, American and Southwest, have donation programs, and some will even credit you additional miles to match your cash donations. K L Colliers international fall 2013

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csr

co rp o r at e s o cial resp o nsibilit y

One hundred percent of waste was diverted from landfills at the 2013 Waste Management Phoenix Open, the biggest tournament on the PGA Tour.

Waste Not

Waste Management’s Zero Waste Challenge is a win for the environment.

by Teresa Kenney

At the 2013 Waste Management Phoenix Open (WMPO), Phil Mickel-

son may have taken home the trophy, shooting a 4-under-par 67 to close, but the tournament’s true winning score was a solid zero—as in title sponsor Waste Management’s Zero Waste Challenge. Through the challenge, 100 percent of waste generated by the tournament was diverted away from landfills and into recycling and composting facilities.

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This achievement is even more impressive when you consider that the Waste Management Phoenix Open—called the “Greatest and Greenest Show on Grass”—is the biggest tournament on the PGA Tour, attracting the largest crowds of any golfing event in the world. In 2013, the crowd at the Open reached nearly 526,000, with a record-breaking one-day attendance of 179,022. knowledge-leader.com

Headquartered in Houston, Waste Management is the leading provider of comprehensive waste management services in North America.

The company’s vice president of corporate communications and community relations, Lynn Brown, says that Waste Management worked with other vendors involved in the tournament, consulting with them on how they could be more green at the Waste Management Phoenix Open. As part of their participation in the Challenge, tournament vendors pledged to provide only recyclable, reusable and compostable materials at the event.

Beyond diverting 100 percent of waste from landfills, the goal of the Zero Waste Challenge, says Brown, was to increase awareness of Waste Management’s recycling services. During the event, some 1,000 Recycling Ambassadors were on hand to answer questions from tournament attendees, and monitor recycling and compost receptacles. In addition, signage along the course and QR codes on recycling and composting bins explained the challenge.

Some of the strategies used to achieve the zero-waste goals included providing hand sanitizers in place of water at hand-washing stations and using water recaptured from cooking and cleaning in the onsite portable toilets. Additional efforts included: • Using diesel and biodiesel fuel in generators, refrigerated trucks and light towers; • Generating 100 percent of the electricity used for the event through renewable energy; • Powering the hospitality tent through solar energy; • Using trucks fueled by compressed natural gas to haul the waste; and, • Incorporating 60 solar-powered compactors along the course. The compactors hold five times more waste than traditional, non-compacting bins.

To assist in the planning process, Waste Management incorporated the ISO 20121 Event Sustainability Management System—the same standard used to plan the 2012 Summer Olympic Games in London. The 2013 Waste Management Phoenix Open also achieved Gold Certification from the Council for Responsible Sport. This recognizes the successful completion of a socially and environmentally responsible sporting event based on Waste Management’s innovative programs to dramatically increase knowledge-leader.com

Recycling and composting bins explaining the Zero Waste Challenge were placed throughout the tournament venue.

environmental and social responsibility at the tournament.

In conjunction with the WMPO, Waste Management hosted the third annual Executive Sustainability Forum, bringing together business executives and some of the country’s leading voices on sustainability, including William McDonough, a designer, architect and author who has been hailed by Time magazine as a “Hero for the Planet.”

In addition, Waste Management and The Thunderbirds—a tournament host and a prominent Phoenix civic organization—donated $1 for every person who wore green to the event.

When all was said and done, approximately $60,000 was donated to environmental organizations, such as Keep Phoenix Beautiful, Arizona Forward and Keep America Beautiful.

The Zero Waste Challenge is just one of the sustainability initiatives that Waste Management has in place. “In 2007, we announced our own goals for sustainability, which include increasing the amount of recycled materials handled, creating more waste-based energy, preserving more wildlife habitat and reducing emissions,” Brown says. With a goal of managing more than 20 million tons of recyclables by 2020, in 2011, the company extracted nearly 12.9 million tons of recyclables from the waste stream—61 percent more than was extracted in 2007.

Businesses interested in setting or increasing their own sustainability goals can take advantage of Waste Management’s sustainability consulting services, which include Waste to Resources Assessments, corporate sustainability reporting, compliance solutions and assistance in achieving sustainable building certifications, such as Leadership in Energy and Environmental Design (LEED) and Green Globes. In 2012,

Waste Management’s consulting services saved its clients $19.85 million.

“Our consulting services help companies become more efficient, reduce costs and achieve their sustainability goals,” Brown says. Past successes have included Waste Management’s work with Alcoa, the world’s leading producer of primary and fabricated aluminum and the world’s largest miner of bauxite and refiner of alumina.

The company wanted a way to recover excess aluminum oxide from its aluminum production plant in Massena, New York. Together, Waste Management and Alcoa designed and implemented a comprehensive resource recovery plan that enabled Alcoa to reclaim 20–25 tons of aluminum oxide per week. All told, the program is currently generating an estimated $500,000 annually in discovered value.

Most recently, the company announced a partnership with the Cradle to Cradle Products Innovation Institute, an international nonprofit organization founded by sustainability thought leader McDonough, which guides product manufacturers and package designers in making safe and healthy products.

Through the initiative—called the Waste Management McDonough Sustainable Innovation Collaborative—the two companies will help foster and guide future product and packaging design innovation among industry-leading companies, focusing on producers, manufacturers, retailers and suppliers of packaged goods and products. Product and packaging design for recyclability as well as careful consideration of ecological and human health are among the collaborative’s goals.

For more information on Waste Management’s sustainability consulting services or the Waste Management McDonough Sustainable Innovation Collaborative, visit www.wm.com. K L Colliers international fall 2013

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In Focus

Fro m t h e Presid en t & CEO

Nice Guys Do Finish First Conventional wisdom dictates that busi-

ness success is achieved through a series of hard-fought battles, each producing a clear winner and a loser. Winners don’t win by being nice. They win by adopting a take-no-prisoners approach, leaving them little time or energy for getting involved in the messy, real-life problems of others.

But I embrace a different model for success, one in which there is a collective focus on helping others which actually produces a culture of winning, bringing with it both satisfaction and abundance.

While “works for the welfare of others” doesn’t rank high on the list of traits we attribute to business leaders, it’s precisely this quality that is transforming companies and communities every day. Some consider this helping approach “soft” or inferior to the traditional cutthroat model of business success. I take exception to that view. It has always been my experience that people who wake up each day with a helping attitude are happier and more successful in all areas of their lives—and research seems to be on my side.

The New York Times Magazine recently profiled organizational behavior expert Adam Grant, who has produced an impressive body of research on this subject. At just 31 years old, Grant is the youngest tenured—and highestrated—professor at the prestigious Wharton School. His influence extends beyond academia to top-tier companies, which seek his help in solving their most pressing organizational problems.

So what does a somewhat obscure field of academic research have to do with business success? Organizational psychology has traditionally operated under the assumption that employers must appeal to workers’ self-interest: 40

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financial incentives, career advancement, etc.

But Grant argues that the greatest untapped source of motivation is a sense of service to others. He believes, as I do, that focusing on the contribution our work makes to other people’s lives can make us more productive than focusing on ourselves.

Make helping a habit

Grant’s conclusions don’t surprise me. I see this principle in action every day, and I work to apply it wherever I can. The simple act of asking my wife, “What can I do to make your day easier?” each morning, a habit I’ve developed over many years, makes a meaningful difference in our family life. And while I can’t always come through for her, just the offer of help pays dividends.

As the CEO of a $2 billion company, helping takes on even greater meaning. It’s my responsibility to ask: “What can we do with our resources?” Part of the answer is philanthropy— giving back to the communities we serve. But that kind of giving is only part of the answer. I believe the answer has more to do with how we treat the professionals and employees who are at the core of our success, and how we continue to encourage a culture of helping throughout our organization. I hear stories nearly every day about what my colleagues around the world do to ensure that their work “families” are supported. They have each other’s backs, and I know they, and the business, are better off for it.

Adopting an attitude of giving—to your family, coworkers, clients or perfect strangers—is simply easier than the alternative. And I’m confident that the habit of helping can be learned.

I’ve seen it change the way people think about themselves and transform the way they interact with others. This attitude may spring from

Doug Frye is the Global President and Chief Executive Officer for Colliers International.

the individual who practices it day in and day out, but it gains real strength when it’s applied by entire organizations. Helping breeds more personal and career satisfaction and, not surprisingly, better results.

Unexpected rewards

Let’s be clear: This isn’t just about feeling good for the sake of feeling good. Professor Grant’s research demonstrates beyond any shadow of a doubt that having a helping mind-set makes people more productive. In one of his most telling experiments, Grant motivated fundraisers at a university call center by getting them to focus on how their efforts would be helping fellow students.

They heard testimonials from beneficiaries of their fundraising, and read letters from grateful scholarship recipients. Previous motivational efforts such as incentives and competitive games had failed, but Grant’s approach got results.

A month into the experiment, students were spending 142 percent more time on the phone and bringing in 171 percent more revenue, using the same script that was used prior to the experiment. Over time, revenues quadrupled.

In our business, a helping attitude comes with the territory. Whether it’s supporting our clients through a stressful move, or helping our colleagues across geographies and disciplines to meet client needs, we’re creating a movement with unlimited scale and potential. It starts with each of us as individuals, finding satisfaction and fulfillment in making others successful. But when individual efforts grow into a groundswell of giving, everybody wins.

And that’s just good business. K L knowledge-leader.com

Kenna Klosterman

Lending a helping hand is a win for all. by doug frye