The Leader by Tim Schelle

➲ NEW COLUMN! LEGALLY SPEAKING: GOT LEGAL QUESTIONS? WE’VE GOT ANSWERS.

JULY/AUGUST 2013

Change Agent: Norma Miller, The Gates Foundation (PAGE 40)

CoreNet Global’s 2020 Predictions Bearing Fruit (PAGE 44)

Fusing the Super Nucleus:

Win the Quest for Talent with a Culture of Flexibility (PAGE 14)

We work with the worldâ&#x20AC;&#x2122;s leading organizations to create places that amplify the performance of their people, teams and enterprise.

Steelcase researchers have identifed 8 different structural models of innovation within organizations, each with its own implications for how to use space to improve the speed and outcomes of innovation efforts. Simply stated, the right spaces make innovation work. To read more about this research, visit steelcase.com/innovation.

THE LEADER IS PRINTED ON RECYCLED PAPER

LEADERSHIP

CORENET GLOBAL BOARD OF DIRECTORS YOUR LEADERSHIP MAKES THE DIFFERENCE. EDITOR Richard Kadzis MANAGING EDITOR Nichole Bazemore

CONTRIBUTING WRITERS Nichole Bazemore Joseph Dobrian Sonali Tare CREATIVE DIRECTOR Bonnie Hofto ADVERTISING MANAGERS Michael Mooney Tim Abrams Matt Dirks

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OFFICERS Jim Scannell, Chair Senior Vice President Administrative Services The Travelers Companies, Inc. Randy Smith MCR, Chair-Elect Vice President Real Estate and Facilities Oracle Steven Quick, Treasurer Executive Managing Director CBRE T. Patrick Donnelly, Governance Committee Chair Principal BHDP Architecture David Goch Legal Counsel to CoreNet Global Webster, Chamberlain & Bean DIRECTORS

ADVERTISING & PRODUCTION OFFICES CoreNet Global 2430 Broadway, Suite 200 Boulder, CO 80304 Toll Free: 866.362.4181 Phone: +1.303.565.4023 Fax: +1.303.443.6943 E-mail: leader@corenetglobal.org THE LEADER, CoreNet Global’s Official Publication, is published six times a year, as a bi-monthly publication commencing January/February, by CoreNet Global. Subscription rates for non-members (in U.S. dollars): = in the United States, $75; in Canada, $85; outside North America, $95. To order, contact Nicki Williams at 404-589-3241 or nwilliams@corenetglobal.org. Office of Publication: CoreNet Global, 2500 Broadway St, Ste 200; Boulder, CO 80304-4237. The opinions expressed in this publication are not necessarily those of the association. THE LEADER is sent as a benefit of membership to all members of CoreNet Global. Articles published in this magazine may not be re-printed without written permission from the Editor. Editorial inquiries should be addressed to Nichole Bazemore at nbazemore@corenetglobal.org. POSTMASTER: Send address changes to: THE LEADER; 2430 Broadway St, Ste 200; Boulder, CO 80304 or leader@corenetglobal.org.

THE LEADER | July/August 2013

Erica Chapman, Esq. Head of Real Estate (NAFTA/ LatAm) & Attorney OSRAM SYLVANIA Micheal Creamer Partner and Head of EMEA, Corporate Occupier and Investor Services Cushman & Wakefield Brian Crockford Business Operations Manager, RE&F Microsoft Corp Kate Langan Group General Manager Property ANZ Banking Group Kenneth Manke Vice President Workplace Services Unilever Irene Masterton GM Retail Real Estate Shell International Petroleum Company Limited

Denis McGowan Group Head CRES Business Alignment & Asset Management Standard Chartered Bank

Tom Donatelli Vice President – Real Estate & Portfolio Management Pfizer Incorporated

Sean Prasad Vice President, Real Estate and Facilities T-Mobile

Larry Ebert Head of Corporate Project Management Cushman & Wakefield

Doug Sharp President Corporate Solutions Americas Jones Lang LaSalle

Scott Foster, MCR Senior Vice President, Corporate Workplace Bank of America

Christopher L. Staal, MCR Vice President and Global Head, Real Estate and Workplace Solutions Thomson Reuters

Thomas Glatte Corporate Real Estate Management BASF Group

Terry Wood Global Real Estate, VP Americas Hewlett-Packard Company ASSOCIATE DIRECTORS Jessica Beers VP, Business Development DTZ, a UGL company Michael Nuby Manager, Project Management Division, Economic Development Services Southern California Edison Gina Rizzo Global Client Relations Herman Miller, Inc. Kent Wiegel Partner Capstan Advisors EDITORIAL ADVISORY COMMITTEE George Bouri, MCR, SLCR Consultant New York Del Boyette Principal, Boyette Strategic Advisors

David Kontra Manager, Real Estate Operations General Electric Rick Kriva Vice President, Global Real Estate Honeywell Sally Maxwell Program Manager IBM Real Estate Operations Richard M. McBlaine Chief Executive, Strategic Consulting Jones Lang LaSalle Keith Perske Head of Global Workplace Innovation Johnson & Johnson Robin Ronne Managing Director, CEO Council Greater Fort Lauderdale Alliance Jim Scannell Senior Vice President, Administrative Services The Travelers Companies Tony Shou Fat Wong, MCR Director, Workplace Resources, APJ Corporate Real Estate Cisco Systems

Florida Power & Light Company Offce of Economic Development

PoweringFlorida.com

“FPL’s enhanced marketing efforts and resources provided to EDOs and the state are proving to be valuable assets for attracting and expanding business in Florida.” – Kelly Smallridge, President & CEO, Business Development Board of Palm Beach County

“FPL’s economic development rate will help not only in reducing our cost of operations at Tradition Medical Center, but we’ll be able to reinvest those savings into top quality health care.” – Mark Robitaille, President and CEO, Martin Health System

Connecting you to Florida Florida offers a world of opportunities. PoweringFlorida.com is the place to connect you to all of them. PoweringFlorida.com gives you immediate access to available real estate, workforce information and detailed community profiles 24/7 on your computer, iPad, or smart phone. For more information on PoweringFlorida and FPL’s discounted business rate for companies that relocate or expand in Florida, contact FPL’s Offce of Economic Development at 888-488-7703 or PoweringFlorida@FPL.com

“PoweringFlorida.com has achieved a frst: bringing the best planning and workforce data together in one click. What that means for companies and their site selectors is insight – unfltered and unparalleled insight.” – Del Boyette, President & CEO, Boyette Strategic Advisors, a leading site consulting frm

JULY/AUGUST 2013

TABLE OF CONTENTS

VOLUME 12, ISSUE 4

14 FEATURES

14 18 22 26

WIN THE QUEST FOR TALENT WITH A CULTURE OF FLEXIBILITY An emphasis on self-direction and outcomes is reshaping the world of work

Adapting to Change Learn how companies are using strategy and transformation to succeed in a tough economic climate

Getting to the C-Suite by Actually Working with the C-Suite A case study in updating skill sets and practice focus

Multi-tasking Large-Scale Initiatives BMO Harris navigates change via two acquisitions and a rebrand

THE LEADER | July/August 2013

30 34

DEPARTMENTS

IFRS Lease Accounting As regulation looms, corporations become more transparent about their lease obligations

Urban Courtyards Outdoor spaces spawn workplace creativity

EXECUTIVE PROFILES

Industry Tracker CoreNet Global's Key 2020 predictions are playing out as forecasted

Leadership

Message from the CEO

CRE in the News

NEW COLUMN!

Economic Developer Robin Sullenberger, Shenandoah Valley Partnership

Service Provider Brian McNeese, Mace Group

In the first installment of our new column, learn how to protect yourself against mechanicsâ&#x20AC;&#x2122; liens

End User Norma Miller, The Gates Foundation

Dashboard 1st Quarter 2013

Members on the Move

A Look Ahead

Legally Speaking:

SPECIAL INTEREST FEATURE Plain States Report: ID, WY, MT, ND, SD, UT, CO

The Leader is now on Twitter! Follow us @CNGLeaderMag

CEO MESSAGE

Investing for the Future ❱ For CoreNet Global, that response is centered exclusively on the changing needs of our 7,900 members worldwide. Like any company, organization or network, associations have to grasp the continuum of change by understanding how it impacts their members, then anticipate ways to increase the relevancy of the organization. In many ways, we can view the continuum as an investment for the future. Te more proactively the continuum is addressed, the more momentum we gain. Te magnitude of change over the course of our Fiscal Year ending March 31, 2013, is playing out over a wide scope of touchpoints for our rising levels of member engagement, as our Fiscal Year 2013 Annual Progress Report demonstrates. Te report was mailed to all members globally in May. Listening and responding to you, we have taken some important steps this past year to crystalize our vision for the future, introduce a clear strategic plan for the next decade, increase our fnancial viability, evolve our programs and content to make them more market-responsive and interactive, and prioritized our growth potential geographically. As a result, members have more channels than ever to choose from, ofering multiple opportunities to increase the value and meaning of the member experience.

We have embarked on a massive change journey, and as such, members may not be aware of the full scope of our transformation. Te main purpose of this report is to capture and relate our widening scale to show the full potential value of CoreNet Global membership. Some key performance indicators from FY 2013 validate our new direction: ¶ An all-time membership high of 7,900 members ¶ More than 50 million mass and trade media impressions citing CoreNet Global ¶ Strong fnancials enabling growth in the reserve fund ¶ A new annual dues-billing model leveraging chapter revenue sharing ¶ Revenue sharing that opens up a new tranche of value creation locally and globally ¶ A more hands-on and participative, reimagined version of the 2.0 Global Summit model ¶ Global Summit learning segments that doubled from 118 to 270 ¶ More than 450 local Chapter programs delivered ¶ Nearly 650 senior corporate enduser participants in 30 Discovery Forums worldwide ¶ Te largest MCR graduating class in the association’s history: 1,546 students through 68 MCR/SLCR courses

As our progress report shows, the totality of CoreNet Global activities around the world is considerable. Te critical mass generated by a diverse range of programs and services and products and events, signifes an organizational culture of robust peer engagement and informed interactions that help our members advance their companies and careers. We’re striving to improve the member experience all the time, and thank you for your continued support and involvement.

Angela Cain, CEO

Message from the Managing Editor Thanks to ever-evolving technology, people in nearly every industry are witnessing major changes in the workplace – specifically, in how and where we work – and the commercial real estate (CRE) industry is no different. In 2012, CoreNet Global introduced its five- to 10-year strategic operating objectives, with the goal of exploring the intersection of a number of disciplines, including human resources, information technology, finance and CRE. As the new Managing Editor of the Leader, one of my goals is to honor those objectives by exploring what the changing workplace means for the CRE industry. To that end, over the next several months, you will see the Leader tackle issues you have not seen in this space before – stories related to diversity, sustainability, attracting a new generation of CRE professionals, and maybe even social media. My goal is to not just feature stories – but to start an ongoing dialogue about what the changing workplace means for our industry. But in order to do that, I need to hear from you: What types of stories and topics would you like to see covered in this magazine? Share your ideas with me at nbazemore@corenetglobal.org. - Nichole Bazemore

THE LEADER | July/August 2013

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Search Sodexo Workplace (http://bit.ly/Sodexoinsight)

CORPORATE REAL ESTATE IN THE NEWS

REITs Report Strong Growth in Q1 Real-estate investment trusts (REITs) reported robust earnings for the first quarter of 2013, with owners of high-end shopping malls and self-storage spaces posting the largest gains. According to WSJ.com, the slowly improving economy and strong tenant demand allowed landlords to raise rents, with some companies reporting record occupancy rates. Large apartment REITs also reported strong rental growth, but experts predict they could face a slowdown, due to rising competition and an increase in home ownership. Shopping malls reported strong growth in Q1 2013.

Worldwide Demand for Green Materials to Increase Global demand for green buildings and the materials used to build them will top $254 billion in 2020, according to a report by Colorado-based Navigant Research. Currently, the green construction materials industry accounts for $116 billion in sales worldwide, but a number of factors – including policies and regulations that prioritize energy efficiency, the expansion of voluntary certification programs for green build ings and consumer demand – are expected to stimulate interest in and sales of green materials.

Europe’s second-largest shopping center market, according to a study published by Cushman & Wakefield. Currently, Russia ranks third, behind France and the U.K., with 16,476 square meters (177,346 square feet) of shopping center floor space. Russia expects to complete an additional 2.4

2013, according to Jones Lang LaSalle’s Asia Pacific Office Index. The report, which was released in May, shows that leasing of office space in Singapore, Hong Kong, Australia and Beijing saw the greatest slowdown. Leasing remained steady in Japan, South Korea and Southeast Asia, but stayed strong in Manila and Jakarta, due to high demand. Net effective rents in the region were flat or grew modestly. Of the 27 markets surveyed, 14 saw a quarterly increase in rents. Jakarta saw the largest quarterly rent increase. Beijing and Hong Kong saw quarterly rental declines, while rents in Singapore stabilized for the first time since 3Q 2011.

“Real-estate investment trusts reported robust earnings for the first quarter of 2012, with owners of high-end shopping malls and self-storage spaces posting the largest gains.”

CBRE Tops List for Industrial Investment Sales During Q1 2013 CBRE was the top U.S. brokerage firm during the first quarter of 2013, according to a report by Real Capital Analytics. The report ranks the nation’s top 15 brokerage firms by investment volume, number of properties and region. CBRE tops the list, while Cushman & Wakefield, Eastdil Secured, Colliers International and NAI Global round out the top five. Russia Emerges as Shopping Center Development Leader Russia will surpass the United Kingdom as

THE LEADER | July/August 2013

square meters (25, 833 square feet) of space in 2013-14, which accounts for more than 20 percent of the entire European pipeline. Five central and eastern European countries – Croatia, Bosnia and Herzegovina, Bulgaria and Ukraine – are also expected to see double-digit growth in shopping center floors pace by the end of 2014.

Leasing Activity in Asia Pacific Loses Steam in Q1 Leasing of Grade A office space in parts of the Asia Pacific region slowed down in Q1

Millenials Prefer Apartments, Not Homes More Millenials are forgoing home ownership in favor of renting. That was a topic of discussion at the ULI Real Estate and Investment Conference in San Francisco, Ca., in June. Experts say that although housing affordability is at an all-time high, Millenials are more attracted by the highend amenities and increased flexibility offered by apartments. Experts attribute demand for apartment living to the increasing trend toward urban living.

SUMMIT

AMSTERDAM 2013 Think diferently. Get solutions

9-11 SEPTEMBER

you can implement quickly for long-term results! Join your peers at the CoreNet Global EMEA Summit in Amsterdam and return to work energized and equipped with: • • •

MONDAY 9 September 2013 9:00 - 16:00 Discovery Forum (Invitation Only) 15:00 - 18:30 Registration Open 16:30 - 18:00 Component Leaders Workshop 17:15 - 18:00 Executive Leaders Council (ELC) Reception (Invitation Only) 18:00 - 19:00 Welcome Reception 19:30 Attendees at Large / Private Events

TUESDAY 10 September 2013 8:30 - 18:00 Registration / Information 8:30 - 9:00 Welcome Cofee & Tea 8:30 - 18:00 Business Centre/Summit Lounge/Beverage Station/ Social Networking Point 9:00 - 10:30 General Session 1: The + Factors: New Recipes for Economic Success - Dr. Jonas Ridderstråle 10:30 - 11:30 Networking Break 10:45 - 11:15 REIMAGINATION Learning Theatre/ App Exchange/ Knowledge Café/Benchmarking Demo 11:30 - 12:30 Breakout Sessions

Advanced methodologies for reducing costs, funding new projects and keeping ahead of the competition. An enhanced ability to infuence and guide the implementation of strategic decisions. Tools for enabling work, encouraging collaboration, engaging employees and ofering work-life supports to drive talent strategies.

WEDNESDAY 11 September 2013 8:30 - 18:00 Registration / Information 8:30 - 9:00 Welcome Cofee & Tea 8:30 - 18:00 Business Centre/Summit Lounge/Beverage Station/ Social Networking Point 8:00 - 10:30 Site Tours 9:00 - 10:30 Breakout Sessions 10:45 - 11:15 REIMAGINATION Learning Theatre/ App Exchange/ Knowledge Café/Benchmarking Demo 11:30 - 12:30 Breakout Sessions 12:30 - 14:00 Peer2Peer Networking Lunch 14:00 - 15:30 Breakout Sessions 15:45 - 17:15 General Session 2: Leadership, Imagination and Your Future - Dr. Alf Rehn 17:15 - 18:00 Closing Cocktails & Prize Drawing

THURSDAY 12 September 2013 9:00 - 17:00 MCR/SLCR Seminar - Portfolio Realignment: Restructuring Real Estate Assets 9:00 - 17:00 MCR Seminar - CRE Finance

12:30 - 14:00 Recognition and Networking Lunch 14:15 - 15:45 Breakout Sessions 16:00 - 16:30 REIMAGINATION Learning Theatre/ App Exchange/ Knowledge Café/Benchmarking Demo 16:45 - 18:00 Breakout Sessions

Friday 12 September 2013 9:00 - 17:00 MCR/SLCR Seminar - Portfolio Realignment: Restructuring Real Estate Assets 9:00 - 17:00 MCR Seminar - CRE Finance

19:00 - 21:30 Networking Dinner at the Stork

NEW

COLUMN!

LEGALLY SPEAKING

❱ Tis month, we’re pleased to introduce our new column – Legally Speaking – where we ask an attorney and CoreNet Global member to tackle our readers’ most pressing corporate real estate (CRE)-related legal questions. Got a question you’d like to see answered in a future issue of the Leader? Simply email it to nbazemore@ corenetglobal.org. Yours could be the next question we feature. In this edition, we tackle the tricky issue of mechanics’ liens.

I just discovered that there is a mechanic’s lien fled against my commercial property. I’m surprised and uncertain about what to do. How can I protect my rights?

Tis is a problem you may not ignore. A contractor can fle a mechanic’s lien if they believe they’re owed money for labor performed or materials furnished to improve real property. Te lien secures its claim even before any determination of validity. Regardless of the merits of the contractor's claim, the lien creates an encumbrance on the owner's or tenant’s property. A tenant could also face a lease default just because the lien was fled. Te lien can afect an owner's ability to borrow against, refnance, or sell the property. If the contractor’s claim is proven in court and is not paid, the lien

BY RICHARD E. STRAUSS

may be foreclosed and the claim recovered upon judicial sale of the property. Tus a mechanic’s lien could result in the loss of ownership of property or a tenancy. Further entanglements occur if the primary contractor diverts money to another job without paying the subcontractors on your job. If the contractor goes into bankruptcy, he or she may be prevented from paying subs, even for work already performed. As a result, the subs look for a “deep pocket” by fling mechanics’ liens against your improved property. Or, the contractor and sub may have a dispute, causing the contractor to withhold payment, so the sub fles a lien. In each of these situations, the fling creates leverage against the owner, which it must address. Inform your attorney immediately to determine what action can be taken to protect your position. Usually, if you have lived up to your side of the contract and fully performed your obligations to the contractor, the subcontractor liens are invalid. (Although each state has its own version of a mechanic’s lien statute, this discussion focuses on the New York scheme, which is similar to many others). A lien may be fled only up to the lien fund, which is the unpaid portion of the construction contract for the work actually performed. If an owner pays the prime contractor in full for all sums due under its contract, but the prime contractor does not pay its subcontractors, there is no lien fund. As a result, the unpaid subcontractor’s

lien is invalid and if you went to court you could have the lien discharged. Richard E. Strauss, Esq. is co-chair of the Real Estate Group at the law frm of Moses & Singer, LLP in New York City. Since 1919, Moses & Singer has represented many prominent businesses in their corporate real estate needs throughout the country. Richard has extensive experience in this area as well as in real estate development, fnancing and work-outs. Viewing this article does not create an attorney-client relationship. Tis article does not contain a complete legal analysis or constitute an opinion of Moses & Singer LLP. Future legislative or judicial developments may modify this information or render it incorrect. Readers should seek professional advice on any individual matter or transaction.

“The lien secures its claim even before any determination of validity. Regardless of the merits of the contractor's claim, the lien creates an encumbrance on the owner's or tenant’s property. A tenant could also face a lease default just because the lien was filed.”

THE LEADER | July/August 2013

• • • • • • • • • •

An EXTRA day of content 100+ unique learning segments NEW Deep Dive Thought Leadership Sessions Professional Designation Content (MCR & SLCR) REIMAGINATION Experience with Learning Theaters & App Exchange NEW Knowledge Community Oferings TWO Nights for Networking NEW Corporate Real Estate Awards & Recognition NEW Closing Gala Newly Renovated Hotel Accommodations

21 - 23 OCTOBER www.corenetglobal.org/LasVegas2013 or call 1.800.726.8111

CoreNet Global North American Summit MGM Grand Hotel

Why Las Vegas? There are more than 21,000 meetings and conventions in Las Vegas annually. Why? Location coupled with the ease of air service and availability of top-notch meeting space makes it a viable space for professional development conferences. With more than 920 inbound and outbound fights each day and nonstop service to more than 130 cities, McCarran International Airport is conveniently located just three miles from the MGM Grand Hotel, the newly renovated property that will house the entire CoreNet Global Summit. Efcient, cost-efective business travel means less time away from the ofce and more time to take full advantage of the content-rich conference agenda.

COVER STORY FUSING THE SUPER NUCLEUS

Win the Quest for Talent with a Culture of Flexibility BY LARRY BARKLEY, KYRA CAVANAUGH AND GARY MICIUNAS

culture of fexibility exists when employees and management work together to decide where, when and how to best perform their work. Tis new way of working shifts the focus from being directed by management toward being self-directed and emphasizing work outcomes. Flexible work practices play a critical role in the future of work, providing a competitive advantage in attracting and retaining talent. During our interactive session at the Orlando Summit in October 2012, our moderating team posed one of three problemsolving scenarios to a total of 69 participants seated at tables. Each table was given a similar scenario to role play from the perspective of Human Resources (HR), Information Technology (IT) or Corporate Real Estate (CRE). Exhibit 1 highlights the CRE Scenario as a representative example of these exercises. Each table discussed challenges posed by the scenario and success factors they thought would be critical as HR, IT and CRE work together toward building a culture of fexibility. Te biggest challenge identifed by all tables was achieving crossfunctional engagement and communication. Early stakeholder involvement was also critical to creating a successful fex work program. While HR, IT and CRE each have their respective roles and responsibilities, cross-functional engagement more efectively allows these staf functions to set common goals, achieve fnancial support, establish policies and develop change management strategies. Workplace innovation that supports fex work cannot be achieved by departmentalized staf functions working in their respective silos. And yet, that’s exactly what is still happening in many organizations today. Innovation requires integrated planning, cross-functional collaboration, aligned business processes and shared measures of success among HR, IT and CRE. During our session we presented a collaborative model for assessing organizational maturity to support fex work in this integrated manner. Tis Maturity Model is summarized in Exhibit 2.

THE LEADER | July/August 2013

Beyond Silos Whenever the delivery services by HR, IT and CRE are not integrated, “silo” behavior of these staf functions falls short of delivering synergistic value to the enterprise. Although the “shared services” approach is more common today, we continue to observe that HR, IT and CRE work independently of each other in most companies. Building organizational capacity to support a culture of fexibility requires alignment on shared objectives and measures. Human Resources When implementing a telework or fex work initiative, HR professionals have a number of things to consider and work through in order to be successful. At a minimum, the role of HR is to ensure legal compliance in developing and administering policies. In addition, HR must consider compensation, change management, talent management, recruiting, employee value proposition, training and learning, program branding, communication strategies and stakeholder engagement. Our HR breakout tables also stressed that having fnancial support from leadership is key. A business case must demonstrate bottom-line return on investment. No diferent than CRE and IT, HR is expected to reduce operating costs while creating value. Human Resources is often left out of the loop on IT mobility strategies or CRE occupancy strategies. While HR input is critical to the success of any workplace transformation project, their involvement might be mistakenly viewed as unnecessary. In these cases, technology initiatives and workspace redesign projects could miss opportunities for integration with similar initiatives managed by HR. Corporate Real Estate CRE is focused on optimizing a portfolio of properties and buildings to satisfy business needs. An ideal strategy provides

the right space, in the right location, at the right time and at the right price. Tis focus includes the following: 1. Controlling total occupancy cost 2. Reducing process cycle times 3. Improving user satisfaction Traditionally, CRE has focused on company-controlled premises in owned assets or lease commitments. Tat made sense in times when the primary location of work was one and the same as the controlled portfolio. In the era of mobility, work takes place as much on company premises as it does of. Te scope of CRE becomes much broader in terms of supporting distributed work across a network of locations that increasingly includes “third places” in between employee residences and corporate ofces, such as cofee shops, business centers and other connected “hot spots” with wireless service.

Exhibit 1: The CRE Scenario The CRE department of SMART, Inc. recognizes the potential of shared work environments to support new ways of working, produce savings and reduce carbon footprint. Senior CRE management has set forth a challenge to reduce its total portfolio by up to one-third calling for a

business case rationale within 90 days. The CRE department proposes a 100,000 sq.ft- (9, 290 sq.m.-) offce consolidation project in Orlando to be completed in early 2014. This consolidation strategy will serve as a model and catalyst for similar portfolio reductions in other cities. The CRE department has decided the following:

Moving toward supporting a highly mobile work culture with fexible work practices, CRE must think beyond spaces to services and policies that keep everyone working together across locations. Tis interdependence of places, practices and platform relies upon integrating the expertise of IT to provide the appropriate technology and infrastructure and HR to establish policies about work practices, e.g., work anywhere anytime. Such integration clearly goes beyond CRE’s traditional role of focusing on the efciency of the physical portfolio and shifts the focus to the efectiveness of the workforce. Information Technology No matter the size of an organization, the IT function fulflls three primary roles and responsibilities: 1. Strategic Planning and Governance: Defning user

1. They will increase the employee-to-desk ratio from 1:1 to 2:1. 2. They will offer greater choice among a variety of work settings on premises, workat-home and “third places” in between home and offce. 3. They will reduce cost per person. 4. They will reduce employee commutes.

Separately, CRE has just learned of concurrent initiatives in IT and HR related to smart devices and fexible working. Consequently, CRE has just called a meeting with IT and HR to explain its intentions for the consolidation project and coordinate development of the business case for its portfolio reduction strategy.

May/June 2013 | THE LEADER July/August

13 15

needs, developing standards, budgeting, emerging technologies, compliance and risk management 2. Provisioning: Network and desktop provisioning, access and capacity management, data retention and management and data availability 3. Operational Support: Security, device usage, project management, help desk and training services As CEOs increasingly focus on attracting talent, the CIO’s agenda is being reset by the expectations of a new generation of workers using disruptive technologies including new mobile devices and decentralized social media platforms. Consequently, IT is now critical to the success of a fexible work environment. Tree major infuences are challenging the authority of IT and its traditional emphasis on desktop computing: 1. Consumerization of IT: Consumer technology is migrating into enterprise computing environments 2. New Management Models: Technology investment and usage is causing IT organizations to reinvent themselves 3. Risk Management and Security: IT organizations remain hyper-sensitive to exposure of proprietary data and breaches of security

Moving Toward Integration Te 11 tables at the workshop each approached their given scenario primarily from one of the above perspectives, i.e., HR, CRE and IT. As the next step, participants were asked to integrate the perspectives of the other two functions by answering the following three questions. Teir most common conclusions are summarized as follows: 1. What are the cross-functional challenges on which HR, IT and CRE can collaborate in the next 90 days? ¶ Shared goals, common objectives and balanced measures (fnancial and non-fnancial) ¶ Change management / communication of value proposition, costs and benefts ¶ Policies on work practices, tools and resource allocation (space utilization)

Te post-PC era calls for a new IT business model. Disruptive technologies and economic shifts are transforming IT departments. Adopting cloud computing, integrated solutions, smart devices and mobile technologies allow companies to achieve greater fexibility at lower costs. Tis was not possible just a few short years ago.

2. Identify three shared measures of success for CRE, HR and IT that will be critical for the success of fexible work practices. ¶ Quality: Employee engagement / user satisfaction ¶ Cost: Overall fnancial performance based on total costs of provisioning (space, tools, services) ¶ Time: Pilot project delivery schedule (speed to market) 3. How will the resulting business case difer from IT, HR or CRE proceeding independently with justifcation for its pilot? ¶ Collaborative process results in support of business case by all staf functions

Exhibit 2: The Maturity Model Financial

Information Technology

Human Resources

CRE Management

Level 5 Institutionalized

Enterprise-wide fex work is recognized as a core business strategy for both controlling operating expenses and attracting and retaining talent. The Triple Bottom Line is embedded into the organizational culture.

Enterprise level support for fex work is established. Formal goals are established, enterprise level resources assigned and programs are formally funded. Device choice at option of user. Monitoring & management controls of ERP data in place.

Senior leaders speak openly of fex as strategic business solution. Managers & employees supported with ongoing communication and integrated training. Flex is customized at a team level to ft departmental and individual needs.

Aggressive sharing ratios accommodate growth without space expansion. Activitybased space standards increase variety and choice of unassigned settings. Portfolio footprint is reduced by up to one-third.

Level 4 Formalized

Synergy is recognized as benefcial to all constituencies. Flex work is recognized as a pro-active department responsibility.

Cross-division level fex work initiatives are identif ed and planning begun. Budget sharing in support of initiatives has begun. Device choice at option of end user. Security issues not formalized

Formal fex/telework policy communicated company-wide. Manager and employee training offered. Performance metrics tracked. Intranet site stores fex information. Visible senior leader support.

Performance metrics incent space sharing. Participation in fex work determines space assignment. Proportion of total support space is increased.

Level 3 Selectively Deployed

Flex work is recognized as possessing potential cross department and enterprise objectives.

Division or cross-department level fex work strategies are identif ed and funded. Funding is on a local project level. Device options provided by IT with limited availability of ERP data.

Expanded to departments run by innovative managers of functions that can fex easily. Policies vary by department. Measure success by utilization rates. Skepticism still exists among many managers.

Standards become performancebased. Departmental work processes determine customized solutions. Total costs per person and per seat become measurement focus.

Level 2 Experimental

Flex work is recognized as an effective cost reduction initiative at a department level.

Individual department level fex work pilots and initiatives are the norm. Funding is tied to existing budgets. Mobile and laptop devices supplied by IT. No availability of ERP data via Mobile devices.

Flex pilots take place in a few progressive departments. No metrics to measure impact. Trial and error prevails. Communication/training focused on pilot rollout. Not widely discussed.

Pilot Project allows variation from space standards. Change management engages employees. Space sharing ratios beyond 1 person per 1 seat are introduced.

Level 1 Ad-Hoc

Flex work impact is not recognized as a distinction at any level in the organization.

Flex work is not formally supported. Individual level informal initiatives are the norm. Funding is ad hoc. No formal device strategy. Use of mobile devices considered a “rogue” effort and discouraged.

Individuals negotiate fex with manager & HR as accommodation. No company policy. Flex not openly discussed. Stigma attached to employees who fex. Face time culture prevents progress.

Prescribed space standards not related to fex work. Space assigned is underutilized. Occupancy cost reduction per Sq.Ft. is independent of fex initiatives.

THE LEADER | July/August 2013

¶ Enabling technologies and work practices benefts employees with choice and fexibility ¶ Space savings balanced with investment in tools and business infrastructure Te responses of each table during the workshop reinforced the progressive stages of our Maturity Model. In the ideal end state, a fully institutionalized program has the following characteristics: ¶ Flex work is a core business operating strategy ¶ Flex work practices are embedded in the culture ¶ Employees choose devices, locations and schedules ¶ Mobile access to ERP data from virtual desktops is secure ¶ Ongoing communications and training support are provided ¶ Environmental footprint is reduced We believe that creating a culture of fexibility will win the quest for talent. In order to do so, more efective means of cross-functional collaboration will be necessary. As session participants agreed, it takes more work upfront in order to reduce downstream conficts and resistance. At each stage of the Maturity Model, we recommend that you take the following action steps: ¶ Engage all parties as early as possible ¶ Establish common ground with shared objectives ¶ Agree on how success will be measured from multiple vantage points ¶ Embrace conficts as opportunities for constructive problem solving and innovative solutions ¶ Develop and present a unifed business case proposal ¶ Hold each other jointly accountable for results While our session lasted only 90 minutes and included a brief presentation, all participants were engaged in active learning in

dialogue with each other for the majority of the time. We encourage this efective format to test and apply ideas, stimulate peer-topeer exchange and foster social relations among participants.

About the Authors Larry Barkley is Managing Partner of Barkley Advisory Group – a management and technology consulting frm specializing in information and communications technology and sustainability. You can contact him at lbarkley@barkleygroup.com.

Kyra Cavanaugh is President of LifemeetsWork – a workforce innovation frm committed to helping clients discover new ways of working to improve employee and organizational performance. She can be reached at kcavanaugh@lifemeetswork.com.

Gary Miciunas is Principal, Advisory Services with NELSON – a global design frm – where he leads workplace strategy, change management and sustainability oferings. His email address is gmiciunas@ nelsononline.com.

For more information on this topic, please search for this title on our Knowledge Center Online. The World is Neither Round, Nor Flat: It’s Virtual, and It’s Fast

July/August 2013 | THE LEADER

Adapting to Change: How Companies Can Use Strategy and Transformation to Their Competitive Advantage BY SHERIDAN WARE, MICHAEL CREAMER, DEBRA MORITZ AND JOHN CONDLIFFE

ow are today’s leading organizations managing to stay ahead of the competition in the current tough economic climate? What strategies are they adopting to remain competitive when faced with the need to grow the business, but with a decreasing budget? How can organizations keep their employees motivated and engaged when salaries and bonuses are being cut back? And where does an organization’s real estate portfolio ft into any of this? Tese were just some of the issues under discussion at Cushman & Wakefeld’s 13th Annual European Occupiers’ Conference, held earlier this year in London, in partnership with leading law frm Hogan Lovells.

THE LEADER | July/August 2013

Te conference theme, ‘Adapting to Change,’ looked at how corporations are adapting their business models to remain competitive in changing political, economic and social environments. Te event attracted over 120 corporate occupier clients, including BP International Ltd, BBC, Ernst & Young, HSBC Bank plc, ITV plc and University of Oxford, to name but a few. Te event featured a number of high-profle speakers, including political pundit and ex-Sunday Times editor Andrew Neil, who gave a quick-fre and incisive overview of the current political and economic landscape; and Richard Reed, founder of Innocent Smoothies, who refected on how to develop a genuinely innovative and team-focused working culture.

Securing a Competitive Advantage Through Intelligent Workplace Strategy— the Benefts:

A Positive Outlook Te starting point for the conference was an online survey that asked registered delegates to refect on how they were approaching business and real estate strategy, business growth, innovation and change in the current economic climate. Te survey results revealed the following: ¶ 75 percent believed their businesses would grow over the next year ¶ 75 percent felt their property portfolio could not keep pace with their business needs ¶ 50 percent believed that change is something their property portfolio could easily accommodate ¶ 60 percent of participants were actively implementing fexible workplace strategies

Driver

Benefts

People (employees)

¶ Ability to attract and retain high-quality talent ¶ Increased communication and collaboration ¶ Increased satisfaction ¶ Increased mobility and fexibility ¶ Increased productivity and effciency – through the use of fexible working practices that utilize the latest technology and reduce commuting time ¶ Improved work-life balance for employees ¶ Reduced absenteeism ¶ Increased diversity amongst the workforce

Competition (rising above – the benefts that help an organization to do so)

¶ Increased innovation and speed to market ¶ Greater accountability ¶ Increased business agility ¶ Faster customer response time ¶ Higher quality output ¶ Increased customer satisfaction ¶ Increased brand awareness ¶ Improved brand image

Financial

¶ Reduced recruitment costs ¶ Reduced real estate and ‘churn’ expenses – through potential space reduction, better utilization of space in general and greater fexibility ¶ Reduced technology related expenses – including devices, network management, updates and purchasing/licensing costs ¶ Reduced operating expenses – travel, paper and power

Sustainability

¶ Reduced water, energy and paper usage ¶ Lowered carbon footprint ¶ Improved air quality ¶ Healthier and more productive employees ¶ Enhanced brand awareness ¶ Ability to meet social, organizational and employee specifc objectives relating to the environment

Technology

¶ Higher return on investment from technology ¶ Enhanced disaster recovery and business continuity processes ¶ More robust data security

Te results suggested that corporate occupiers are optimistic, despite the continual efects of the economic downturn and believe their businesses will grow over the next year. However, the same percentage also felt their property portfolio could not keep pace with their business needs – something that would only become more acute as their business grew. Te consensus was that change was necessary in order to best support business growth. The Incentive for Change Over half of those surveyed admitted they were implementing fexible workplace strategies, specifcally focusing on transforming their workspace to meet the needs and expectations of employees, the wider business and not least the fnancial bottom line. However, for this type of approach to be most efective, change is generally required – something that 50 percent of those surveyed believed their property portfolio could accommodate.

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Increase Employee Productivity

now enabling corporate occupiers to look at their property portfolio in an alternative light and develop practices, focused mainly on employees and their productivity, to bridge the gap between real estate and the wider business. Organizations are now looking to change and adapt what they have before acquiring additional space. However, there are still a number of corporate occupiers yet to consider ‘workplace’ as an opportunity to drive much needed change.” John Condlife, Partner in the Real Estate team at Hogan Lovells, adds, “Te conference showed that occupiers are focusing more and more on how their real estate matches their business needs, and how they can align the two better. Tis might mean taking new space with a short lead in time, or conversely disposing of surplus liability space which they no longer need.”

54%

Increase Communication & Collaboration

57%

Attract & Retain Employees

Reduce Real Estate Costs

59%

62%

Source: Workplace Transformation Barometer (Asia Paciﬁc). Cushman & Wakeﬁeld in cooperation with CoreNet Global.

Michael Creamer, Head of Corporate Occupier & Investor Services EMEA for Cushman & Wakefeld, says, “Te results closely refect with what we’re experiencing across a number of our corporate occupier client accounts. Te current economic volatility has resulted in a greater focus on reducing cost and better utilization of property and space in general, elements that both form part of the overall Corporate Real Estate (CRE) strategy. However, these elements alone cannot enable businesses to better align their real estate portfolio with the wider business needs. Te emergence of the ‘workplace strategy’ is

KEY STATS

Have started a workplace transformation program

73%

Have or are planning a work from home policy

25%

Measure the success of their program

92%

Said their change program failed to meet all objectives

69%

THE LEADER | July/August 2013

Implementing an Effective Workplace Strategy With 75 percent of those surveyed predicting business growth over the next year, it is even more imperative that corporate occupiers look far more closely at their workplace and implement a strategy to ensure such growth isn’t restricted. Workplace elements that can hold companies back typically include inefcient HR, IT and environmental policies, or an unclear leadership or accountability structure. Tese elements are often neglected by organizations, yet contribute to the wellbeing of employees who in turn drive fnancial success and infuence the perceptions of prospective clients. Rapid advances in technology, the increasingly collaborative and global nature of work, shifting workforce demographics, changing employee demands, increased competition, fnancial pressures, and a greater focus on sustainability all mean that the traditional ofce setup is becoming increasingly unsuitable. Organizations that ignore these changes are likely to fnd themselves at a considerable disadvantage from which it will be difcult, if not impossible, to recover. By embedding a workplace strategy within the overall CRE strategy, organizations are not only improving the current workplace but also future-proofng it. Te benefts outlined in the table, particularly those in bold, are supported by Cushman & Wakefeld’s Asia Pacifc Workplace Transformation Barometer (sent to attendees of the CoreNet Asia Pacifc Shanghai Summit). Te survey revealed that over 70 percent of respondents have started their workplace transformation journey, with 11 percent having already completed their program and 20 percent driving change globally or across multiple regions. However, for the majority, the workplace journey is a relatively new one, with nearly 80 percent having commenced their program within the last two years, driven primarily by reduced real estate costs and people-related factors illustrated in the chart below. Clearly, a large percentage of organizations are now embracing the idea that a workplace strategy can help to achieve multiple, strategically important goals; however, there is still a long way to go. Te barometer results indicate that nearly 70 percent of workplace transformation programs have failed to achieve all objectives, pointing to the need for a carefully planned workplace strategy and change management program.

“Rapid advances in technology, the increasingly collaborative and global nature of work, shifting workforce demographics, changing employee demands, increased competition, financial pressures, and a greater focus on sustainability all mean that the traditional office setup is becoming increasingly unsuitable.” How to Develop a Business Case for Workplace Strategy and Transformation When developing a business case for workplace strategy and transformation, it is important to realize that a one-size-fts-all approach will not work. Te business case should be designed around the specifc situation and benefts that are achievable for the organization. Whether it’s improving employee productivity, efciency and morale through the roll-out of new technology, or strengthening agility and lowering cost by changing the physical and virtual working environment, the business case must uncover what’s driving workplace strategy and transformation in the organization, in the business unit(s) occupying the space and in each location. Whilst an efective workplace strategy can reduce real estate costs by up to 40 percent, the people, competition, sustainability and technology benefts outlined above can be collectively greater in terms of ‘added value’ to the organization. Devising a set of measurable and achievable objectives across these areas, which are driven by the organization’s broader strategic objectives, will result in greater cross-functional involvement and buy-in at a senior level. Adopting this integrated approach from the outset will also enable workplace change to be rolled out more efectively; ensuring the property portfolio is better aligned with business needs and ultimately supports business performance and growth. Further Information Cushman & Wakefeld has recently launched the Workplace Programme, which explores the workplace topic in detail and from alternative viewpoints. Temes explored include: ¶ Introverts vs. Extroverts: do ofce environments support both? ¶ Creating change in the ofce: people, process and perception ¶ Where in the world: where to locate to and why? ¶ Te Holy Grail II: establishing the Holy Grail, or a clear cause and relationship between the workplace and the wider business Te themes will collectively help organizations gain a better understanding of the workplace topic, help generate thought provoking ideas and fnally, identify areas that require change – all of which will help to build a business case for workplace strategy and transformation.

About the Authors

Michael Creamer is responsible for Cushman & Wakefeld’s Corporate Occupier Services Group in EMEA. Te group is made up of 6 specialist teams that collectively focus on developing the strategies, processes and tools required for global corporates to deliver property portfolios designed for their businesses. Michael is a member of C&W’s Global CIS Leadership team and a CoreNet Global Board member.

Sheridan Ware is an experienced change manager and consultant focused on designing and delivering strategic programs which transform the way organizations work, collaborate and innovate. Sheridan is a Director within Cushman & Wakefeld’s Corporate Occupier Services Group in Asia Pacifc and is based in Shanghai.

John Condlife is a London-based real estate partner with Hogan Lovells. He deals with a wide variety of real estate-related work, including property development, institutional investment, landlord and tenant, and more.

Debra Moritz is the Executive Managing Director and Lead for Global Business Consulting at Cushman & Wakefeld. She is a frequent speaker at the Conference Board and CoreNet Global and has been interviewed by many publications, including Te Economist, for her workplace industry expertise.

For more information on this topic, please search for this title on our Knowledge Center Online. Adapt and Succeed Together in Challenging Times: The Role of an Agile Workplace

July/August 2013 | THE LEADER

Getting to the C-Suite by Actually Working with the C-Suite A case study in updating skill sets and practice focus BY ROBERT T. OSGOOD, JR.

P-T-P relationship. For me, the implication is that if you’re only addressing place, or only ofering solutions that result in changes to place, there’s a strong likelihood that you’re not truly enabling core business in a meaningful, measurable way – certainly not one that’s going to be easily sold to the C-Suite.

Refocusing the People-Technology-Place Interface Sven Govaars, in an Industry Tracker piece in December 2010, reinforced the importance of the people-technology-place interface in his discussion of fve forces that are shaping corporate real estate. Te additional point he made is that the issues related to people are far and away the most important elements of the

Transformation of a Practice In fact, that is precisely my experience, and in the paragraphs that follow, I will use the evolution of my consulting practice over the last 10 years as an example. Quite simply, my work has transitioned from trying to sell “upstream” to the C-Suite about the value of place in enabling business to one in which my team and I perform business strategy services, and in the course of doing so, subtly introduce the value of place as just one element in a broader model. Te focus of our approach is a form of business process mapping (BPM) applied specifcally to teams focused on innovation. BPM is a process of understanding exactly what a business does, breaking it into its individual elements and putting it back together to determine how information fows, who’s responsible, key internal and external collaboration networks, and identifying opportunities and constraints across an innovation value chain. Our eforts aren’t just focused on top-of-funnel innovation or ideation that resides in the R&D department. By defnition innovation is the introduction of something new or diferent; a change in the way of doing things. Innovation happens across organizations, often involving multidisciplinary teams comprised of people

very year I make a series of presentations on enterprise alignment in which I advocate a number of ways that corporate real estate (CRE) executives can best link their eforts with core business strategies and outcomes developed by C-Suite leadership. Many discussions at regional and national CoreNet Global functions come back to the fundamental issue of gaining timely access and proving our value to the C-Suite – or what I often refer to as trying to get a seat at the adult table for Tanksgiving dinner. Opportunities to do so range from demonstrating ways that portfolios can maximize fexibility for organic and acquisition growth and change; physical and virtual workplaces that enable new ways of working; change management processes that help achieve buy-in and ownership to concepts and solutions; to benchmarking that goes beyond typical quantitative, generic real estate indices, focusing instead on best practice research specifc to organizational objectives and business processes. A theme common to much of the dialog is application of the CoreNet framework of people, the processes they employ, technology and place in enabling core business strategy. I often refer to this as the people-technology-place (P-T-P) interface.

the leader | July/August 2013

from numerous backgrounds and levels, who, especially in Fortune 1000 companies, reside in several diferent locations. Across multiple industries, we’ve found that innovation can be broken in to as many as 10 diferent categories, namely disruptive, customer, marketing, application, product (and service), brand, structural, business model, organizational, and process. Te people who have defned these categories for us typically are our client leads, including Directors of Strategy or Innovation, the CEO or COO, business unit heads, organizational development and HR experts – all typically supported by senior IT and CRE/FM representatives. Our eforts are focused on connecting and aligning, distributed, often global innovation teams in ways that drive superior, measurable innovation performance. So, we’re not working with businesses to establish or refne their innovation strategy, but instead to enable the ways teams work in creating innovative ideas, products and services. For those of you who are old enough, it’s the BASF TV commercial in which the selling point is “we don’t make your products, we make them better”. The Innovation Connectivity Performance Path Innovation tends to drive focused processes that require signifcant, often multidisciplinary, collaboration to enable those processes. Te term “connectivity”– or to join together, a

demonstrable union – serves as the framework for exploring how people, technology and place can be employed to maximize the possibility that innovation teams work efectively to drive innovation. Figure 1 depicts how these elements come together in what we’ve coined the Innovation Connectivity Performance Path. During the course of specifc assignments, C-Suite leaders defne the types of innovation they seek to drive, and we work with them and their teams to map processes and describe how elements of people-technology-place help or hinder those processes. Te 10 types of innovation mentioned earlier are depicted in Figure 2, along with sixteen elements of P-T-P that we use to evaluate and then develop strategies for connecting teams and individuals along the performance path. As shown, there are nine elements of people, three associated with technology, and four for place. I’d like to write more extensively about the details of the model, defnitions, performance outcomes and best practices benchmarking related to it – and will do so in upcoming articles – but my space here is limited, so I’d strongly encourage readers to search the vast array of articles in Harvard Business Review, MIT Sloan and countless books by leading business authors about innovation, collaboration, organizational development, connectivity and related topics.

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Figure 1: The Innovation Connectivity Performance Path

Figure 2: The 10 Categories of Innovation and 16 Elements of Connectivity (Top 8 in Parentheses)

Power of the Path and the Importance of People in the P-T-P Interface As an alternative, I’ll take a few paragraphs to discuss a couple overall results and to highlight a recent case study, specifcally: ¶ Innovation teams that score highly on all 16 elements of P-TP, meaning their people are highly connected and processes are very efective, have strong team and overall business performance outcomes. By contrast, teams with low P-T-P connectivity are associated with lower levels of team and innovation performance.

¶ Te four elements most closely associated with team and innovation success are people issues (see the numbers in parentheses in Figure 2), and in general, all nine of these elements must be addressed frst to ensure that technology and place issues are positioned for maximum efectiveness. In the few situations in which technology and place solutions have been implemented – alone or together – but without addressing people issues frst or at all, the team or innovation outcomes have been moderately to strongly negative (i.e., you can’t impose tech and place concepts on teams that aren’t ready for them). Sound familiar? Recently my colleagues and I completed an assignment in which our client’s company had spent much of the last fve years acquiring several new businesses that resulted in many of their key innovation teams being spread throughout the world. Our client’s fundamental hypotheses were that there was extensive duplication in capabilities and that most, if not all, teams needed to be consolidated in one or two locations. After mapping all processes and evaluating the connectivity of the teams (16 elements of P-T-P) our evaluation indicated that there was little in the way of duplication, and co-location – at least as an isolated single solution – was not the answer. Te real concerns were related to teams with unclear missions; changing leadership and inconsistent decision making; excessive multitasking, with key people on way too many innovation projects having concurrent time lines, and incredibly outdated communication technology. In fact, many of the key participants were on so many projects, with parts of their collaboration networks located in so many diferent places (many outside the company!), that co-location with one would only create problems for others. On top of that, the focus and composition of each team often changed throughout the year, so assuming that most could or needed to be brought together in one or two places simply wasn’t feasible. As a result, we spent weeks working on a variety of peopleand process-related issues, and then addressed technology enhancements that created a much stronger sense of virtual presence. It was only after addressing people issues and concurrent with addressing technology that we began to focus on place responses in great detail – and in only a few locations deemed essential to innovation processes. Had we entered the process at a point when a traditional “occupancy and workplace study” was requested, we would have waited months and had little context with which to understand the extent

“Innovation happens across organizations, often involving multidisciplinary teams comprised of people from numerous backgrounds and levels, who, especially in Fortune 1000 companies, reside in several different locations.”

the leader | July/August 2013

of the business issues that needed to be solved. In addition, our value, and connection to the C-Suite, would have been severely limited. Te organization in this case study has saved millions of dollars avoiding excessive changes to facility infrastructure and paying for numerous employee relocations. Perhaps more importantly, focusing on the heart of the problem frst – people issues (and to a lesser degree tech concerns) – and then creating a variety of ways to connect and align its teams, has resulted in sharply improved team and innovation performance that is contributing to bottom line revenue growth. If You Can’t Beat ’em (so to speak) Join ‘em Te changes in my practice represent just one way to gain better access to the C-Suite. I certainly recognize that there are numerous other ways to do so, and I always look forward to new approaches ofered by fellow CoreNet Global colleagues. For me, being able to work with C-Suite leaders focused on innovation, and subtly show how place, in the context of people and technology issues, plays an important role in enabling their work processes, has proven successful and intellectually rewarding. I spend less time selling or trying to “prove” the relevance of place and more time demonstrating its value as a business tool. Perhaps most importantly, it’s allowed me to reach back to

skills that I developed in college many years ago and apply them in new, and hopefully innovative, ways.

About the Author Rob Osgood, Principal at Flad, is a strategist and researcher who helps organizations drive business innovation by connecting and aligning distributed multidisciplinary, typically global workforces. He has completed hundreds of BPM, workfow network collaboration, change management, and related assignments throughout North America and a dozen other countries. Rob has been published more than 30 times and presents frequently at CoreNet Global and other societies and universities.

For more information on this topic, please search for this title on our Knowledge Center Online. Industry Tracker: Extreme Information Brings Greater C-Suite Access, Credibility

July/August 2013 | the leader

Multi-tasking Large-Scale Initiatives BMO Harris Navigates Two Acquisitions and a Rebrand

Exterior of a BMO Harris branch location in Schaumburg, Ill.

BY DAN COOKE, BMO FINANCIAL GROUP AND MARK MELAS, JONES LANG LASALLE

hree years ago, Harris Bank was a medium-sized Midwest regional bank whose customers were mostly unaware that its parent was one of Canadaâ&#x20AC;&#x2122;s largest banks, BMO Financial Group. Today, the U.S. division of the bank has a very strong deposit share position in two key U.S. Midwest markets (ranked number two in Greater Chicago and number two also in Milwaukee), and has also undergone a brand refresh, becoming BMO Harris Bank in the process. For the real estate and facilities team, rapid change has

T 26

THE LEADER | July/August 2013

required the assimilation of disparate acquired branch networks, consolidation of ofce operations, a highly visible redesign of existing branches and the navigation of logistical challenges such as changing signage at more than 600 locations across eight non-contiguous states. Tis fast-paced change occurred in tandem with the usual priorities, such as achieving cost savings â&#x20AC;&#x201C; savings that well exceeded expectations. In 2011, while juggling these large expansion initiatives BMO achieved more than 10 percent sav-

of a program to reduce cost and drive productivity during rapid mergers and acquisitions (M&A); and hands-on management with a commitment to implementing innovative plans while navigating complex corporate environments. Planning for Acquisitions As the fnancial crisis downshifted, BMO Harris was in a strong fnancial position to make strategic acquisitions, thanks in part to its ownership by a Canadian bank. And when the time for M&A came, the real estate team was poised for rapid response. First came the acquisition of Amcore Bank, adding 35 branches and several back-ofce operations locations. Tis integration went quickly and seamlessly; but it was just the opening act. Next came the $4.1 billion acquisition of Marshall & Ilsley (M&I), Wisconsin’s largest bank, with more than 400 branches. In announcing the M&I acquisition in December 2010, BMO Chief Executive Bill Downe called the acquisition “clearly transformational” for Harris Bank. BMO pledged to cut $250 million in costs from the combined bank, with very little coming from branch closings, since very few locations of the combined 684-branch portfolio overlapped. Instead, savings were expected to come mainly from consolidation of headquarters and back-ofce operations – priorities that made the facilities team central to the acquisition’s success. But the groundwork was laid for a successful integration strategy long before the real estate team learned about the M&I deal. In 2010, Michael Solano, Director of Global Facilities Management, led an outsourcing process that resulted in the consolidation of a range of services – project management, energy management, integrated facility management and strategic planning – to one frm, Jones Lang LaSalle, a well-known business partner and one which had already managed the bank’s facilities for more than 10 years.

ings across its U.S. facilities portfolio, surpassing the original target. In 2012, savings programs contributed to an additional 1.4 percent reduction in baseline operating expenses relative to the previous year’s results. Energy costs were a large part of the program and represented another strategic opportunity for savings. In 2012, the bank exceeded targeted utility savings by more than 150 percent and improved its productivity ratio, thanks in part to the real estate team’s ability to execute several major initiatives simultaneously. Tree overarching factors have enabled the real estate team’s success: foresight on pending strategic direction; development

Awareness of the Bank’s Expansion Strategy Informed Agreement Structure Te agreement was structured knowing that BMO was in expansion mode – that was critical. Tanks to this approach, an acquisition would be a matter of fipping a fgurative switch: Everyone on the team would know their responsibilities toward ensuring a smooth path to success. As such, instead of spending precious time hammering out new Key Performance Indicators (KPIs) and compensation structures, when each acquisition was announced, the team was able to focus on due diligence and implementation. One of the key contract features credited with helping to achieve this focus was guaranteed maximum pricing – hardly a unique concept in outsourcing relationships, but necessary to BMO Harris’ success in an environment of rising operating costs. KPIs based on constituent satisfaction scores, combined with a shared cost savings model, allowed JLL to raise its compensation level only if BMO Harris’ overall spend declined and service level criteria were met. Te team expected to achieve a “glide path to savings” over fve years. Results Surpass Expectations Te actual results have thus far surpassed expectations. All of the

May/June 2013 | THE LEADER July/August

13 27

With all glass, interior walls, no teller lines and a smaller footprint, the redesigned branches reduce the cost of build-out and ongoing operations.

savings guarantees for the entire fve-year contract were achieved by 2012, and customer satisfaction scores in that year were at the highest possible level. Te pre-negotiated contract had another signifcant beneft: M&I facilities staf were shifted to JLL, helping the bank meet its headcount consolidation goal painlessly. Te move also enabled M&I staf to get acclimated and trained on BMO Harris systems and practices via a well-established onboarding program. Another feature of the outsourcing contract obliges the JLL team to bring at least two innovative ideas to BMO Harris each year. Tis requirement ensures that BMO Harris stays on top of the most forward-thinking ideas in corporate real estate, helped in no small part by JLL’s thought leadership supported by the frm’s experience serving many of the world’s largest banks. Improving Operational Effectiveness Te two acquisitions and years of organic growth left BMO Harris with fve operational centers that needed to be consolidated. Te facilities team acted quickly, renovating a former AT&T ofce building in Naperville, Ill. Te entire project – from the initial portfolio analysis through transaction negotiation, space design, to build-out – took less than two years, and, remarkably, the move-in happened only 10 months after completion of the Spring 2011 M&I acquisition. Rather than simple consolidation, the team moved to create

THE LEADER | July/August 2013

centers of excellence, creating efciencies through the alignment of work products through clearly identifed adjacency advantages and, of course, encouraging collaboration between groups once located in far-fung, distinct locations. “Meetings that we once performed via conference calls from multiple locations can now take place organically in our shared conference room facilities. Our space not only brought most of our Illinois-based operating functions together into a single, central location, but the design itself efectively facilitates both group and 1-1 collaboration as well,” said Lois Robinson, Senior Vice President and head of P&C Product Operations U.S. In fact, executives at the parent company have noted that the Naperville location could be a model for the Toronto headquarters. Te Naperville operations center project demonstrates how the facilities team improves BMO Harris’ productivity ratio, also known as the expense-to-revenue ratio – a key metric for stock market analysts, and an industry-standard measurement of operational competitiveness. Other ways the facilities team, in partnership with their service provider, has helped improve operational efectiveness include: ¶ Energy use reduction and sustainability. JLL conducted energy audits which uncovered many low-cost savings opportunities. In response, the bank authorized a lighting retroft program at branches, replacing existing lighting with high-

“As the financial crisis down-shifted, BMO Harris was in a strong financial position to make strategic acquisitions, thanks in part to its ownership by a Canadian bank. And when the time for M&A came, the real estate team was poised for rapid response.” efciency LED fxtures that use a fraction of the energy and last twice as long as incandescent bulbs. On the supply side, the Corporate Real Estate (CRE) team has helped the bank move from an open-market rate structure to a fxed-rate structure, ensuring reliability and cost efciency. CRE developed a strong sustainability platform encompassing everything from green ofce strategies to an electronics recycling program tailored to branch staf and bank customers, to the purchase of renewable energy credits. Tese strategies helped BMO Harris become carbon neutral in 2011, earning a Green Power Award from the U.S. Environmental Protection Agency. ¶ Technology. Te JLL business analytics platform provides sophisticated analytics that visually present historical and predictive data ensuring that information is accessible in multiple ways. Te ability to easily view data in a variety of graphic formats, including multiple charts, timelines and comparative functions, empowers BMO Harris to budget and set priorities that efectively reduces expenses while paving the way for increased staf efciency. ¶ Strategic sourcing. A robust program is in place to analyze competitive bids from a variety of vendors, ensuring BMO Harris banking clients are included in RFPs. In cases where multiple bids have similar costs and quality factors, the work may be awarded to a bank client, adding value to those relationships. ¶ Acquisition transition. During the M&I and Amcore acquisitions, to explain the transition process, the CRE team conducted “roadshows” with business unit leaders and facilities staf of the incoming frms. Tese well-received meetings created good will, particularly for employees of the acquired banks. Enhancing the Productivity Ratio Perhaps the clearest example of how the real estate function can enhance both sides of the productivity ratio equation can be seen in the redesign of BMO Harris bank branches, a redesign that accompanied the rebrand – and sent a strong message of fnancial strength and commitment to customer service. In the last couple of years Harris Bank has taken on the name of its long-time parent. Te name change came with a new brand, including a new logo on signage, a redesigned website and a prototype branch. While the corporate real estate group typically gets involved only at the implementation stage, BMO Harris looped in JLL’s team earlier in the process. Involving

project managers earlier than standard ensured that designs on the drawing board would work in the real world, and that all planned branch layouts and fnishes would be cost-efective. Te prototype branch opened in Oak Brook Terrace, Ill., with a unique look for a bank. With all-glass interior walls and no teller lines, the location is smaller than more standard branches in recognition that customers increasingly conduct business online. Te smaller footprint reduces the cost of buildout and ongoing operations. Proof is in the design’s ability to help attract new customers. It is clear that carefully rebranded branch locations both reduce ongoing expense and help drive revenue, similar to the positive impact of many of the strategies pursued by the facilities team in ongoing work to improve BMO Harris’ productivity ratio. As the newly repositioned fnancial institution continues to grow in a competitive marketplace, the corporate real estate team is already looking at new ways to add value to operations while maintaining the frm productivity plans of programs already in place.

About the Authors Dan Cooke is the Vice President of Corporate Real Estate at BMO Financial Group.

Mark Melas is an Account Director in the Banking Industry Group at Jones Lang LaSalle. He can be reached at Mark.Melas@am.jll.com.

For more information on this topic, please search for this title on our Knowledge Center Online. Mergers & Acquisitions: Real Estate’s Role in Successful Planning and Acquisitions

July/August 2013 | THE LEADER

Lease Accounting as a Catalyst to Change Corporate Real Estate Decision Making BY TIM SCHELLE, SJUUL BALTUSSEN, LEON VAN LEERSUM AND RIANNE APPEL-MEULENBROEK

ith new Lease Accounting regulation expected to come into full force in 2017, corporates will have to become more transparent about their lease obligations. Companies will be forced to have all real estate data up-to-date to meet the reporting requirements. Companies collecting detailed data will beneft from automatically being catapulted in the direction of strategizing their corporate real estate (CRE). Changing regulatory issues are not just compliance issues but can be a catalyst for corporates to change their CRE decision-making processes. Te existing accounting models for leases require lessees to classify their leases as either fnance leases or operating leases. To date, a lessee is not required to recognize lease assets or liabilities for operating leases. Tose models have been criticized for failing to meet the needs of users of fnancial statements because they do not always provide a faithful representation of leased assets. In particular, they omit important information about signifcant assets and liabilities arising from operating leases. As a result, many users of fnancial statements adjust the amounts presented in a corporate’s statement of fnancial position to refect the assets and liabilities arising from operating leases. Te International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) considered all leases an important source of fnancing that should be presented as such on the corporate balance sheet, removing the current diference between fnance leases (on-balance) and operating leases (of-balance). Leasing is a means of gaining access to assets, obtaining fnance and reducing an entity’s exposure to the risks of asset ownership. Te prevalence of leasing, therefore, means that it is important that users of fnancial statements have a complete and understandable picture of an

THE LEADER | July/August 2013

entity’s leasing activities. Te lease contract will be recognized both on the asset side as a Right of Use (ROU) asset and the Present Value (PV) of payments during the lease term will be recognized as a liability. Te change in accounting standards will automatically shift the way in which corporations communicate about their corporate real estate management (CREM). Where information on CREM was often opaque and incidental, fnancial reporting will ensure that lease liabilities will appear more often and more prominently in the corporate fnancial statements Companies that had not previously structured their real estate information will now be able to recognize the amount of CRE they use, own and rent and motivate the decisions that have been made in the past. Tese proposed regulations will be mandatory for all companies accounting under IFRS/US GAAP. Decision Making CRE Strategies are formed within an organizational and environmental context. Since the proposed lease accounting afects the environmental context by changing the legal environment, CRE strategies could indirectly be afected by new regulatory issues towards leasing. In addition, strategies are implemented in order to ensure the corporations’ continuity and to maximize shareholder value. To be able to do so, it is essential for CRE strategies to be fully aligned with the corporate business strategy. Tis alignment is classifed according to the fve stages of the Jorof model (illustrated in fgure 1 for AEX- listed companies). Te CREM contribution depends on the stage of CREM on the Jorof model and competitive advantage is only realized when CREM operates at the strategic level and therefore fully aligned with the overall corporate strategy. CRE departments

that operate below ‘Strategist’ level are in general driven by their added value in terms of proftability and productivity. Tese fnancial performance indicators are exposed to the new Lease Accounting regulations. If these performance indicators change signifcantly, it could result in adaption of the CRE strategy in order to meet the internal performance goals. For those CRE departments, new regulatory issues could form a bottleneck. Lease Accounting can therefore be a catalyst for revising CRE strategy and may result in its evolution on the Jorof model. What about operating decisions? When CRE departments lack an explicit real estate strategy consistent with their business strategy, they may exercise operating decisions that are unrelated to (or even contradict) the corporate business strategy. Tis could force companies that rely heavily on fnancial components and have large real estate portfolios to make changes to their data management, transaction ma nagement and/or portfolio decisions, all with respect to CRE. The Impact Quantifed Schelle & Baltussen have scrutinized CRE strategies and operating decisions of the majority of listed companies in Te

Netherlands. To be able to quantify the impact for each corporate, an extensive analysis was conducted to determine what the relative impact of lease accounting will be on key performance indicators, balance sheets and income statements. Prior to the actual analysis they observed that in contradiction to previous studies, the amount of real estate and land (seven percent) on the analyzed companies’ balance sheets seemed to be much lower than expected. Tis might be caused by the method that is used for determining the value – book value versus market value. In addition, 74 percent of lease portfolios consist of operational leases. Irrespective of whether these leases are knowingly structured as operational leases or not, the IASB is right in stating that it is hard to justify that presenting just 26 percent of the total lease liabilities on the balance sheet is transparent. Te CRE-related impact seems to be signifcant, especially for corporations with a high retail lease exposure. Also, corporations with a large exposure towards leases related to aircrafts and freighters are subjected to the magnitude of lease accounting. However, the analysis illustrates that the greater part of the impact can be traced back to real estate leases. Table 1 shows that lease accounting impacts key fnancial

May/June 2013 | THE LEADER July/August

13 31

Figure 1: Joroff Model Strategist

Corporate Management, Long-term

Business Unit Structure

Facility Management

Entrepreneur

Portfolio Management

Corporate Strategy

Asset Management

Property Management

Dealmaker

Controller

Operational Management, Short-term Taskmaster

Source: Schnelle & Baltuggen (2013)

ratios. Since these ratios play an important part in the decision making of internal reviews, lenders, rating agencies and shareholders, corporations tend to mitigate the impact as much as possible. Especially corporations that endure more impact than comparable corporations within the industry could expect additional questions from stakeholders. In general, the impact for a particular company would be largely based on (a combination of) three factors: 1. Te maturity of its Corporate Real Estate Management (position within the Jorof model) 2. Te size of a company’s operating lease portfolio relative to its balance sheet, and

Table 1: Median Impact

5% 4%

4.00%

4.15%

3.78%

3% 2%

2.50%

2.50% 1.83%

1% 0% -1%

Increase Assets

Increase Liabilities

Leverage

Return on Assets

-2%

-1.60%

-3% -4%

Median Total

Median CRE

-3.69%

-5% Source: Schnelle & Baltuggen (2013)

THE LEADER | July/August 2013

3. A company’s sensitivity, due to their CRE strategy, to the presentation of their fnancial statement The Tools One of the consequences of the implantation of lease accounting is the compliance issue with debt covenants, especially when, due to incomplete disclosures recorded in the past, additional information about the CRE portfolio becomes visible. Before renegotiating it is essential to predict what the impact will be and prepare to reduce the impact, if necessary. Since the greater part of the impact is related to real estate leases these are the ones that could most infuence the impact. Terefore, it is quite likely that the 10 management variables (fgure 2) will be used as instruments to mitigate the impact. For corporations with stressed fnancial positions, the management variables are a welcome tool for executives to reduce the impact of lease accounting. To what extent these 10 variables should be altered is a question that should be answered for every real estate transaction in the context of the real estate strategy. Te fact is that all real estate transactions and renewals are subject to future reporting; as such, the proposed Lease Accounting is already ‘in play’. What is the Market Expecting? During the interviews conducted by Schelle and Baltussen, an important observation was the idea that the proposed accounting guidance would require a new level of information because every lease, no matter the size or length, would need to be accounted for and scrutinized over its term. Several companies that have already begun the implementation process admit-

Source: Schnelle & Baltuggen (2013)

Figure 2: 10 Management Variables Financing Management

Number of Assets

Discount Rate

Purchase Option

Subleases

Lease Term

Service Contracts

Renewal Options

Rent

Location

ted to realizing that their current information systems lack the required detail. Terefore, managing an entire portfolio of complex leases, subleases and segmented reporting would prove to be extremely challenging. Some companies that already installed specifc lease tracking systems were provided with a level of understanding far beyond that which had previously been available. Assuming virtually every company with the need for this data would incorporate such systems, this will create clarity and possibly even efciency throughout the industry, as companies become more aware of the space they occupy versus their actual space requirements. Consequentially, companies will be forced to look critically at their real estate strategies and the lease accounting changes may be a catalyst to implementing change. A good understanding of the CRE portfolio is a critical ingredient for successful implementation of the corporate (real estate) strategy. It also ensures that CREM can communicate its contribution to the company in a language that the top decision makers understand. Tis ‘language’ will become far more important when the relationship between the CRE executive and the CFO changes due to the proposed lease accounting. As a result, new questions about CRE and its strategy will arise. CRE managers will have the potential to visibly contribute to the future (fnancial) performance of their organizations. Starting Today Changing regulatory issues are not just compliance issues for all organizations, but they can also be a catalyst for corporates to change their decision-making processes. Tese factors make companies more likely to change their behavior to mitigate the efects of the proposed changes. CRE will receive more attention from the fnancial world and therefore from the CFO. Te new accounting rules will probably be introduced on 1 January 2017. Tis means that frms using US GAAP should report comparative fgures starting from January 1, 2015 (2016 for IFRS users). Moreover, all necessary information and transitions should be taken into consideration before this date. Every CRE department should view current decisions on (longterm) lease commitments in the light of these new regulations. Tis makes it necessary for a CRE department to collect the necessary data and analyze the impact on real estate decisions in the short term and start today.

Sources • Schelle, T.G.F., & Baltussen, S. (2013). IFRS lease accounting impact on Corporate Real Estate Management. • International Accounting Standards Board (2013). www.ifrs.org

About the Authors

Tim Schelle MSc. (graduate student at REDEPT) recently graduated from the Eindhoven University of Technology. Te thesis focused on the impact of the upcoming changes of IFRS Lease Accounting on Corporate Real Estate Management.

Sjuul Baltussen MSc. (graduate student at Deloitte) recently graduated from the Eindhoven University of Technology. Te thesis focused on the impact of the upcoming changes of IFRS Lease Accounting on Corporate Real Estate Management.

Leon van Leersum BSc FRICS is partner at REDEPT, specializing in corporate real estate and tenant representation. In his prior role at Philips Electronics he was responsible for the Lease Accounting project.

Rianne Appel-Meulenbroek MSc. is Assistant Professor of CREM at Eindhoven University of Technology. Her education and research activities focus on the way CREM can provide added value for an organization. She was mentor for the master thesis.

For more information on this topic, please search for this title on our Knowledge Center Online. Leasing Accounting Rules…Getting Closer

July/August 2013 | THE LEADER

Paley Park in Manhattan

Urban Courtyards: The Next Alternate Workplace? BY BILL HALTER, AIA, LEED AND GARY WARNER, ASLA, AICP

ong before we could sit in an urban park and work on our portable devices using a local wireless network, parks were an important part of the urban corporate work environment. Tey provided a much-needed escape from the ofce, ofering a benefcial, therapeutic space for the worker who needed to get outside, clear his or her mind, or get a fresh outlook on a particular problem. Creatively designed urban courtyards are as livable and engaging as many of our typical interior ofce spaces. Te most successful courtyards today provide opportunities for meaningful connections with nature, social interactions and viable work environments. A great example is Paley Park in Manhattan. Te park, which is a mere 42 feet wide by 100 feet deep, is one of the most visited parks in the city. Today, it has become a popular place for remote work for those fortunate enough to claim it as part of their work neighborhood. Before Paley Park became a model for an urban park, most European cities had what is more of a private urban park associated with a particular neighborhood – or in today’s vernacular, the urban courtyard. Tese wonderful spaces are multi-purpose because they serve not just the workers in adjacent ofce and merchant spaces, but after work hours and on weekends, the local residents claim them, as well. What is unique about these urban spaces is that they achieve a healthy connection to the amenities of the city that can also support the worker. Cofee shops, exercise studios and restaurants all contribute to an invigorated work experience.

THE LEADER | July/August 2013

Today, we are fnding that more and more of our corporate clients are interested in returning to the urban core of the city. Te reason is simply that much of their workforce, whether the millennials or the boomers, are seeking a place of work that is rich in amenities, in addition to being close to home. Tose amenities support the work and the worker by providing the diversity of work experience that compliments the traditional workplace of the interior. As part of the move to the city we have found the integration of the urban courtyard is catching on as a semi-private place for workers. Tese places are part of the workplace and are used in much the same way – when the weather permits. Te spaces are designed with secure wireless networks, electrical connections and movable site furniture to provide a variety of settings for diferent size groups. Nature can be your laptop’s best friend with careful design and thoughtful attention to details, and a successful and productive work environment can be provided with just a bit of shade and shelter. Studies have shown that employees often do better and are less stressed when there are a variety of spaces in which they can work. Outdoor break and lunch areas have been the norm for many years, but expanding technology options have increased the opportunities for work to be done in these same environments. Te outdoor lunchroom is now becoming the outdoor conference room or studio space outside of the ofce. For example, fnding new building sites on Turner Broadcasting’s main campus has become more challenging.

Te popularity of its midtown Atlanta campus has placed greater burden on the limited amount of land remaining. Te company’s growing entertainment and sports group placed even more demand on the corporate campus to deliver a highperformance workplace with a unique ‘southern quality’ that appeals to the new generation of creative work force. When I was with TVSdesign, we were commissioned to design a new 200,000 sq.ft.- (18, 580 sq.m.-) headquarters building on an existing parking lot for Turner in Atlanta, it was agreed that an urban courtyard space was needed to provide outdoor space for those working in the building. Working with the client, a new kind of workplace evolved that became a powerful connection between the existing studio buildings, an existing ofce building and the new Turner Entertainment building. Te urban courtyard is a success story for Turner because it provides a new and uncommon space for the sports and entertainment groups to both work and relax. It is now an alternate place for collaboration and creative thinking among the talent that is recruited from the top universities around the world to keep Turner competitive in the marketplace. Similarly, Intergraph had a vision to incorporate their existing lakefront because of its signifcant historical meaning to this 35-year-old high-tech software company. Cooper Carry’s solution was to create a split-level town center entry lobby leveraging the elevation change on the site to visually connect the main entry to the lake and outside to a richly landscaped lake-front plaza. Tis ‘corporate courtyard’ has been programmed with secure wireless and large and small seating areas, as well as a place to fre up the barbeque grill for company events. Tis is just one of the features of this build-to-suit corporate facility intended to attract and retain top talent. Atlanta developers Seven Oaks and Legacy Properties understand the importance of creating urban courtyards very well. When Cooper Carry presented our winning solution for a 350,000 sq.ft.(32, 516 sq.m.-), mixed-use project – named 285 Marietta – in the popular Lucky Marietta District of downtown Atlanta, we proposed an urban courtyard as a key ingredient to our solution. While somewhat controversial at frst, the client soon realized the potential advantage the amenity brought to the downtown story and the ‘pitch’ to the broker and corporate community. Tis urban courtyard is the connective experience that links existing hotel and high-end condominium buildings to the ofce and mixed-use project. Te urban courtyard provides a pathway between Centennial Olympic Park and two major downtown commercial streets. For the developers, the value proposition to potential tenants is the amenities of the downtown restaurants, housing, hotels and entertainment, combined with a private and calming urban pocket park that is an alternative to the edgy workplace setting of the ofce tower above. Technology is driving the opportunities and the creative use for the distributed workplace more every day. Next on the horizon is the latest wireless standard – 802.11ac or ‘AC’ – that will triple its predecessor’s typical speed. Tis means that connectivity is more seamless and more portable, with corporate secure networks. It is largely the ease with which we can move from work setting to work setting without the wires and the

Rendering of 285 Marietta St. in Atlanta

loss of signal strength that mobility and the ‘uncommon’ spaces are providing a great new standard for the high-performance workplace now and into the future. As we see the linking of our natural environment with the high-tech work setting, the urban courtyard is becoming a great and often preferred alternative to the indoor ofce space. While immense improvements continue to advance the quality of the interior workplace, access to this latest alternative – the ‘urban courtyard’ – is gaining importance as an option for work and collaborative space.

About the Authors Bill Halter, AIA, LEED has more than 30 years of experience specializing in the design of numerous award-winning building types. As Director of Corporate Services for Cooper Carry, Bill has focused his career on creating distinguished architecture that is appropriate to each unique corporate user, the context and the community. Gary Warner is Director of Planning and Landscape Architecture at Cooper Carry and leads the frm’s design and documentation of landscape architecture and planning projects.

For more information on this topic, please search for this title on our Knowledge Center Online. Workplace Strategies That Enhance Human Performance, Health and Wellness

May/June 2013 | THE LEADER July/August

13 35

ECONOMIC DEVELOPER

BY SONALI TARE

based dairy products company, plans to invest $50 million to build a 200,000 sq.ft- (18,580 sq.m-) facility in Augusta County and will employ 60 people.

Shenandoah Valley’s ‘Fields of Gold’

he Shenandoah Valley Partnership is a public-private venture that works to promote the Shenandoah Valley area of Virginia. Its goal is to encourage fresh investment, while bolstering business and directing the development of the future labor force. In addition, the Shenandoah Valley Partnership aims to enhance regional cooperation by bringing together business, educational institutions and government. Location, Location, Location Shenandoah Valley is made up of seven Virginia counties, and it also sits close to Washington, D.C., something that Robin Sullenberger, CEO of the Shenandoah Valley Partnership, says makes the area adequately positioned to

compete. “We are two hours from Dulles airport, and proximity to the D.C. area means that we are within close distance of government contractors and other similar interests,” he says. In addition, the Valley is located on both Interstates 81 and 64, something that puts it within a few hours’ reach of three quarters of the nation’s population. Furthermore, the I-81 corridor is well known as a logistical distribution network, one that has attracted a number of global companies. “While this is especially true of our core industries, such as the food industry, it has also allowed the advanced manufacturing sector to grow,” Sullenberger says. A prime example of how the Shenandoah Valley continues to attract the best and biggest in the food industry is Shamrock Foods, an Arizona-

Building on the Base and Beyond Agriculture and the food industry have been the mainstays and pillars of the Shenandoah Valley. Sullenberger says, “About 90 percent of our growth, over the past three to fve years, has been from existing industry. While we aim to expand and are already expanding in multiple felds, the food industry has been the backbone of the region.” Sullenberger is referring to the significant investment that companies such as MillerCoors and Hershey Foods have been making in the area. For example, MillerCoors has a USD 300 million brewery in the Shenandoah Valley. A recent announcement by WhiteWave means that the company, which manufactures a number of products, including those for Silk and Land O’ Lakes, will be investing an additional $68.9 million in the area. “Te Partnership has also been looking for new ways to promote the natu-

“About 90 percent of our growth over the past three to five years has been from existing industry. While we aim to expand and are already expanding in multiple fields the food industry has been the backbone of the region.”

THE LEADER | July/August 2013

ECONOMIC DEVELOPER

ral attractions of the Valley. A prime example of this is the ‘Fields of Gold’ project, which the Partnership devised in conjunction with the area’s Planning District Commission. Te idea is to increase agritourism by leveraging the fact that the Interstate 81 corridor is considered one of the top scenic drives in the country,” Sullenberger adds. But the virtues of diversifcation are not lost on the Partnership. In fact, the interest that the life sciences industry has started to show in the region is signifcant. Following are some recent investments in the area: ¶ SRI International, which has opened a bioscience research lab, employs 40 advanced-degree researchers. ¶ Merck, which plans to move into the biologics industry, recently made a $30 million commitment. It currently has over 700 employees at its plant in Rockingham County. ¶ Hollister Company, which manufactures medical instruments, also has a presence. It will be invest $27 million to upgrade its facility, which employs 770 people in Augusta County. ¶ Daikin McQuay, is investing $10 million in a test facility, which will employ 50 people. According to Sullenberger, “Another area of immense interest to the Partnership is the advanced manufacturing sector. We have had success attracting companies in this sector to the Valley as well. For example, PGI, Invista, PPI/Time Zero all have facilities in the Shenandoah Valley.”

Investing in the Future While the Valley has weathered the economic downturn quite well, Sullenberger says the county continues to plan for the future. “Shenandoah Valley is renowned in the feld of undergraduate research. With universities such as the James Madison University and other colleges and vocational schools in the area, the talent in the region is very attractive.” Te educational institutions in the area focus on a variety of specialties, such as cyber security, IT, healthcare, business development and more. He adds, “Te increased participation, in recent years, by the region’s universities and colleges in the economic development of the area has been a bonus. James Madison University, for example, has introduced integrated classroom instruction, which builds teamwork and increases problem-solving skills.” Various educational institutions have also established an education training database, which they update with a list of the training programs they ofer. Tis enables businesses to search for talent by specifc training and other credentials. “In addition to the economic dividend of the talent in the region, the Shenandoah Valley Partnership also aims to increase emphasis on entrepreneurship and investment,” Sullenberger says. Historically, the region has been conservative in terms of risk, but he hopes to change this somewhat by spurring additional entrepreneurial spirit. “Te need is especially high in the educational sector, where professors as well as students have demonstrated interest in patenting and

Robin Sullenberger

then marketing their inventions to the public. In order to do so, the Partnership aims to start of with an angel network that could support and fund inventions.” Connecting with CoreNet Global While the Shenandoah Valley Partnership is new to the world of CoreNet Global, they are eager to get involved. Sullenberger says, “A recurrent theme that we heard from many individuals and organizations in the private sector, especially the corporate real estate sector, is that we need to be more involved with CoreNet Global. With that in mind we look forward to a long and fruitful involvement in CoreNet Global activities.”

Robin Sullenberger CEO, Shenandoah Valley Partnership svp@jmu.edu

July/August 2013 | THE LEADER

SERVICE PROVIDER

BY ERIN CORTNER

Brian McNeese and Mace Group’s North American Dream Team

ace Group is a privatelyowned, international consulting and construction company that has provided project and program management, facilities management, cost consultancy and construction delivery services for 22 years. In that time, the company has grown to more than 3,800 professionals without a major acquisition. Clearly, Mace Group has been doing something right. Brian McNeese is an Atlanta-born young leader who graduated from Georgia Tech with aspirations for a career in construction and real estate. His frst job out of college with Ernst & Young opened his eyes to the world of corporate real estate (CRE) consulting, and he never looked back. After 10 years in the industry, McNeese is Managing Director for Mace in North America, and is working to help the company expand its global reach in this market. Never Stop Growing While Mace has locations in more than 65 countries worldwide, it is only in the past four years that the company set its sights on organic growth in the United States. McNeese credits Mark Holmes, Mace COO in London, with having the

foresight and desire to establish a business in the U.S. “North America is the largest construction market in the world and we weren’t here yet until 2009. Mark and the rest of the Mace Board really had the vision to bring Mace to this market on a national scale. In my role, I work alongside our senior leaders as chief architects and implementers of the initial vision.” Mace has grown signifcantly in the U.S. since 2009, with regional hubs in Atlanta, New York, Chicago and San Francisco. It also has active projects in about a dozen other cities. For McNeese, this accomplishment is truly a group efort. He attributes Mace’s growth in North America to the efectiveness of its senior leadership team, which includes Greg Parker, Frank Alvarado, David Stoutamire, Ann Mendelsohn, Michael Arikat and Melissa Trifro. “Te biggest success is really attracting a core group of people who believe in the mission and believe that we can build a brand for Mace here,” he says. “We all come from diferent backgrounds and expertise. None of us had a history of working together before, but we share a common desire to provide project, cost and facilities management services independent of the brokerage, design and engineering supply chain.”

Mace frst came to the U.S. after securing an expanded contract with Atlantabased Invesco to manage the company’s facilities in the U.S. and Canada. Since then, the list of clients has grown to include Ofce Depot, Univision and Northern Trust Bank, to name a few. Currently, McNeese and his team are working with Porsche Cars North America on their new North American headquarters in Atlanta. Mace has also been selected by the Port Authority of New York and New Jersey to project manage their new headquarters ft-out at Four World Trade Center. “We are fortunate to be able to work for many frst-class clients on more than a few premier projects around the world and here in the States. Our work includes all project types – new build, renovation, ft-out, retail, maintenance, tall towers, resorts, healthcare, broadcasting, mission critical. Tis variety is a testimony to the confdence our clients have in Mace to deliver, regardless of the project type or location.” A Business on the Rise Tis is Mace’s twentieth year of successive growth, growing 15 percent in 2012 to total revenue of $1.5 billion and managing capital expenditures for clients in excess of $100 billion. McNeese credits much of this success to the clarity of vision and belief in ambition supported by leadership and carried out by employees. A service delivered by colleagues who believe in what

“We all come from different backgrounds and expertise. None of us had a history of working together before, but we share a common desire to provide project, cost and facilities management services independent of the brokerage, design and engineering supply chain.”

THE LEADER | July/August 2013

SERVICE PROVIDER

Brian McNeese

they are doing, is the reason many clients think Mace employees go the extra mile. He also credits their ‘laser-focus.’ In other words, the Mace team sticks to what they know: construction projects and facilities consulting. Tat focus has paid of. Even in tough economic times, Mace has held strong and is seeing improvement in the recovering market. In the past 10 years, the company has grown 2.5 times in terms of headcount and eight times in terms of revenue. Market Trends Trends are ever-changing in corporate real estate, and McNeese has seen the value in paying attention. “I am seeing an increased shift to ‘best-in-class’ providers for project, cost and facilities management services. In the past, I believe there was a leaning towards single, integrated providers for all corporate real estate services. Now, I believe corporate clients lean towards frameworks with a select group of providers for these services, especially project management.” McNeese also believes the U.S. market

can learn a few things from the European model of project service delivery. “Specifc to construction costing and proactive risk identifcation and mitigation, the European model of Cost Consultancy is something we’ve imported from our colleagues overseas. Tis model brings a greater degree of transparency and independence to our clients as we assist them in managing important capital decisions.” For Those New to CRE For those just beginning their careers, McNeese ofers three pieces of advice: First, he advises that they treat everyone they meet with respect. Second, he says, seek good mentors and learn as much as possible from industry veterans. Lastly, he says, keep learning: Find new information to help further your career. After Hours McNeese often says he has two babies in his life: his young daughter and the development of Mace in North America. Neither leaves much time for spare activities, but McNeese and his team set aside

time each quarter to review their progress as a business and to ensure they continue to grow cohesively. Strategic with CoreNet Global McNeese has been a member of CoreNet Global for the past seven years. As a company, Mace is a silver-level strategic partner with CoreNet Global, which provides its employees the opportunity to attend the summits and participate in research opportunities. In addition, Mace sponsors the local chapters in Atlanta, New York, Chicago, San Francisco and Los Angeles. McNeese and his team decided that CoreNet Global was important to their expansion in North America. “Leadership in the U.K. asked us what kind of organizations we needed to be part of in order to reach our audience of corporate clients. Without hesitation, all of us raised our hands and said ‘Corenet Global.’”

Brian McNeese Managing Director, Mace North America

July/August 2013 | THE LEADER

END USER

BY NICHOLE BAZEMORE

Norma Miller: Change Agent at The Gates Foundation

n business, as in life, change is the only constant. And most often, how you navigate that change determines whether you succeed or fail. Norma Miller knows a little something about change. In fact, for much of her career, she’s actually sought it out. Miller is Director of Global Workplace for Te Bill & Melinda Gates Foundation, a philanthropic organization founded by the couple in 2000 that is dedicated to helping people lead healthy, productive lives. In developing countries, the Foundation focuses on improving people’s health and giving them the chance to lift themselves out of hunger and extreme poverty. In the United States, the foundation seeks to ensure that all people – especially those with the fewest resources – have access to the opportunities they need to succeed in school and life. In her current role, Miller directs multiple Operations teams in the Foundation, including its Global Facilities and Real Estate, Global Events, Global Travel and the organization’s newest addition – the Visitor Center at their new Seattle campus

THE LEADER | July/August 2013

– where people can learn about the Foundation’s work and how to get involved, “or better yet, get inspired to do something – no matter how big or small – to make a diference in the world,” she says. A Deliberate Change of Course After graduating with an economics degree from Evergreen State College, Miller, a native of Washington State, began working in a number of fnancerelated positions. Her frst job was that of a budget analyst. From there, she progressed to Facilities Administrator for the City of Seattle, serving under three mayors and numerous City Councils. In 2000, she left to work for Starbucks Corporation, where, for the next eight years she served as Director of Development and later, Corporate Real Estate and Facilities. While there, Miller supported the company’s signifcant growth through expansion of regional ofces, roasting plants and various alternative work spaces for corporate ofce needs. “Te pace of growth was exciting and challenging,” Miller remembers.

In 2008, she got a call from Te Bill and Melinda Gates Foundation. Te organization had just broken ground on its permanent campus (the previous headquarters had been scattered across fve diferent buildings), where employees could work more collaboratively to solve some of the world’s most challenging problems. Te Foundation was looking for someone with both development and construction experience, but also operational experience, to “stand up” the campus buildings and the complex move-in. Miller ft the bill professionally, but the opportunity spoke to her on another level, as well. “Te idea of being involved in creating an iconic building from the ground up for this organization to do their impactful work in was truly a once-in-a-lifetime opportunity.” Collaboration as the Key to Effective Change Tis new job also provided an opportunity for Miller to indulge her interest in change management – simply, the process of moving a group of people or an organization from a current state to a desired state. “We didn’t want staf to lose a beat from their important work

The 640,000 sq.ft.- Gates Foundation headquarters sits on 12 acres. The LEED NC Platinum-certifed campus features green roofs and a shaded courtyard.

END USER

because of the move. I needed to put together a team and a plan on how we would efectively give employees what they needed to do their hard work and then engage them just enough so they knew what to expect when they moved,” she says. It wasn’t an easy job, but it’s one Miller and her team approached enthusiastically and head-on. And to do it, her staf collaborated with HR, Technology, Security and Communications for two years to listen, learn and educate Foundation staf about the changes they would experience. Te team used traditional methods for soliciting input, including surveys and engaging team meetings and open houses, but went deeper by enlisting “change champions” at all levels of the Foundation who had a constant pulse on what their peers were thinking or worrying about. “We had a rhythm of communications and were able to anticipate their needs and issues proactively and positively. We certainly changed some of our direction due to the feedback we heard. Most importantly, we wanted the staf to be excited about the new campus and to look forward to the change in how they do their work as a result.” Change is Good In 2011, three years after construction began, the new headquarters for Te Gates Foundation opened. And as it turns out, the move wasn’t just good for employees – it was good for the environment. Te 1 million sq.ft.- (92, 903 sq.m.-) campus is a model of sustainability: It features two six-story, energy-efcient buildings with two acres of green roofs; solar panels that ofset hot water energy; a 1.2 million gallon underground rainwater storage facility that supplies toilets, exterior ponds and landscaping; and a narrow foorplate design that allows substantial

Norma Miller

daylight into all spaces. And unlike the Foundation’s former, multi-building campus – where employees had to ride a shuttle to get around – this location features a transportation program that incents employees to take the bus, walk, or ride bikes to work while requiring single-occupant drivers to pay to park. Te Foundation has also instituted additional, ongoing measures across the campus to reduce its carbon footprint focused on business travel and waste/ energy use in building operations. All these changes also netted another beneft: In 2012, Te Gates Foundation campus in Seattle was awarded LEED-NC Platinum certifcation from the United States Green Building Council, making it the largest non-proft LEED-NC Platinum building in the world at the time. world at the time (the ‘NC’ designation refers to new construction and major renovations). “We said from the beginning that we would not purposely go after LEED points. Instead, we made decisions based on appropriate long term ROIs and in the best interest of our community.”

Involvement with CoreNet Global Miller’s involvement with CoreNet Global goes back to her days at Starbucks. “I wanted to understand how other companies were innovating business practices, what metrics were most efective to benchmark against and what others are learning in change management” she says. She started by using the Knowledge Center to do her research, using conference proceedings and whitepapers and eventually attended the monthly CoreNet meetings to meet others who were involved with the Washington State chapter. “I decided to get involved in another way. Now, I’m on the board (as Secretary/Treasurer). Seattle is such a rich environment for business leaders to learn from each other. I learn a lot from my CoreNet colleagues and regularly collaborate with them when the opportunity arises.”

Norma Miller Director, Global Workplace

July/August 2013 | THE LEADER

SPECIAL INTEREST FEATURE

BY JOSEPH DOBRIAN

Plain States Report: Energy and Tourism Spark New Growth Wave

Chobani Yogurt’s 1 million sq.ft- (92,903 sq.m.-) manufacturing plant, the largest yogurt manufacturing plant in the world.

he Plains and Mountain States seem, as a group, to be a remarkably opportunity-rich region for real estate investors and developers. Employers are taking a closer look at these states, which tend to be business friendly and not overburdened with taxes or regulations. Demand for energy of all types is driving economic growth in these states; so is tourism. Although most of these states are hampered by sparse population, they’re also gaining favor as back-ofce locations. In all, the region seems set for signifcant growth in commercial and residential real estate. “Two of the key industries in our state are energy production and the support of energy production,” says Brett Doney, President of Great Falls (Mont.) Development Authority. “We’re seeing investment in oil and gas, in wind and hydroelectric generation, and in fabrication and logistics in connection with the Alberta Oil Sands. We have four companies in our region, and one in Billings, developing product for hard rock mining and for oil sands projects. ADF Group, from Québec, is building a 100,000 sq.-ft- (9, 290 sq.m.-) fuel fabrication plant in Great Falls, and an outdoor module assembly area that will employ 1,200 people. “Another area of growth is agricultural processing. We have a barley malting plant owned by Malt Europe – the most modern

THE LEADER | July/August 2013

of its kind in the world, a $95 million project – which produces mainly for Anheuser Busch. Montana is also getting more into the production of pulse crops, in addition to grains.” A third area of growth, says Doney, is back-ofce operations. “Tis is surprising since we have a relatively small workforce,” he admits. “But we’re productive. Centene Corp. has a 300-employee processing center in Great Falls to handle Medicaid management, and they’re contemplating expansion. General Electric has a back ofce center in Billings. Both say that the retention and productivity in their Montana ofces are the highest of any ofces in their company. Tat’s probably to do with our farming and ranching work ethic, and our network of two-year colleges.” Most of Montana’s real estate growth is in industrial property, Doney concludes, but this has resulted in some collateral growth in retail, especially restaurants. Increased tourism has led to some growth in the hospitality industry, as well. Tourism is a major driver of Wyoming’s economy, too – and so is energy. Bob Jensen, CEO of the Wyoming Business Council (Cheyenne), notes that Wyoming has every energy source known to mankind: coal, natural gas, oil, uranium “and lots of wind.”

SPECIAL INTEREST FEATURE ¶ PLAIN STATES REPORT: A MIXED BAG OF GROWTH AND RECESSION

“Much of our industrial growth happens around the supply chain for energy and the deployment of advanced energy technologies that use the existing mineral and energy base we have,” Jensen says. “New uranium properties around the state are being looked at, for more domestically-sourced uranium for our nuclear feet. Also important to our economy are carbon conversion technologies that can turn natural gas to liquid, or coal to gas to liquid fuel in an environmentally friendly way. Our digital industry is growing. We’ve had lot of success in attracting data centers, and growing them within the state. Te main reason why data centers like Wyoming is that we have abundant, redundant, low-priced power.” Wyoming is also seeing investment in its rail infrastructure, since access to rail drives manufacturing and distribution. Transportation is also vital to the tourism industry, which ranks just behind energy as a driver of the state’s economy. “We’re a global destination,” says Jensen. “We’ve always targeted hunting, fshing, and other outdoor activities, and due to our low cost of doing business, our regulatory stability, and new controls being imposed in other states, the gun industry is giving us some attention. Other states will do what they’ll do, and businesses need an atmosphere in which they can grow.” Idaho is also a big hunting and fshing state, but what really draws visitors there is “agritourism.” Idaho’s farmers draw visitors with various food attractions, petting zoos, corn mazes, rides and other events, and these enterprises often provide a hedge against agricultural hazards such as changing crop prices or weather variables. A recently passed piece of legislation, the Idaho Agritourism Protection Act, which protects farmers against liability if a guest is injured by the inherent risks of a farm operation, is likely to lead to more growth of that industry. Te legislation also protects farms’ status as agricultural land, which is taxed more lightly than commercial property. Boise, Idaho’s capital, boasts one of the highest home price appreciation rates in the nation, and one of the lowest rates of foreclosure availability. Price appreciation has led to a jump in new home construction, with starts in January of this year showing a year-over-year increase of 17 percent. According to the Idaho Department of Commerce, several major food processing companies have recently opened new facilities in Idaho, or expanded existing ones, including Glanbia, High Desert Milk, Sorrento Lactalis, and Chobani (which built the largest yogurt plant in the world – one million square feet (92,903 square meters) – in 326 days, in Twin

Falls). Other major industries in the state include recreation technology, shared services, software and aviation. South Dakota, meanwhile, has a problem most states wouldn’t mind having: more jobs than people. Last year, the state government hired a private recruiting frm, with a goal of bringing 1,000 new workers into the state, including 700 skilled manufacturing workers and 100 professionals. Te absence of a state income tax, plus a low crime rate and plentiful tourist destinations, might reverse the population decline that the state has experienced in past decades. Te state also recently received $1.9 million in grants from the Federal Home Loan Bank to rehabilitate and repair hundreds of residential properties across the state. North Dakota is booming, also, and doing its best to attract new workers. Te state placed 34th on the list of state economies that are innovative, globally oriented and built around knowledgebased industries, according to the Information Technology and Innovation Foundation, a Washington, D.C.-based think tank. North Dakota placed 47th in 2002. Te growth has been seen largely in manufacturing and software development, but the main driver is the oil boom in the western part of the state. Te most noticeable consequence of this economic upsurge is demand for more afordable housing. In Utah, Solar Winds, a Texas-based infotech company, has announced plans to bring 1,040 jobs into the state in the next two decades. Colorado, the most populous of the Mountain states, is seeing considerable retail growth, and a tightening of the housing supply. Both circumstances bode well for the real estate industry there, in the long run.

“Much of our industrial growth happens around the supply chain for energy and the deployment of advanced energy technologies that use the existing mineral and energy base we have.”

A construction worker surveys solar panels.

July/August 2013 | THE LEADER

INDUSTRY TRACKER

BY RICHARD KADZIS

Manufacturing’s Return to the U.S. Validates 2020 Visioning Industrial overtakes multifamily as the strongestperforming commercial real estate sector

an we say, “We told you so”? In some important respects, Corporate Real Estate 2020’s 46 predictions on the future of business and the changing nature of work are living up to the “bold statement” label that CoreNet Global ascribed to them. For the nearly 300 industry professionals whose visioning helped shape more than 500 pages of forward-facing research analysis, there is validation about tomorrow’s world as they foresee it. It can readily be found in our forecast that manufacturing jobs would be “reshored” to the United States and Western Europe. While the European Union’s sovereign debt issues have slowed the trend there (with the exception of Germany),

THE LEADER | July/August 2013

the U.S. has realized a net gain of 432,000 new manufacturing jobs, an increase of 3.6 percent, since August 2010, during the dregs of the Great Recession. Manufacturing employment today totals 12 million in the U.S., compared to just over 11.5 million three years ago. It’s a long climb back from the new millennium high-water mark of 15 million jobs, ofering another example of today’s ‘new economy of scale.’ But, to that end, we got it right, saying in August 2011, when our 2020 iteration began, “Tere will be a re-emergence of manufacturing in the U.S. with smaller regional facilities.” Evolving From Rachets to iPads At the center of this smaller-scale

rebound is advanced automated machine technology. So, imagine fewer people running leaner, more agile industrial facilities, driving assembly lines with an iPad instead of a ratchet. Tese individuals are likely to have received technical degrees coupled with two years of university education. Te rebound is robust enough to make industrial the strongest-performing sector of the commercial real estate industry. “Te resurgence of the manufacturing industry is giving commercial real estate’s industrial sector a strong boost right now,” reported GlobeStreet.com, from SIOR’s spring world conference in May of this year. Industrial recently bypassed multifamily housing as the hottest industry category, after multifamily led the pack during the recession as a result of the backlash from the sub-prime home mortgage disaster. But as our 2020 analysis pointed up, there are other outcomes infuencing manufacturing’s return, including: ¶ China’s rising middle class, ofering lower-cost market distribution to manufacturers there ¶ Volatility of oil prices and the rising cost of transoceanic distribution ($2,300 to ship a 40-ft. container from China to West Coast vs. $1,200 in 2009) ¶ Te drive for energy efciency and the unsustainability of globally dispersed supply chains ¶ Product quality control and safety in ‘events’ ranging from baby formula to pet food ¶ Intellectual property piracy, trademark and copyright infringements ¶ Rising operating costs in formerly emerging markets like China and India Another noteworthy, game-changing development: U.S.-produced natural shale gas is also fueling manufacturing’s resurgence in the U.S. Proof of Concept “Te ofshoring boom does appear to have largely run its course,” Paul

INDUSTRY TRACKER

Ashworth told Time Magazine in its April 22, 2013 edition in an in-depth trend report, “Made in the USA.” Ashworth is the chief U.S. economist for the research frm Capital Economics. Time reported, “Against all odds, manufacturing is staging a comeback.” For example, Apple is cited. “Famous for its factories in China that produce its gadgets, (Apple) decided to assemble one of its Mac computer lines in the U.S.” Walmart, pioneer of global sourcing in search of the lowest consumer prices, will increase spending with American suppliers by $50 billion over the next 10 years. France’s Airbus, meantime, plans on building JetBlue’s aircraft in Alabama. Ten, there’s the example of North Carolina’s furniture industry, which Time reports lost 70,000 jobs to companies outside the U.S. Ashley Furniture is investing at least $80 million to build a new plant in North Carolina. Te magazine quotes Ashley’s CEO observing, “If you go back 10 years, we didn’t think we’d be manufacturing in the U.S.” “From education to equipment, today’s (industrial) worker has come a long way,” the Time article also states, ofering another example: 3D Printing. It embodies the “relentless advance of technology” that frames the Corporate Real Estate 2020 vision implying a massive scaling-of-innovation opportunity. “Would-be manufacturing entrepreneurs can buy the (3D) devices and begin turning out high-tech metal parts for aerospace, automotive and other industries at lower cost and higher quality faster than ofshore suppliers,” Time also reported. As Japan’s automated automobile assembly lines and quality circles showed in the 1980s, the labor-intensive model is fast being left behind. Now, factory workers are more likely to ofer a blend of technical and artisan skills, managing automated production lines. More than half (53 percent) have at least some college education, and one in 10 has a grad-

Other Predictions Coming to Fruition Beyond manufacturing, other predictions residing within our eight domains of Corporate Real Estate 2020 are also turning out to be accurate precursors of the fast-evolving global knowledge economy.

Energy Management We predicted that buildings, sometimes connected by ‘micro-grids,’ will be both consumers and producers of energy and that advances in energy storage will impact building operations, transportation and planning. According to global energy management thought leader Dr. Amory Lovins, founder of the Rocky Mountain Institute and author of the book Reinventing Fire: Bold Business Solutions for the New Energy Era, “A global clean-energy race has emerged with astounding speed. The ability to operate without fossil fuels will defne winners and losers in business – and among nations.” At the center of that economic, environmental and national security paradigm shift are net-zero buildings that produce at least as much energy as they use, such as DPR Construction’s 16,000-sq. ft.-(1,486 sq.m.-) offce in Arizona Or the

300,000 sq.ft- (27,870 sq.m.-) National Research Energy Laboratory in Colorado. This development lends credence to CoreNet Global’s net-zero position advocating conservation.

Big Data Management and Analytics We said that technological innovation will enable integration of data streams from different parts of the organization into cross-functional dashboards to better support real-time decision making. The management and analysis of ‘big data’ is clearly becoming an overarching theme, not only to support the rapid decision making that frames the knowledge economy, but its effective use will win CRE executives ‘trusted advisor’ status and a ‘seat at the table.’ Big data will affect everything from the ability to accurately forecast the demand for space to informing the triple bottom line of people, planet and profts. No wonder Harvard Business Review rated the data scientist as “the world’s sexiest job.”

Effectiveness vs. Effciency Our 2020 forecast also calls for a shift toward effectiveness and away from effciency, saying that organizations will recognize the potential detrimental im-

uate or professional degree. Compared to the average hourly wage of $2.57 in 1960, plant workers today earn an average of $24.11. All of this combines to make food, chemicals and complex machinery the top three manufacturing industries in the U.S. today. Louisiana, for example, has capitalized on the chemical manufacturing trend. Dow Chemical is expanding ethylene and propylene production there and is expected to create 35,000 jobs in Texas, according to Time. Looking across the spectrum of manu-

pact of cost cutting on productivity (and, for that matter, employee engagement), changing the conversation from cost cutting to value creation. A study by Jones Lang LaSalle (JLL) proves the point. In a new report on Global Corporate Real Estate Trends, JLL unearths the fve top corporate real estate risks, including possible negative impacts to corporate competitive advantages and proftability from cost-cutting, procurement processes, lack of collaboration between functions and failure to drive productivity. CoreNet Global’s vision for the formation of a ‘Super Nucleus’ to serve as the corporate ‘brain center’ for enabling work and engaging employees also implies more emphasis on investment over cost management.

BYOD Based on a recent study, the Gartner Group expects a majority of corporations will require employees to bring their own devices to work (BYOD) by the year 2017. We predicted companies would become more comfortable with the notion of ‘bring your own technology’ (BYOT), thanks to the consumerization of technology, as defned by Gartner and increased internal IT security. It’s all about the blurring of lines between work and personal life.

facturing on a global scale, regardless of whether companies are expanding industrial operations in America or elsewhere, they are reinventing themselves and becoming more competitive. Ford, Caterpillar and General Electric (GE) have embraced this transformation, becoming more globally competitive along the way and restoring their shareholder value in the process. As Jeff Immelt, CEO of GE put it to Time, “We are probably the most competitive, on a global basis, that we’ve been in the past 30 years.”

July/August 2013 | THE LEADER

THANK YOU THE LEADER extends a warm â&#x20AC;&#x153;Thank Youâ&#x20AC;? to the following organizations that help shape the future of the corporate real estate and workplace industry through their generous support of CoreNet Global and its many initiatives.

CoreNet Global Strategic Partners Gold

Silver

Bronze

THE LEADER | July/August 2013

THANK YOU

2013 Spring Forward New York Sponsors MEETING OF THE MINDS

LEADER’S EDGE Title Sponsor

Pinnacle Sponsor

Leadership Sponsor

WOMEN’S LEADERSHIP FORUM Gold

Silver

2013 MCR Learning Sponsors North America

Asia Pacific

July/August 2013 | THE LEADER

DASHBOARD 1ST QUARTER 2013

City

Lease Rates (USD/SF/year)

Vacancy Rates (%)

Net Absorption (%)

*Ofﬁce

**Industrial

Ofﬁce

Industrial

Ofﬁce

Industrial

Amsterdam

$46.00

$8.00

16.0

n/a

0.5

n/a

Frankfurt

$50.00

$10.00

13.0

3.3

2.3

n/a

London

$152.00

$17.50

6.4

n/a

0.5

n/a

Moscow

$111.00

$13.00

14.0

6.5

n/a

Paris

$97.00

$14.00

7.5

7.1

1.2

n/a

Beijing

$120.00

$6.00

2.2

5.1

n/a

Hong Kong

$200.00

$15.00

3.9

n/a

2.5

n/a

Mumbai

$77.50

n/a

11.3

n/a

Shanghai

$105.00

$6.00

6.1

6.6

14.9

n/a

Singapore

$170.00

$17.50

6.2

16.8

9.4

n/a

Tokyo

$165.00

$20.00

n/a

7.1

n/a

Melbourne

$50.00

$9.50

5.1

n/a

Sydney

$85.00

$11.00

n/a

Auckland

$65.00

$10.50

8.1

n/a

Chicago

$24.81

$4.28

17.3%

9.5%

0.04%

0.42%

***Los Angeles

$29.85

$5.35

16.9%

5.4%

-0.42%

-0.15%

New York

$61.65

$5.09

11.8%

7.7%

-0.26%

0.34%

Washington DC

$35.81

$7.61

14.2%

10.2%

0.31%

0.04%

EUROPE

ASIA

AUSTRALIA / NEW ZEALAND

UNITED STATES

Data provided by Cassidy Turley and GVA 1

Average full service Average NNN 3 LA & NY Q4 12 ofﬁce inventory rediﬁned from previous quarter 2

¶ All office rental rates reflect CBD & Suburban unless otherwise noted ¶ New York office includes - Midtown, Midtown South, Downtown Manhattan; rent reflects the overall average for Class A and Class B in those submarkets ¶ New York industrial refelcts New Jersey statistics ¶ Washington DC industrial reflects Suburban Virginia and Suburban Maryland statatistics ¶ Washington DC office reflects Downtown Washington DC, Suburban Virginia, Suburban Maryland

THE LEADER | July/August 2013

Outshine the Competition! Light up your career

with coreNet gLobaL’s professioNaL deveLopmeNt programs!

The changing workplace and the changing nature of corporate real estate (CRE) dictates that professionals stay on top of trends. CoreNet Global’s professional development programs help you do just that highlighting your expertise and experience not only to the C-Suite, but also to other companies looking for today’s top talent! Build a learning schedule to ft your needs with seminars held throughout the year and around the globe!

Seminar schedules and more information about CoreNet Global Learning at www.corenetglobal.org/ProfDev

MEMBERS ON THE MOVE

land. Exxon Mobil will relocate operations at its Northern Virginia campus to a new corporate campus which is currently under development in suburban Houston.

❱ Business Facilities Magazine has

❱ Brian Patterson, Managing Partner of AIG/Lincoln, is the recipient of the 2013 Central & Eastern European Real Estate Quality Award (CEEQA) for Lifetime Achievement. Te annual awards honor companies and individuals who make signifcant contributions to the commercial real estate (CRE) sector in Central and Eastern Europe. Patterson led the development of two prominent commercial projects in Poland in 1992. He became a founding partner of AIG/Lincoln in 1997.

Scott Steuber

❱ Scott Steuber has

joined Avison Young’s ofce in downtown Los Angeles, Ca. ofce as Principal. Steuber, a corporate-occupier specialist and LEED Accredited Professional, most recently served as a director at Cushman & Wakefeld. He also serves on CoreNet Global’s Southern California Board of Directors and Young Leader Committee. Joseph Chavez

❱ Joseph Chavez has

been named president of Lee & Associates’ Investment Services Group (ISG). Chavez, who joined the frm in 2010 as senior vice president, specializes in the acquisition and disposition of multifamily properties. In 2011, Chavez was ranked as the number one agent in ISG and was awarded “Broker of the Year.”

THE LEADER | July/August 2013

Russell Lipscomb

❱ Russell Lipscomb has

been promoted to senior vice president of property management services for Transwestern’s Atlanta ofce. Lipscomb was previously with Ben Carter Properties, where for 12 years he managed a portfolio of assets for a number of clients, including Sumitomo Life, Florida Teachers Retirement Fund and Travelers Insurance. In his new role, Lipscomb will focus on business development initiatives that will expand Transwestern’s footprint throughout its Southeastern territory.

❱ Exxon Mobil Corporation has selected Cassidy Turley to provide divestiture services for its 117-acre corporate campus in Fairfax, Va. Te property includes fve buildings with 1.3 million square feet (120,773 square meters) of Class A ofce space; secured, approximately 1 million square feet of underground parking and approximately 92 acres of undeveloped

named the Greater Fort Lauderdale Alliance as the winner of its highest honor, the 2013 Excellence in Economic Development Award. Te award recognizes agencies that establish and consistently execute best practices in the corporate real estate (CRE) industry. Tis is the second consecutive year the Greater Fort Lauderdale Alliance was honored by the magazine. In 2012, it won the publication’s inaugural Economic Development “Achievement in Public/Private Partnerships” award. Doug Sharp

❱ Doug Sharp has been

elected to the board of CoreNet Global. Sharp, who was named president of Jones Lang LaSalle’s Americas Corporate Solutions business in 2012, is a 25-year veteran of the commercial real estate (CRE) industry. He holds a Bachelor of Arts in economics from the University of Michigan and a Master’s of Corporate Real Estate (MCR) designation from CoreNet Global.

❱ Moira Moser, founder and chairman of the architecture frm M Moser & Associates, was recently appointed to the American Institute of Architects (AIA) College of Fellows. Founded in 1981, M Moser Associates has 700 staf in London, New York, Hong Kong, Beijing, Shanghai, Singapore, Delhi and 10 other locations on three continents. Moira Moser

A LOOK AHEAD

¶ Innovation: The Value of Human Capital ¶ Up Close and Personal: An Inside Look at This Year’s Global Innovators Award Contenders

¶ State of the CRE Industry in India ¶ Young Leader: Matt Denio, Sierra Nevada Corporation

IN THE NEXT ISSUE!

¶ The Consumerization of Real Estate

CORENET GLOBAL EVENTS Calendar of Seminars The following seminars can be taken individually for credit toward the Master of Corporate Real Estate (MCR) designation or the Senior Leader of Corporate Real Estate (SLCR) certificate: HONG KONG: 22-23 JULY MCR Elective SHANGHAI, CHINA: 25-26 JULY MCR Seminar • Real Estate Transactions: Impact on Corporate Financial Transactions (MCR Required) MUMBAI, INDIA: 29-30 AUGUST MCR Elective • Advanced Real Estate Negotiations TOKYO, JAPAN: 5-6 SEPTEMBER MCR Elective/SLCR • Sustainable Strategies: Impact on Corporate Real Estate Portfolios SHANGHAI, CHINA: 21-22 NOVEMBER MCR Required • Enterprise Alignment

GLOBAL SUMMITS CORENET GLOBAL EMEA SUMMIT AMSTERDAM ¶ 9-11 SEPTEMBER 2014 The Rai Congress & Exhibition Centre

www.corenetglobal.org/Events/AmsterdamSummit2013

INDEX OF ADVERTISERS Colliers International

Florida Power & Light

Johnson Controls, Inc. Knoxville-Oak Ridge Innovation Valley Inc. Sodexo Steelcase

7 52 9 2

CoreNet Global (Amsterdam Summit)

CoreNet Global (Las Vegas Summit)

CoreNet Global (Learning)

CoreNet Global (Thank You Sponsors)

CORENET GLOBAL NORTH AMERICAN SUMMIT LAS VEGAS ¶ 21-23 OCTOBER 2013 MGM Grand

46-47

July/August 2013 | THE LEADER