Risk Alert: Top Three Real Estate Pitfalls of Emerging Market Expansion
As more businesses look to emerging markets for revenue, JLL reveals what not
to do while expanding internationally
CHICAGO, Dec. 2, 2013
CHICAGO, Dec. 2, 2013 /PRNewswire/ --For many companies, the most promising
revenue growth opportunities lie in emerging markets. Yet, this potential also
carries risks for those on the front lines of expansion, according to Jones
Lang LaSalle's (JLL) 2013 Global Corporate Real Estate (GCRES) Trends report.
Real estate is a major factor in market growth and companies must identify the
associated risks, such as market transparency, team experience and resource
Corporate real estate (CRE) executives are often key members of the team
bringing market expansion to reality. "Real estate teams need to educate their
business leaders on the realities of expanding into opaque markets," said John
Forrest, Global Director and CEO of Jones Lang LaSalle's Corporate Solutions
business in Asia Pacific. "The possibility of misguided expectations is high
and failure to deliver can damage the company's reputation and the standing of
its real estate team."
JLL's report, which surveyed more than 630 CRE executives, found that 46
percent of CRE executives face an increasing demand from the C-suite to
deliver platforms for growth in select markets. "There is a real danger that
the pursuit of growth and need for competitive advantage in emerging markets
will lead to unrealistic demands being placed on CRE teams," said Forrest.
Pitfall #1: Real estate market transparency
As real estate footprints in North America and Europe are being right-sized,
many companies are looking to grow their portfolios in some of the world's
least transparent real estate markets. In fact, 44 percent of survey
respondents anticipate net portfolio growth in China over the next three
years; 38 percent in India, 31 percent in Brazil, 20 percent in Russia, 16
percent in Mexico, followed by 8 percent in South Africa.
According to JLL's survey, 19 percent of the respondents see the lack of real
estate market transparency as the single greatest threat to expansion in
emerging markets, above lack of political (18 percent) and economic (17
percent) transparency (Fig. 1).
"Where mature markets tend to provide access to market information and public
records, emerging markets often have cultural and social dynamics that are
difficult for non-locals to navigate," said Forrest. "The lack of clarity
equates to a slower speed-to-market, greater operational complexity and more
barriers to entry. The C-suite may not be aware of these ground-floor
obstacles and may not be thinking about real estate concerns."
Pitfall #2: Unequipped teams can delay expansion
Only 28 percent of survey respondents believe their organization is "well
equipped" to meet the various tactical and strategic demands now being
expected (Fig. 2), and 26 percent cite lack of skills and knowledge as a major
constraint in enhancing their corporate real estate department's role. While
training and strategic hiring can help teams rise to the challenge, 75 percent
of respondents say they are experiencing increasing demand from senior
management to reduce direct real estate costs, and more than 70 percent have
been asked to improve workplace utilization rates and reduce operating costs.
Pitfall #3: Lack of resources can constrain growth
Even amidst growing C-suite demands for overseas speed-to-market, CRE
departments may be underestimating the time and costs involved. "Delivery is a
significant and often underestimated drain on the finite resources and skills
of the CRE function," said Forrest. "Time and costs can escalate rapidly,
while compromises around the quality of the real estate solution are
inevitable. The reputation of the CRE department across the wider business is
at risk unless proactively managed."
Despite the risks, CRE executives are not advance-managing accordingly. Only
19 percent are likely to spend more than half of their time on delivering in
emerging markets (Fig. 3), and 53 percent plan to spend less than 20 percent
of their time--or none at all--to emerging market growth.
Wondering where your corporation stands? Find out how your organization
measures up to its peers in key areas such as outsourcing plans, workplace
strategy and resource capacity. Answer five quick questions via JLL's
interactive online tool and receive an instant comparison of your responses
with the survey result norms.
To request a full copy of the report, visit www.jll.com/globalCREtrends or
download a presentation on JLL's new Slideshare profile. Social media users
can also engage in the conversation about the future of corporate real estate
on Twitter using #CRETrends.
A leader in the real estate outsourcing field, JLL's Corporate Solutions
business helps corporations improve productivity in the cost, efficiency and
performance of their national, regional or global real estate portfolios by
creating outsourcing partnerships to manage and execute a range of corporate
real estate services. This service delivery capability helps corporations
improve business performance, particularly as companies turn to the
outsourcing of their real estate activity as a way to manage expenses and
For more news, videos and research resources on Jones Lang LaSalle, please
visit the firm's global media center Web page http://bit.ly/18P2tkv.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE: JLL) is a professional services and investment
management firm offering specialized real estate services to clients seeking
increased value by owning, occupying and investing in real estate. With annual
revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more
than 1,000 locations worldwide. On behalf of its clients, the firm provides
management and real estate outsourcing services to a property portfolio of 2.6
billion square feet and completed $63 billion in sales, acquisitions and
finance transactions in 2012. Its investment management business, LaSalle
Investment Management, has $46.7 billion of real estate assets under
management. For further information, visit www.jll.com.
SOURCE Jones Lang LaSalle
Contact: Joanne Bestall, +1 312 228 2344, Joanne.firstname.lastname@example.org or
Jennifer Harris, +1 224 619 2190, Jennifer.Harris@am.jll.com
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