1997 Expansion Forecast: More Go-Go Global Growth

1997 will be earmarked by go-go global corporate facility growth, perhaps on a gargantuan scale.

Site Selection?s New Facilities Index clearly indicates 1997?s strong expansionist drift, projecting a substantial 10 percent increase in the number of worldwide new facilities and expansions.

Based on a global survey of expansion plans at some of the world?s business blue bloods, the SS Index (SSI) has accurately anticipated facility growth trends since its 1991 inception.

1997?s generally robust business environment suggests that new facility growth may even outstrip bullish SSI projections.

Vital Global Signs

1996 world economic output grew an estimated 3.8 percent. 1997 global growth will accelerate to 4.1 percent, the International Monetary Fund forecasts, which would mark the biggest increase since 1988.

Regardless of growth rates, sheer statistics will likely underestimate total growth in corporate facility activity. That?s due to many leading-edge firms? quick-strike expansion strategies, which instantly secure manufacturing capacity to cope with slashed product life cycles and intensifying global competition.

?When you ask how much companies are planning to spend this year, they?re continuing to invest in capacity to meet business return criteria,? says John Dues, Arthur Andersen director of corporate real estate services. ?But more and more companies are buying, rather than building, capacity, investing in existing companies and rolling them into their operations.?

?Companies are also doing real estate [projects] by rapidly forming alliances,? says Steven Goldman, co-author of 21st Century Manufacturing Enterprise Strategy.

Other firms are breaking traditional real estate ?rules? by renting space at other firms? under-capacity facilities (long practiced in the petroleum industry) or acquiring other firms? outmoded plants.

Regional Expansion, Office Compression

For example, despite Asia?s torrid business growth, ?1996 has been a really terrible year,? says Philip Tose, chairman of Peregrine Investments, Hong Kong?s top fund manager. Though 1996 economic growth in Asia?s nine major economies ?slowed? to 7.5 percent, expect a ?general rebound? in 1997, says Hong Kong-based Merrill Lynch economist Nicholas Kwan, with China and Hong Kong particularly surging after British colonial rule ends in July.

Budget deficit battles in Europe, Japan and the USA pose perhaps the biggest potential threat to new facility expansion.

Decreased new investment per office employee is likely to continue in 1997, as it did 1996, falling 25 percent to US$22,762. In part, that decrease is due to the broad-scale adoption of innovative office strategies like shared space, hotelling, and telecommuting. As the Atlanta-based International Development Research Council?s trailblazing work has documented, those strategies allow more employees to productively utilize less space.