Real Estate 1997 and the Art of War: Strategic Planning Pushes Global Expansion

Strategic planning-fueled growth will be a big part of real estate?s new year, judging from a recent Site Selection survey of top corporate real estate professionals.

A whopping 87 percent of SS survey respondents? firms, for example, plan to ?locate new facilities or expand existing ones during 1997.?

Strategic planning?s expandability is fast supplanting downsizing?s expendablity, the survey suggests.
John Dues, Arthur Andersen director of corporate real estate services, has seen that expansionist bent among his corporate clientele.

?As near term as a year ago,? Dues says, ?companies were looking for real estate flexibility, but much of it was driven by exit strategies. The dominant flexibility driver we see in purchasing today, though, is not so much the ability to vacate, as it is to maintain the ability to grow and expand.?

A Rising Asian Sun

1997?s expansion is propelled not so much by traditional location, location, location as it is by ?glocation, glocation, glocation,? (to borrow a phrase from the ?mindmappers? at Ernst & Young Kenneth Leventhal Group).

Some 84 percent of respondents say their firms plan to expand in 1997 outside their home nation.

North America ranks as 1997?s No. 1 targeted growth region, with 73 percent of respondents predicting 1997 expansions or new locations. But that No. 1 ranking comes with a king-sized caveat. Some 90 percent of survey respondents? firms are U.S.-based, making the results? North American drift far less striking.

Correspondingly, the survey sample?s composition makes the Asia-Pacific?s No. 2 regional rank much more impressive, as 64 percent of respondents plan Asia-Pacific growth in 1997. The SS forecast underscores an evolving new world economic order, with the Asia-Pacific expected to rank as the world?s dominant regional economy in less than a decade.

?If you look at a map showing the future growth of cities,? says high-profile futurist David Pearce Snyder, ?they?re all going to be in Asia and Latin America. It?s quite striking.?

China Ties for No. 1

Almost half of surveyed firms? 1997 expansion plans target China, which tied the USA as the new year?s No. 1 site.

That Sino-leaning bent echoes one of the enigmatic strategic designs of Sun Tzu, the legendary Chinese general from the fifth century B.C. who wrote the influential The Art of War: ?Fish in troubled waters.?

China?s vast pond of market potential is apparently overshadowing its highly publicized troubled waters — namely, the uncertainties surrounding Deng Xiaoping?s eclipse and Chinese control of Hong Kong. (Significantly, only 5 percent of surveyed companies are targeting Hong Kong.)

On the other hand, comparatively few firms are looking to fish Europe?s comparatively calm business waters. Only two European nations — the UK and Germany — rank among 1997?s top 10, reflecting many observers? concerns over Europe?s business competitiveness.

?Europe is having big problems with its social welfare benefits,? Snyder says. ?Its labor costs are high, making it less competitive in the global marketplace.?

Europe?s long-term business fortunes may significantly improve as unification evolves. Perhaps a paradoxical glimpse of the EU?s locational future can be seen in the strong No. 4 rank of the UK, which has doggedly gone its own way within Europe?s unification.
Central and South America ranks below Europe for 1997 business expansion, targeted by 24 percent of surveyed firms. But with snowballing free trade and the region?s growing stability, Latin America?s location fortunes are definitely ascendant. Brazil ranks No. 5 for 1997 growth. And the region as a whole is expected to rank No. 2 in global economic growth by the end of the century (see this issue?s cover story).

Whither, Outsourcing?

How companies will execute their 1997 expansion strategies says much about what?s happening in today?s business. In a word, outsourcing is how.

Already high, real estate outsourcing levels are going to get higher: More than one-fourth SS-surveyed executives expect ?increased real estate outsourcing at my firm during 1997.? Only 6 percent anticipate a decrease.

Short-Term Strategies

Real estate, the survey indicates has become a strategic resource at many firms. Almost 60 percent of survey respondents say their companies have ?overall real estate strategic plans.?

At the same time, an overwhelming 91 percent say ?strategic planning cannot be done the same way the process was done five years ago.?

?What we?re seeing now are very dynamic strategic plans that last, at most, 18 months to three years,? says consultant Steven Goldman, founder and head of The Agility Forum. ?Change is just too fast to plan out any farther. Some companies have evolving strategic plans that they totally revise every year.

?Companies need the sort of agility to cross a wide but flowing stream by hopping from rock to rock — and each rock is sinking as they go across.?