The Real Estate Legacy of the Dot

orporate real estate executives who think they have nothing to learn from the boom-and-bust era of New Economy companies should think again. “The real estate legacy of the dot-com era will outlive many of the start-ups that have now collapsed,” says Jacques N. Gordon, international director of LaSalle Investment Management Inc. in Chicago.

       
Gordon was part of a global research team at Jones Lang LaSalle that conducted extensive interviews with 350 technology companies in 10 major cities in Asia Pacific, Europe and North America. What these researchers found may surprise you.

       
“The interviews were carried out in the third and fourth quarter of 2000, just as these companies were coping with layoffs and falling stock prices,” says Gordon. “We learned a lot about their need for flexibility, for connectivity and for less formal work environments.”

       
Indeed, it did not seem to matter whether these tech companies were in Chicago or Hong Kong. The new global standards of the Information Age show that high-tech minds tend to think alike regardless of where they work. The most important factors driving the site selection and specific building decisions of technology firms were as follows:

• Access to the worldwide Internet backbone — including sufficient bandwidth in the location and within the building — is not a preference but an absolute requirement.
  
• Proximity to public transportation is seen as a key tool in attracting staff and limiting turnover.
  
• External building appearance is not nearly as important as the design and configuration of internal workspace.
  
• High-tech companies demand substantial flexibility in how they contract for, use and lease space.
  

The interviews were conducted in Hong Kong; Singapore; Sydney; Chicago; San Francisco; Washington, D.C.; London; Hamburg; Munich; and Paris. In every city, tech firm representatives said that connectivity is the leading factor in location and facility selection. Equally as important, the respondents said, their increasingly young and cyber-savvy workers reject the traditional commuter lifestyle and choose to live where they work.

       
“Building design and lease terms for New Economy companies reflect their stronger focus on worker satisfaction, productivity and flexibility,” noted the Jones Lang LaSalle report. The average lease length for these companies was just three and a half years. More than 25 percent of these firms operate around-the-clock operations.

       
What are the implications for traditional companies in the wake of the dot-coms’ demise? The report concludes that “the key factors that drove the New Economy — more efficient business models, speed to market and value of networks — will, over the next decade, transform what remains of the old economy.”

       
For corporate real estate executives and property managers alike, the lesson is clear: “The property sector must change along with the rest of the economy.”

       
This means that corporate real estate departments must be more willing, not less, to incorporate e-business strategies into every aspect of their operations. It also means that the best applications for streamlining real estate operations are yet to come.

       
Whether you run a multinational corporation like Boeing with 124 million sq. ft. (11.5 million sq. m.) of inventory (see our September, 2001 Cover Story), or whether you’re searching for a location for your next call center (see our Question and Insight feature from September, 2001), smart use of new technology can spell the difference between profit and loss.

       
To learn more about the lessons that can be learned from the rise and fall of the tech firms, go to www.joneslanglasalle.com and check out the fourth edition of Property Futures.

Welcome to Mesa: Boomtown, USA

The fastest growing cities in America aren’t New York and Los Angeles. They’re the new genre of sprawling suburbs — or “boomburbs” — and they’re luring the lion’s share of corporate growth.

       
They’re places like Mesa, Ariz. (population 396,375), and Arlington, Texas (population 332,969), suburbs of major metropolitan areas of several million people. These relatively young communities are larger than older, more established cities such as Minneapolis and Pittsburgh, but they lack much of the infrastructure and governmental coordination that enable a city to thrive.

       
Replacing City Hall are homeowners associations, water districts and privately run master-planned communities. What they lack in public policy oversight they make up for in explosive growth. Irving, Texas, grew by more than 7,000 percent from 1950 to 2000. Several other boomburbs grew by more than 4,000 percent during this period.

       
The insightful analysis of this distinctly American phenomenon can be found in a Fannie Mae Foundation report analyzing the 2000 U.S. Census. “Boomburbs: The Emergence of Large, Fast-Growing Suburban Cities” is available at www.fanniemaefoundation.org.