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MNCs expanding in Mideast: CBRE

By Staff

As the economic outlook improves, multi-national companies (MNCs) are demonstrating an appetite for international expansion into new markets.

The latest annual European Occupier Survey by global real estate advisor, CBRE, 30 per cent of the corporates surveyed identified the Middle East as a potential destination for expansion in the next two years, a rise from 24 per cent in 2012.

The survey, now in its fourth year, polls corporate real estate decision makers at global corporations collectively occupying approximately 2.7 billion square feet (250 million sqm) worldwide.

The survey demonstrates that more than half of corporates [56 per cent] name access to new markets and customers as the principal driver for location decisions. This broad appetite for expansion sees India and Africa emerge as destinations of choice.

When asked to identify where they intended to expand their operations, 48 percent named India (double the figure from 2012 at 24 percent), with China mentioned by 42 percent, down from 60 percent in 2012. There is also a significant increase in the number of corporates intending to expand into Africa. This target market is now identified by a third of respondents [34 percent today], versus a fifth [21 percent in 2012].  In the case of both India and Africa, rapid population and economic growth, coupled with increasing transparency and improving infrastructure, is removing many of the traditional barriers to entry.

Nick Maclean, Managing Director, CBRE Middle East, said, “The Middle East is witnessing strong economic and population growth which represents significant investment opportunities for global businesses. Dubai being the region’s commercial and tourism hub remains a focal point in the Middle East and a destination of choice for global corporates looking to expand into this region or the lucrative African market.

“The World Expo 2020 announcement in November last year has further fuelled this positive sentiment and over the period of next six years we will see real estate assets exhibiting strong growth and development.”

The survey shows corporates’ increased confidence in the economic recovery, with less than half [46 per cent] identifying weak economies as a concern. In 2012 the overwhelming majority [70 per cent], reported that the uncertain economic outlook in Europe was a key factor in their real estate strategy, with cost management being the primary objective.

The shift in corporate focus towards the future is also re-focusing attention of the corporate real estate (“CRE”) function. There is now a greater desire for increased alignment between real estate activities and broader business objectives with 72 per cent of companies surveyed noting this as an area for improvement. This indicates that with the correct management, CRE functions could become facilitators of future growth with the knock-on-effect of increased CRE outsourcing.

Mark Caskey, EMEA Head of Global Corporate Services, at CBRE stated, “As we move into a phase of economic recovery it is clear that occupiers are beginning to look beyond pure cost saving initiatives. In the near term we expect a broad cost saving attitude to prevail, however, it is encouraging that corporates are seeking out new target destinations and adopting increasingly sophisticated workplace strategies.

“In particular, a core theme throughout our results has been the increasing influence and focus on workplace strategies. It is clear corporates are sitting up and taking note that ideal working environments lead to better employee productivity and enable the best talent to be attracted and retained. Furthermore, labour outlay is more expensive than real estate costs, so improved staff productivity has a greater impact on companies’ profitability. We expect this trend to continue next year and beyond.”

Richard Holberton, Director, EMEA Research, at CBRE concluded, “While financial objectives still govern the corporate occupier landscape, increasingly there is a greater desire to look toward the future. This has seen a greater alignment between real estate activities and broader business objectives. As corporate real estate teams become more strategic and client focused, scope remains for the trend of outsourcing to persist.”