Companies Increasingly Taking a "Lead-With-Labor" Approach When It Comes To The Workplace

October 13th, 2016


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New CBRE paper reveals that talent shortages are reshaping the workplace paradigm, with the war for talent influencing all aspects of real estate decision-making

A new paper from CBRE Group, Inc. reveals a paradigm shift in how companies are approaching real estate decisions today. According to the paper, the first in a CBRE Thought Leadership series on workplace performance, the age-old adage, “location, location, location,” is being replaced with “talent, talent, talent” as the primary driver behind real estate decision-making.

In a recent survey of global occupiers conducted by CBRE, top corporate real estate executives cited talent availability as a major criterion when it came to selecting a market for their workplace. This “lead-with-labor” approach allows companies to maximize talent recruitment, while also achieving potential cost savings by locating in secondary markets where real estate costs are lower, and where talent is clustering.

“If an organization is able to create a business strategy based on where it needs talent, possibly relocating certain operations to secondary markets, they can reduce both real estate costs and the labor costs compared to major markets,” said Kristin Sexton, managing director, Labor Analytics, CBRE.

While many companies still prefer to locate in gateway cities for client access, proximity to suppliers and major transit options, many of these markets are “already tapped in terms of labor and many of our clients are asking what lies beyond, what is the next tier of markets in which to find talent,” said Mark W. Seeley, senior vice president, Labor Analytics, CBRE.

Though smaller, secondary markets often have a limit to the number of space requirements they can support, they likely represent the next phase of growth for employment, according to the CBRE paper. Moreover, given the reduced competition, such markets allow strong companies to become the clear preferred employer. 

At the core of the war for talent are millennials as companies across all industries strive to create workplace environments that attract this critical, yet still somewhat perplexing, next-generation talent.

While conventional wisdom suggests that millennials are obsessed with living and working in the center of big cities, a recent global survey of more than 13,000 millennials commissioned by CBRE showed that three-quarters of employed millennials work in large towns or cities, split two-to-one in favor of central rather than suburban locations. The vast majority of the remainder work in small- or medium-sized towns.

Further, when asked to rate each type of location according to its appeal as a place to work, the millennials surveyed said they preferred central city locations—but not overwhelmingly, as suburban and small- to medium-sized towns ranked a close second with 55 percent saying they find these markets “fairly” or “very” appealing. Even a third of millennials would be happy working in a business park or campus setting, and over a quarter find a rural location appealing.

“It’s about cost, community and cultural values,” says Christopher J. Perri, senior managing director of CBRE’s Global Workplace Solutions business. “As young tech leaders and other millennials transition into family-oriented phases of their lives, there’s going to be more of a need to get out of the city and find alternative locations where they can still have the ‘cool factor’—but at a manageable cost profile and in a place where they want to raise their kids.”

“We believe those areas that can replicate the CBD live-work-play experience are certainly outpacing performance of other suburban areas and perhaps in some cases maybe even the larger cities,” said Julie Whelan, head of Americas Occupier Research for CBRE.

The first paper in CBRE’s Thought Series on Workplace Performance can be viewed here. To access the compete series, click here. 

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Tamarack Investments is a privately-held real estate investment company based in Atlanta, GA. Tamarack seeks to acquire, develop and reposition various types of commercial real estate projects in the Southeastern United States that have the potential of delivering superior, risk-adjusted returns to investors.