There are more than 5 million corporate real estate end users which occupy more than 75 percent of commercial real estate in the U.S. These are companies that are not in the real estate business, but need real estate to be successful - companies like Sprint, Lockton, and Ford.
"The reason they're so important is because they are the source of cash," Bill Early, senior vice president at Copaken Brooks, said to a group of KCRAR Commercial members on Wednesday. "It's often underestimated the impact that the end user has on all of our lives. It's the underlying asset for the entire industry and I think people often forget that."
A group of corporate end users explained to the Kansas City real estate community what their corporations are looking for in terms of real estate, what challenges they're coming up against, and what the local broker can do to help.
Tina Itschner is the procurement director for Kansas City-based HNTB, a 100-year-old civil engineering firm with more than 3,700 employees in more than 95 offices across the country. The firm, which tackles stadiums to roadways to airports, opens project offices often on a "burn and turn" basis, meaning they'll need offices in 30 to 60 days to support a project underway.
HOW TO GET END USERS' ATTENTION
Bruce Poetter is the senior real estate manager for Verizon, a global corporation which has 8,000 people who service its 115 million square feet of real estate, comprised of both retail and non-retail space. In the Kansas City area alone, Verizon corporate real estate works with more than 60 vendors to maintain its retail locations.
"It's paramount that we have feet on the street in a local environment, and we rely heavily on that," Poetter said. "The way to get involved with us decision makers and end users is to get involved. Make speeches, get yourself known. You can call on us all day long, but if we don't know who you are or what you are capable of, it falls on deaf ears. When we have a need, we go to the community to see who is out there working. Doing educational things for the real estate community is very noticeable."
Vik Bangia is the founder and managing principal of Verum Consulting. With a 25-year background in corporate real estate, he's been involved in the entire spectrum of aspects of corporate real estate, from major corporate downsizings, headquarters relocations, and land acquisitions and disposals to corporate restructurings and turnarounds, lease negotiations of all sizes, real estate administration and strategic planning.
With such a wide-ranging knowledge of real estate from both a manager and a user's perspective, he needs to know that any brokers or other vendors he works with on a local level are really tapped into the needs of his organization as well as real estate trends on a global scale.
"What's really important about Kansas City to me in my role as a consultant is that the [real estate community] and clients I'm working with really know what's going on in the global market," Bangia said. "What I really need is to tap into the excellent resources underground to know what's going on in town and what companies are coming in and moving around."
HOW THE LOCAL BROKER ADDS VALUE
As the real estate industry consolidates, end users are continuing to standardize and centralize processes including their real estate transactions. While thirty years ago, there might be 50 brokers who knew the Kansas City market inventory, today it seems there are half a million brokers who know 90 percent of their market knowledge from CoStar. So how does the local broker bring value to the end user?
"The local broker is paramount; It's the meat that keeps our operation going," Poetter said. "It's a very tough environment when we try to relocate a property into a new location or expand, and we need someone there to do our negotiations for us. We can't always put horsepower in each community to do that so we rely heavily on the local brokerage community and area service providers."
He said it's important for the local brokers to really know the market, to identify locations, understand demographics of the local community and where the trends are going.
Itschner says that although major corporations often use a specific brokerage house for the majority of transactions, this isn't always the case.
"Sometimes in spot markets we'll back other brokers or organizations that really are the local experts," Itschner said. "It's important from a company standpoint that you don't get locked into feeling like you have to use a certain company, but that you're actually picking the right broker and not just staying in the right 'house' to achieve the maximum benefit for the deal."
There are also times, Bangia said, where a brokerage firm may have a conflict of interest and the end user needs to work outside of that exclusivity and find a different provider of broker for a particular deal. He describes a situation in Santa Rosa, a small market in which the majority of listings resided with one broker.
"I had to bring in a broker from San Francisco, and once I did, that building sold very quickly," he said.
EMPLOYEE ATTRACTION & RETENTION
One of the biggest drivers in selecting real estate locations is the talent in the area, and how a company can leverage that talent while still selecting a location that will maximize the work experience for employees.
"It's quickly becoming one of our number one priorities," Itschner said. "Today we partner with HR and everyone else in the game to find out how we can find the right talent, especially in the engineering world where we need highly qualified people."
Bangia noted that the millennial generation is having a big impact on this conversation. It's a highly talented and in-demand generation, but one that's more transient. This has the potential for huge implications on employee retention and longevity.
For HNTB, a company in growth mode that's got projects underway across the country, Itschner said the company is strategically looking to where the best locations are for its employees to have an enjoyable work experience.
Poetter says that alternative office spaces provide additional options for companies looking to hire a workforce without the long-term facility to house them. And with companies with permanent locations or long-term leases, furniture and space planning firms can help come up with creative, flexible solutions that will allow companies to scale up or down as needed. It's what he calls "on-demand space."
Looking to continue the conversation on the youngest generation in the workforce and the trends they're driving in real estate? Register to attend our upcoming event, Millennials in the Workplace, on June 3rd. More information is available here.