Commercial Real Estate in a Flat World the Implications of Corporate Restructuring and Economic Globalization for Industrial, Office and Mixed-Use Property in America
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Commercial Real Estate in a Flat World The Implications of Corporate Restructuring and Economic Globalization for Industrial, Office and Mixed-Use Property in America Submitted by: David Pearce Snyder Consulting Futurist Help ensure that the NAIOP Research Foundation continues to promote industry success. Thank you for your choosing to download this report. Foundation research and analysis gives industry professionals unique insights in to the current business environment and emerging trends that lead to successful development and communities. Traditional sources of revenue cover only a portion of the costs of producing these reports. Additional support, provided by end users of this research through the Foundation’s Sustainer Fund, helps to ensure that the Foundation will have the funds to continue to proactively address the many research project requests it receives each year. Donate to the Sustainers Fund today! 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Mail or fax your donation to: NAIOP Research Foundation (Sustainers Fund) 2201 Cooperative Way Suite 300 Herndon, VA 20171-3034 Fax: (703) 674-1486 Commercial Real Estate in a Flat World The Implications of Corporate Restructuring and Economic Globalization for Industrial, Office and Mixed-Use Property in America Prepared for and Funded by The National Association of Industrial and Office Properties Research Foundation By David Pearce Snyder Consulting Futurist The Snyder Family Enterprise Bethesda, MD November 2007 Commercial Real Estate in a Flat World NAIOP Research Foundation November 2007 i About NAIOP The National Association of Industrial and Office Properties is the nation’s leading trade association for developers, owners, investors and other professionals in industrial, office and mixed-use real estate. Founded in 1967, NAIOP comprises more than 16,500 members in 55 North American chapters and provides networking opportunities, educational programs, research on trends and innovations and strong legislative representation. For more information, visit www.naiop.org. About the NAIOP Research Foundation The NAIOP Research Foundation was established in 2000 as a 501(c)(3) organization to support the work of individuals and organizations engaged in real estate development, investment and operations. The Foundation’s core purpose is to provide these individuals and organizations with the highest level of research information on how real properties, especially office, industrial and mixed-use properties, impact and benefit communities throughout North America. Funding for the Research Foundation’s activities comes from the generous support of the Governors, annual gifts from NAIOP members, and underwriting from the National Association of Industrial and Office Properties (NAIOP). 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For additional information, please contact Sheila Vertino, NAIOP Research Foundation, 2201 Cooperative Way, Herndon, VA, 20171, at (703) 904-7100, ext. 121, or [email protected]. ii Commercial Real Estate in a Flat World NAIOP Research Foundation November 2007 Table of Contents PREFACE .................................................................................................................................1 EXECUTIVE SUMMARY.........................................................................................................2 Introduction ........................................................................................................................... 2 PART 1 – The World Is Getting Flatter.................................................................................. 3 PART 2 – What’s FLAT and What’s Not..................................................................................5 PART 3 – Property Development on Planet Flat ...................................................................6 Conclusion ..............................................................................................................................8 PART 1 - THE WORLD IS FLAT AND GETTING FLATTER...................................................9 1.00 Introduction....................................................................................................................9 1.10 Defining “flat”................................................................................................................9 1.20 Friedman’s “Triple convergence:” Three new facts of economic life on Planet Flat ................................................................10 1.21 A level, Web-enabled playing field .......................................................................10 1.22 Horizontal enterprises ..........................................................................................10 1.23 The globalization of work ....................................................................................10 1.30 Four important features of our flattening world..................................................10 1.31 “The Great Sorting Out” .......................................................................................10 1.32 The “Untouchables” ............................................................................................11 1.33 “The Quiet Crisis” ................................................................................................12 1.34 “Compassionate Flatism” ...................................................................................12 1.40 How flattening could go wrong..................................................................................12 1.50 Why flatter is better.....................................................................................................13 1.51 Coase’s Law: 10 words that are flattening business around the world ..............13 1.52 Flattening: a multi-purpose metaphor for productive change ............................14 1.60 How flat is flat? ........................................................................................................... 15 1.61 The BLS biennial employment forecasts..............................................................15 1.62 Things will get flatter before they get better....................................................... 16 Commercial Real Estate in a Flat World NAIOP Research Foundation November 2007 iii Table of Contents (cont) PART 2 - WHAT’S FLAT AND WHAT’S NOT.......................................................................18 2.00 Introduction ................................................................................................................18 2.10 The rise of flat enterprise............................................................................................18 2.20 A flatter supply of labor ..............................................................................................19 2.30 Fat cities and flat cities ...............................................................................................21 2.40 Peaks and valleys in future U.S. employment growth .............................................21 2.41 Employment in Construction ................................................................................ 21 2.42 Employment in Manufacturing ..............................................................................24 2.43 Employment in Services ........................................................................................27 2.44 Sizing the low-cost off-shore workforce ..............................................................27 2.45 High growth Services in a FLAT World..................................................................30 • Professional, scientific and technical services ............................................... 30 Computer systems design and related services........................................ 30 Legal services ..............................................................................................32 Management, scientific and technical consulting services .......................33 Accounting services ....................................................................................35 Architects and engineers ............................................................................36