The impact of September 11 on corporate real estate

In June of this year, corporate real estate executives from more than 50 of Jones Lang LaSalle’s largest corporate clients were surveyed to determine the actual impact of September 11 on their CRE strategy.

The survey results also provide an interim review of what has changed—and what has remained the same—in the post-9/11 corporate real estate environment. From immediate security concerns to questions of long-term occupancy strategy, this analysis offers insights into how corporate occupiers are actually responding to
new priorities and challenges.

These findings are of tremendous importance to owners and investors—not just in U.S. real estate, but around the world. The corporations surveyed for this study are also major occupiers of space in Asia,Australia and Europe.Their needs will shape the dynamics in many metropolitan office markets for years to come.

Executive Summary
Above all, the survey results demonstrate that the September 11 attacks had a significant and widespread impact on corporate real estate.U.S.-headquartered companies responded quickly and decisively to the events of September 11. In addition to adapting new security and safety measures, companies also reexamined
their overall corporate real estate strategies.

As expected, enhanced safety and security measures proved to be of primary importance to corporate real estate executives, consistent with the importance of ensuring the well being of employees. Among the measures implemented since September 11, 51 percent of the respondents rated entrance security as the top priority,with 91 percent ranking it as one of the top three areas of importance.

According to the survey, occupancy costs have generally held steady at participating companies.While more than half (58 percent) of respondents said their occupancy costs have risen due to the events of September 11, the increases have been relatively small. This may be due to the fact that additional increases in occupancy costs are expected in early 2003, when increased insurance and security costs are likely to be passed on to tenants.

The events of September 11 have put the corporate real estate function under a microscope,with increased scrutiny coming from both internal and external directions. More than 70 percent of companies surveyed said that the perceived relative safety of facilities and workplaces has an effect on the company’s ability to attract and retain employees.Additionally, 85 percent said they
believe that investors and shareholders are paying more attention
to their company’s ability to resume operations quickly and
efficiently after a disaster. As a direct result, perhaps, 21 percent of CRE executives report having more interaction with senior
management and boards of directors.

It is clear that the events of September 11 have caused many
corporations to alter their real estate strategies. Over 20 percent have already implemented these changes, while 28 percent said it will take six to 12 months, and 17 percent said it will take more than a year to implement changes. This indicates that changing preferences and requirements will take many years to play out in the nation’s office markets.We also would expect that some of these changes will have an influence on international office markets as well.

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(source: Jones Lang LaSalle)

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