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Planning for Post-Pandemic Success: Preparing for Commercial Real Estate’s “Next Normal”

Posted on by SVN

With the global vaccine rollout now underway, there are plenty of reasons to be optimistic about an economic rebound ahead. As lockdowns end, restrictions lift, and new COVID-19 cases continue on a downswing trend, the commercial real estate industry can certainly expect some relief as we enter into the “Next-Normal.”

The CDC COVID Data Tracker (below) tracks daily trends in the number of COVID-19 cases in the U.S. as reported to the CDC by state and territory. As the below Data Tracker illustrates, the COVID-19 surge trend appears to be behind us.

Source: CDC COVID Data Tracker

While we aren’t completely out of the woods yet, things are looking up for industry recovery. And although we still have many unanswered questions, we also now have the forward momentum we lacked for so long, which allows for the big-picture planning needed for success in a post-pandemic world.

The global pandemic upended daily life for more than a year. It has changed how we live, where we work, even what we wear on our faces. As a result, we are seeing major shifts in consumer behavior, consumption, and lifestyle, among other things. Data collected during 2020 and currently in 2021 shows that several sectors of the commercial real industry are certainly still feeling the weight of these shifts.

Sectoral Impact

RETAIL

The Retail sector took a significant blow as the pandemic made nonessential in-person shopping quite literally illegal for a period. As Americans sheltered indoors, everyday activities such as going to the grocery store were now weighed under a contagion risk analysis. Consumption that would have normally been completed in-person has quickly flowed into online orders. The e-commerce share of retail consumption has steadily risen for more than two decades, reaching 11.8% in Q1 20201, but as the full effect of the lockdown reached a fever pitch in Q2, the share ballooned to 16.1%. While the share came down to 14.0% through Q4 2020, reflecting some natural reversion, the familiarity gained by consumers cannot be undone, and the pandemic has permanently accelerated some retail activity away from brick-and-mortar.

At the same time, manufacturers don’t have the same options they once did: As governments enacted state-wide lockdowns and shelter-in-place orders to limit the spread of COVID-19, manufacturers across the globe — which typically operate with long lead times — were brought to a complete halt. The manufacturing sub-sector has since been fighting an uphill battle, but as market conditions continue to improve, there is hope that factories will have the capacity to gain back some of the productions they lost in 2020.

INDUSTRIAL

For the Industrial sector, particularly warehouse spaces, there was a period in 2020 just ahead of the pandemic and the rapid shift to record levels of online shopping when rent growth for the overall Industrial sector was pacing ahead of cold storage. (A cold storage warehouse is used to store fresh and/or frozen perishable fruits or vegetables, or any combination thereof, at the desired temperature to maintain the quality of the product.) Cold storage rent growth has been rising since the start of the pandemic in 2020. Prior to the pandemic, rent for cold storage space averaged around $10 per square foot; currently, that number could vault to as much as $30 per square foot.2

As of February 2021, the Industrial sector has seen production drop by nearly 5%, compared to a year prior, while retail sales have increased by over 6%.3

HOSPITALITY

Hospitality was, and continues to be, among the hardest-hit industries during the pandemic. Some research suggests that recovery to pre-COVID-19 levels for the industry could take until 2023 or later. However, things already seem to be looking up for Hospitality: For the week ending March 13, 2021, U.S. hotel industry RevPAR was $53.45 — a decline of only 15.8% from the same week in 2020, which is mostly a function of easier comparisons, according to data from STR, CoStar’s hospitality analytics firm.4

Looking Ahead: The Road To Recovery

Economic recovery in a post-pandemic world depends on several factors. The economic impact of COVID-19 is being felt on a global scale, and with specific sectors more severely impacted, some may experience a quicker rebound than others once the crisis is behind us. Given the universal lifestyle changes people have had to make, and their subsequent effects on the economy, the COVID-19 crisis has pushed many industries to adjust rapidly… and continuously.

The recovery rate of various sectors will have a massive impact regionally over the next two years, according to a report by KPMG. And not all industries are equally affected: certain sectors of the economy will thrive once the pandemic is over, while others will face a seemingly endless headwind.

The Industrial sector seems poised for post-pandemic growth. A few sub-sectors are already beginning to see significant recovery:

  • Warehouses underlying e-commerce, such as cold storage space
  • Big-box retail selling essential goods, such as Walmart and Target
  • Office space in certain locations, such as suburban areas

In the long run, the Retail sector is likely to be the biggest casualty as we exit the pandemic. This sector was already struggling before COVID-19, with vacant suburban shopping malls and big retailers shuttering stores across the country. Since the pandemic hit, many well-known brands have all filed for bankruptcy. The weakness of the retailers themselves, the accelerated growth of e-commerce, and questions about how quickly shoppers will head back to the stores all weigh against a strong recovery.

If the laws of physics extend to commercial real estate, then 2021 should be a year of recovery in the Retail sector, especially as restrictions on density are further relaxed and the resumption of normalcy gains steam. Notwithstanding the short-term recovery, Retail remains in a period of secular reorganization, and the sector remains open to disruption for the foreseeable future.5

Like so many industries, Hospitality will also see both subtle and substantial shifts in the post-pandemic era. Oxford Economics reports that gross domestic product grew by 9% in the first quarter of 2021, which has positive implications for the American travel industry. Jan Freitag, National Director for Hospitality Analytics at CoStar, reported that the March 2021 revenue per available room percentage change was “very positive” at 34%.6

We are still far off from “normal,” though an accelerating vaccination rollout brings the promise of a more rapid return to normalcy. As the economy recovers, leaders in the commercial real estate industry must begin to turn their attention to preparing for opportunities presented in the post-pandemic world.

Seizing Our Opportunity

The Census Bureau’s Small Business Pulse Survey (SBPS) measures the effect of changing business conditions during the COVID-19 pandemic on our nation’s small businesses. According to the SBPS, companies are consistently marking up when they expect conditions to normalize. As leaders in the industry, we now have clear opportunities to re-strategize asset attribution and ultimately redefine what post-pandemic success means for commercial real estate.

Source: CoStar7

Looking at history, other crises and external events show that generally, the CRE industry tends to lag the trajectory of the larger economy. But with the far-reaching effects of this pandemic, the CRE industry has felt the effects much earlier. In many ways, the pandemic has accelerated trends already occurring. While there is no specific answer or one-size-fits-all solution at this time, organizations that are able to move nimbly through the phases of recovery and embrace the “next normal” will thrive post-pandemic.

As the economy gains momentum, we will begin to see a split: organizations built to last, and those that are not. Those built to last, like SVN, are using this time to not only learn and emerge stronger, but also to prepare for and shape the future of commercial real estate.

Catalysts to Recovery: The SVN Difference

There are several components of SVN’s DNA working together to pull the future forward. For example:

  • A strong and established brand, foundation, and community backing Advisors, attracting new talent and supporting local independent ownership
  • Information & Fee Sharing: Every Monday, SVN Advisors present new and featured commercial real estate property listings on SVN | Live®. This live property broadcast is open to everyone in the industry.
  • Product Council meetings and collaboration tools for all asset classes such as Industrial, Office, Self Storage, and Healthcare
  • Online and scalable training to expand teams quickly, such as our SVN System for Growth courses and digital onboarding support
  • Advanced digital recruiting tools, such as Mike Lipsey’s System for Success online training for Advisors
  • Consultation support for asset attribution to establish team development

SVN was built to be future-proofed. That’s why, from 2019 through 2020, SVN’s gross commission income grew 3.1%… when everyone else was down. When all publicly traded CRE brokerages were up against double-digit declines — some facing 30% or more in lost revenue — SVN had its best year in company history. Models like SVN, which embrace automation, collaboration and cooperation, are uniquely positioned to take market share in this era of change, as client behaviors and expectations evolve.

The SVN brand offers something completely different from what any local, regional, or national firm is offering. This is the SVN Difference. And this difference is what ultimately creates 9.6% more value for our clients.

The Future Is Now

There is significant hope that 2021 will be a year of earnest recovery. As of the March WSJ Economic Forecasting Survey, on average, leading economists expect the US economy to grow by 6.0%. If reality ends up matching expectations, 2021 will mark the fastest annual growth since 1984.

SVN Advisors are leading the way into the “Next-Normal,” pulling the future forward, enacting change where and when it matters most.

The future is here. Are you ready?

 

 

Endnotes

  1. Census Bureau; through Q4 2020
  2. https://product.costar.com/home/news/19461
  3. https://product.costar.com/home/news/848506453
  4. https://product.costar.com/home/news/1802437521
  5. SVN Asset Class Report, Retail, 2021
  6. https://www.costar.com/article/1537124142/recovery-of-us-hotel-industry-is-firmly-underway
  7. https://product.costar.com/home/news/848506453

Looking to the Future: The Disruption of COVID-19 and the Transition into the Next-Normal

Posted on by SVN

Exactly one year ago, eight governors across the US took the initial move to close bars and restaurants, and the Dow Jones posted its largest one-day drop ever, finishing down a record 2,997 points. The world as we knew it was hitting the proverbial fan. New incoming information —none of which was encouraging — came across our screens at a frantic pace, causing our stomachs and portfolios to drop in tandem. 

With a full year now passed by in the COVID economy, the universe of uncertainty has thankfully compressed. While it was not an advanced degree that any of us had applied for, the pandemic has imparted a lifetime of lessons, offering clear clues about the future of commercial space demand and the ways we as humans interact with the built environment.   

Macroeconomy

Starting first with the economy as a whole, I know we have all become a bit numb to sideways numbers during the past year, but to dig ourselves out of this hole, it is important to understand just how deep we are. Early last year, while we were all still finishing our champagne and settling in after the holiday season, the Congressional Budget Office released its estimates of 2020 economic growth, serving as a reliable benchmark of where the economy would have stood without the pandemic. Actual output last year fell short of the CBO’s early 2020 forecast by $1.2 Trillion Dollars, good for an average loss of $3,560.06 for every American.

More workers filed for initial unemployment claims in the first nine weeks of this crisis than during the entirety of the 2007-2009 recession, and the unemployment rate hit a stratospheric high of 14.8% last April. Through the most recent Jobs report, it looks like we are once again starting to see some positive momentum toward an eventual recovery. The civilian unemployment rate ticked down 6.2% through February as the economy added back 379,000 jobs. We remain a long way to go, but between vaccination rollout and the onset of warmer weather, the W-shaped recession we have seen so far should have enough fuel in the tank to prevent another near-term downturn.   

Multifamily

An often-peddled refrain during the early days of the pandemic was that the multifamily, and apartment sector as a whole, would maintain its stability by the simple fact that people will always need somewhere to live. If anything, the same optimists argued that the resiliency of cashflows could actually improve as renters were spending more time in their homes due to involuntary quarantines. With a year of data available now supplanting conjecture, we find that residential rentals have indeed performed up to expectations. No, conditions have not been ideal, and distress is not too hard to find, especially in gateway markets. However, compared to worst-case scenarios, the apartment sector has lived up to its reliable bedrock status. According to the National Multifamily Housing Council’s rent tracker, which follows the performance of more than 11 million professionally managed apartments, 93.5% of renter households paid rent in February— only a 1.6% drop off from the same month last year. These data may, however, likely understate some sector-level underperformance, as they do not include vacant units or self-managed “mom-and-pop” properties. According to Freddie Mac’s latest forbearance report, we know that small balance originations, which tend to cater to the “mom-and-pop” investor class, make up 75% of loans in forbearance.1 

The CDC’s eviction moratorium remains a pressing challenge for the industry and an impediment to its return to pre-pandemic health. The market for rental housing is a circular flowing ecosystem between lenders, investors, and renters. There is no net-positive corrective policy that achieves more benefit than harm by breaking the symbiotic process, much as the moratoriums have.  The NMHC offers that moratoriums “fail in their purpose of addressing renters’ underlying financial distress” and “jeopardize the stability of housing providers and the broader housing market.” Despite two different federal judges ruling against the CDC policy in the past month, the ban remains in place. There are, however, green shoots forming, which could signal a return to more normal conditions in the near future. At the end of this month, the moratorium is scheduled to expire— a deadline that we should accept with a coarse-grained piece of salt. Nevertheless, the appropriations bill passed at the end of the year, and the American Rescue Plan of 2021 passed last week collectively set aside $46.6B for rental assistance programs. A CPPB analysis of Census Bureau survey data finds that roughly one-in-five renter households are behind on rent— a crisis that should see meaningful relief as funds are released.2

The permanence of COVID-induced migration will be a hot-button topic as more jabs land in arms. Taken together, the trifecta of New York, California, and Illinois, the states that are home to the three largest US cities, collectively lost more than 275,000 residents in 2020. The human density that has historically attracted demand toward superstar cities has had the complete opposite effect in the past year. Without accessible cultural amenities or the need to be in an office Monday through Friday, a significant share of the workforce became untethered to their home cities and have made their way toward the exit. According to CoStar, New York, LA, San Francisco, Chicago, Seattle, Boston, and Washington DC are all among the list of cities to post year-over-year declines in asking rents through Q4 2020. 

While the outgoing flow of residents has been lumped together as one homogenous cohort, there appear to be at least two major groups leaving. The first group of COVID-nomads is defined by those that already had eyes towards more affordable and spacious housing options over the next couple of years. Given the urban context in 2020 and the attractively low borrowing costs, many of these renters simply said, “Hey, why not now?” and moved up their progression timeline. These are the types of households that are more likely to be buying baby carriages before the next time they step on a subway, and their transition out of major metros is probabilistically permanent. The second group contains those who are transient, often early into their careers, working remotely, and still seeking the lifestyle amenities they had enjoyed pre-covid. Watching how this group behaves as large companies start calling workers back into the Office and cities look more like their pre-pandemic selves will be telling.   

Office

Today, there is no property type subject to more speculation than the Office.

Unlike multifamily, Retail, and industrial, where COVID has mostly magnified pre-existing trends, the pandemic has led to rampant reimagination in the office sector. Our understanding of how both firms and workers interact with physical office space to optimize productivity is permanently changed. According to the Census Bureau’s Household Pulse Survey, an estimated 38% of working American adults have transitioned to remote work in some capacity due to COVID. The share is even higher in large office markets like New York and Los Angeles, rising to 47% and 45%, respectively. En Masse, The American Workforce traded morning commutes for Zoom links, an illuminating natural experiment that has challenged the Office sector’s core-assumptions. When PwC launched its remote work survey in June, 44% of employers thought that the transition to remote work has allowed their teams to be more productive than before the pandemic.3 When the same employers were polled again in December, the share climbed to 52%, indicating that not only has a consensus emerged, but that efficiency has improved following the initial learning curve. The realization that companies can not only maintain but actually improve performance through a remote infrastructure is a ‘no turning back,’ Pandora’s box type of moment. It should therefore come as no surprise that, according to the same survey, only 21% Of US executives think that a full five days in the office every single week is the best setup to maintain a strong corporate culture. 

The likelihood that total office space demand will have a smaller footprint in the post-pandemic world is a consideration that we cannot afford to take lightly. A Fitch research report released just last week estimates that an additional 1.5 work-from-home days per worker would lead to a 15% reduction in property-level net cash flow— a development that would meaningfully recalibrate our understanding of risk and value. Given the long-dated lease structure common throughout the sector, it will take a few years for emerging preferences to filter through fully. Moody’s Analytics REIS forecasts that vacancy rates are likely to rise to near-record levels through 2023 before beginning a gradual recovery in 2024. 

Of course, not all metro-level office markets will move as one. Some of the migratory demand that is leaving large cities and contributing to localized weakness ahead will also lead to strength in other markets, particularly in major Metro adjacent suburbs. According to Real Capital Analytics, Central Business District-located Office properties posted a 0.2% decline in value for the year. On the other hand, suburban located office assets saw valuations continuing to grow at a healthy 6.6%.

Industrial

The industrial sector remained the undisputed top performer of commercial real estate through an otherwise challenging 2020. Secular tailwinds, such as e-commerce adoption, grew from a healthy gust to a sustained hurricane force. Over the past decade, online retail sales have increased by an average of 15.2% annually. Brick and mortar retail sales over the same period have only grown by an average of 3.4% per year. The share of total Retail sales satisfied by online orders has steadily risen, entering 2020 At 11.3%. In the second quarter, as nonessential retailers across the country closed their doors, this share skyrocketed above 16%. While the share has reverted down to 14%, the pandemic has permanently transitioned some in-person retailing onto online platforms. Online grocery delivery services, a concept that had faced greater consumer resistance than other E-platforms before 2020, stood uniquely positioned to benefit from the demands of a lockdown economy. According to grocery e-commerce specialist Mercatus and research firm Incisiv Projects, online grocers accounted for 3.4% of all US grocer sales in 2019, before swelling to 10.2% in 2020.4 Further, the same study estimates that online groceries will satisfy 21.5% of domestic demand by 2025. Surging demand for E-grocers also means an increased demand for distribution and fulfillment facilities in close proximity to consumers. In the most recent Emerging Trends in Real Estate report, fulfillment facilities ranked as the subsector with the best prospects for future investment and development opportunities. 

Another source of new industrial demand can be traced to the supply chain disruptions experienced this last year. The pandemic exposed critical sensitivities, and e-commerce retailers are looking to better safeguard their ability to match inventory supply with order demand. Doing so has meant a transition away from “just in time” distribution models in favor of “just in case” models instead. The latter requires excess warehousing space to stock contingent inventory. 

Retail

There was no shortage of pessimism surrounding the retail sector heading into 2020, even before there was a pandemic to contend with. Pre-pandemic, Retail was in the midst of what was widely expected to be a 10-year shakeout and a painful rightsizing process. As noted in the 2021 ULI / PwC Emerging Trends Report, the US retail sector had three major headwinds going into last year: the US has more retail square footage per capita than any other country in the world, an increasing share of core-retail activity has transitioned online, and domestic consumers have experienced a long-term stagnation of wages. Concepts that were on the path towards obsolescence, with hopes of maybe squeezing out a few more years of economic solvency, are those that have struggled the most during COVID— none more so than department store retailers.

While the outgoing companies will argue otherwise, a case can be made that 2020’s pain will help the retail sector pave a quicker path back to recovery. The sector has gone from Darwinism to ‘Darwinism on steroids.’ Though, before we can imagine a radical future where physical retail demand sits just a bit higher than supply, the existing glut of obsolescent space needs to find adaptive reuse. After all, not every struggling mall will be turned into an Amazon distribution center. Lifestyle centers, where fitness centers, housing units, and mixed Retail are blended together, are one of the leading concepts to aid in re-positioning and re-absorption. According to Real Capital Analytics, Lifestyle Centers have an average price per square foot that is almost three times higher than average assessed for Mall assets, reflecting some of the value that can be recaptured through re-positioning.  

As Retail continues to match physical footprints with the forward-looking consumer behavior, the short-term reversion back to normalcy will at least provide some much-needed relief. Cabin-fever-consumers armed with unspent stimulus checks should give Retailers a potent shot in the arm, even if the upside effects are only temporary.

Outlook

Whether it be the public health front, the economy, commercial real estate, our lives in general, or how all the above are inexorably linked, 2021 has all the makings of a year defined by recovery. The Federal government’s push to have vaccine availability for every US adult by May 1st means that herd immunity is not too far behind. 

Between the safe resumption of our pre-pandemic lives, the commitment by the Federal Reserve to maintain low interest rates even as inflation pressures rise, and the unprecedented level of stimulus in the hands of consumers, a perfect storm of economic momentum is brewing just offshore. If anything, there is increasing concern that the economy has the potential to overheat in the year ahead as too much fuel enters the fire all at once. According to the February and March iterations of the Wall Street Journal’s Economic Forecasting Survey, a majority of leading economists believe that this year will have more upside risk than downside risk, and more than 80% think that the newly passed stimulus will generate inflation higher than the Fed’s 2% target.

In many ways, we as an industry remain in wait-and-see mode, with questions over a return to the office timing and rightsizing are still swirling overhead. Although, overly conservative and reactive strategies rarely make winning formulas in Real Estate. Now is the time for landlords to engage tenants and companies to engage employees about emerging preferences, then execute on a strategy. If 2020 has taught us nothing else, it’s that the pace of change can accelerate quickly, and falling behind the curve of innovation is a costly and often un-correctable mistake.

 

Endnotes
1. https://mf.freddiemac.com/docs/January_forbearance_report.pdf
2. https://www.cbpp.org/research/housing/housing-assistance-in-american-rescue-plan-act-will-prevent-millions-of-evictions
3. https://www.pwc.com/us/en/library/covid-19/us-remote-work-survey.html
4. https://www.supermarketnews.com/online-retail/online-grocery-more-double-market-share-2025

Re-thinking Talent & Recruiting In Commercial Real Estate — And How To Do More Than Just Talk About It

Posted on by SVN

SVN’s Leslie Bateman discusses how the talent and recruiting landscape in commercial real estate is changing, and how we can seize the opportunity it presents.

Rapid and continual advances in technology have been disrupting many of the sectors that anchor the U.S. economy, including the commercial real estate industry. However, the commercial real estate (CRE) industry has long been known to be slow to adapt, often “lagging behind” others when it comes to large-scale industry transformations. While other industries blaze forward to embrace technology and digital disruption, for the most part, CRE has only budged.

Experts suggest that this industry-wide delay in advancement is due in part to the age imbalance of the industry. This isn’t new information, as aging of the CRE industry is known and well documented: According to CIRE Reader Surveys and NAR Commercial Member Profiles, the average age of a CCIM member is 54 and the median age of a commercial Realtor is 60.1

In addition to age diversity, another area ripe for improvement lies in the adoption of new technologies. Much of the commercial real estate industry still relies on traditional methods of doing business, preferring the experienced and familiar over the new and risky. As a cyclical result, the industry has become less attractive to younger people, who often prefer organizations and job roles with a high degree of technology integration and support.2

What the CRE industry has now is an incredible opportunity — to harness new technologies, redefine its talent processes, and alter the trajectory for future success.

Digital Disruption, COVID-19, and CRE
Today, digital disruption is all-pervasive, leaving no industry untouched. Digital innovation has the power to change markets and economies, accelerate business operating models, and wholly reinvent the way business is done across the globe. While certain industries feel the profound influence of this digital transformation immediately, others – such as commercial real estate – are a little late to the game. With the surge of CREtech over the past two decades, CRE companies have begun building momentum by integrating technology with the built world and associated systems. However, at its slower pace and with nothing forcing it to move any faster, commercial real estate still largely remains behind.

Until the COVID-19 pandemic.

The global pandemic has changed the nature of office and work culture considerably, forcing all industries to adapt to remote work and rely on new methods and tools for virtual engagement and operations. Some companies (such as Spotify and Facebook) experienced cost-cutting epiphanies early in the pandemic, taking action after recognizing that the in-office concept simply won’t be necessary into the future.

While the pandemic has forced some CREtech innovations to flourish, it has also placed a magnifying glass on industry problems and shortcomings. For CRE, an industry still reliant on handshakes, years of experience and Rolodexes, the immediate shift to virtual work hasn’t been easy. The industry-wide disillusionment has accelerated the need for CRE companies to acknowledge, accept, and lean into major change. It’s not the catalyst we expected, but the pandemic has opened a large window of opportunity for the industry to make big strides toward a more prosperous future.

 

The Pre-Pandemic Talent Landscape
It’s becoming increasingly evident that, as CRE companies figure out the technologies required to support digitization shifts, they need to secure the right “talent” in order to accelerate the pace of adoption and implementation.

Prior to the pandemic, the talent landscape in CRE skewed heavily toward the Baby Boomer generation. There was little to no focus on recruiting Millennial and Gen-Z talent. In 2019, 45% of CRE employees were 55 or older compared to 4% in the 19–24 age range. In comparison, 24% of the workforce across all industries and 22% of the banking and insurance workforce were 55 years old or older.”2

This imbalance is both emphasized and continued as the industry prefers experienced hires, over-indexing on industry experience and comfort with traditional job roles. The outcome here is compounding: firms continue to contribute to the rift by favoring experienced hires and maintaining conventional practices; meanwhile, the industry becomes less attractive and less accessible to younger generations.

Preparing for the Workforce of the Future
To help companies attract and retain up-and-coming talent, reduce the demographic gap, and create a more fulfilling work environment, leaders will likely need to reexamine the talent function and its processes.2

As Deloitte Insights states: “The pandemic is expected to force a paradigm shift in the way the industry operates and how work is done. Digital transformation could play an important role as companies wrestle with liquidity and profitability in the near term and prepare for the post-crisis world. And so CRE companies should look at digital and talent transformation in tandem.”

While change is not easy and certainly not always comfortable, the sooner CRE companies understand and embrace the shifts they need to make, the better off they will be. Clearly, digital advancement is critical for CRE organizations’ success and relevance. The talent implications are vast.

CRE leaders must work to balance the talent landscape by rethinking and adapting to the way their employees work, embedding technology into their decision-making, and redefining skills, talent processes, and practices to meet new demands. The bottom line: Hiring younger talent is no longer optional, it’s essential.

At SVN, we often talk about “pulling the future forward.” This concept is so much more than a tagline. We live, breathe and practice this mentality daily through promoting a culture of learning, embracing remote work flexibility, hiring for location-agnostic roles, providing remote/online systematic training for new hires, and by believing in the powerful data on workplace diversity.

Diversity has long been a hallmark of the SVN brand and business model, and we strongly believe in the research proving that workplace diversity (e.g., gender, age, ethnic, cultural) leads to smarter teams and greater company success.3

Studies show that the most diverse companies are now more likely than ever to outperform less diverse peers on profitability4, and we’ve seen this firsthand at SVN.

To further underscore our company-wide belief in the power of diversity, here’s an inside look at SVN’s employee base:
· 73% women
· 40% minorities
· 53% under the age of 45

 

The Opportunity of a Lifetime
The COVID-19 pandemic has exposed unsustainable truths about the CRE industry’s approach to recruiting and retaining talent.

So now what?

If CRE firms want to find success in the future, many will need to step back to analyze and upgrade their current talent processes. Digitization, remote flexibility, and diversity should hold more weight in the talent landscape, and it’s time for us to do more than just acknowledge the known lags, more than just talk about where we can improve. It’s time for us to take action… to really make change.

In this challenge lies immense opportunity. For those in leadership positions, I challenge you to think about your own recruiting strategies, open roles, and growth goals. What adjustments can you make? Are some required skills now irrelevant with technology, and years of experience an arbitrary line in the sand? Are you willing to place your trust in the positive research on workplace diversity and prioritize it in your next hires? If these initiatives seem daunting, scary, overwhelming… you’re not alone. But just as we must trust in the data on diversity, we must also trust that great things rarely come from comfort zones.

As Virginia Rometty so eloquently states: “Growth and comfort do not coexist.”

 

Endnotes
1. CCIM Institute, “The Millennial Way,” accessed March 4, 2021
2. Deloitte Insights, “Preparing for the future of commercial real estate,” accessed March 4, 2021
3. Harvard Business Review, “Why Diverse Teams Are Smarter,” accessed March 4, 2021
4. McKinsey & Company, “Diversity wins: How inclusion matters,” accessed March 4, 2021

Finding Success In Commercial Real Estate: The SVN Difference

Posted on by SVN

Transparency and openness have long been hallmarks of the SVN culture and business model. Embracing and fostering inclusivity drives our approach to practicing commercial real estate, which is rooted in proactively cooperating and collaborating with our colleagues, communities, and even our competitors. It is this shared vision that enables SVN to create more value for our clients — 9.6% more value, to be exact.

We recently held our quarterly “JumpIN” event, which is designed to acclimate and welcome new-to-SVN advisors to the systems, tools, resources and culture inherent in the organization. Today, we’re pulling back the curtain and inviting you in to one of our internal JumpIN training sessions. And in the open and transparent manner in which SVN operates on all fronts,  we’re giving you a closer look at how we train and develop our SVN advisors and staff.

The commercial real estate industry is rapidly growing and constantly evolving, driven by powerful, transformative trends in technology, consumer behavior, culture and more. In such a dynamic, mercurial and competitive industry, it’s critical now more than ever to build a strong point of differentiation that helps an SVN advisor stand out as the advisor of choice.

So, what makes one commercial real estate advisor stand out from another? As a CRE broker, what can you offer that your competition can’t (or won’t)? How do you become truly different? And, ultimately, how do you leverage your point of differentiation to create more value for your clients, colleagues, and communities?

These were some of the questions that led to the creation of what we call The SVN Difference.  

  One of the most profitable commitments SVN advisors can make is to become a champion of understanding and articulating all components of the SVN Difference. Just as its name implies, The SVN Difference is the strongest differentiating value proposition that SVN advisors have — it’s the sharpest tool in the toolkit.

Democratizing commercial real estate information to bring greater transparency to the marketplace is receiving an abundance of attention today – our company and the SVN Difference were built on this idea in 1987.

Our forward-thinking, innovative approach early on positioned SVN to be on the bleeding edge of technology in CRE. For 30 years we have pioneered the development of online collaboration platforms, allowing us to deliver better results for our clients. In fact, SVN was the first firm in the industry to connect our offices in the southwest via a local area network. Later, SVN developed the industry’s first online publishing platform, known today as Buildout. Today, we’ve opened up our weekly in-house sales meeting, SVN Live, to anyone who wishes to participate.

So, what does all of this mean?  

  It means that SVN was built to be future-proofed.

It means that SVN was built to deliver better results.

It means that SVN was built to last.

The commercial real estate brands with whom SVN competes are all themselves competing on size and breadth. Whether it’s the highest number of brokers, greatest number of markets served, or the most access to data — they are all issuing the same narratives. It is therefore our job as SVN advisors to effectively articulate our compelling point of difference and demonstrate what we can do that the competition cannot.

It’s important to keep in mind that the SVN business model is  rooted in openness and transparency in conjunction with a fee sharing model, which ensures that we’re putting our money where our mouths are.

Unfortunately, SVN is the exception — not the rule. But it’s our mission to change that.

It’s rare for the industry to step back and question the soundness and integrity of industry business models of which they are a part and ask, Why do things work this way?, Why do other industry brokerage models fly in the face of fundamental economics? For instance, today, more than 80% of investment sales transactions are double ended (e.g., the same broker who lists the property also finds the buyer). This happens in an environment where more than 65% of all buyers come from out of state, and more than half the buyers can be categorized as new or unlikely buyers. These buyers are not in any one broker or brokerage firm’s database.

This begs the question: Are the seller’s interests placed first, or are the broker’s (and his/her quest to earn twice the fee)?  

  Upon close inspection of the commercial real estate industry, you’ll see clear points of differentiation between SVN and its global competitors. Exemplary SVN advisors understand that the key to success is mastering these differences and leveraging them to offer clients something the competition is unwilling or unable to offer.

Models like SVN, which embrace automation, collaboration and cooperation, are uniquely positioned to take market share in this era of change, as client behaviors and expectations evolve. SVN advisors have a tremendously powerful competitive differentiating value proposition to bring to the table.

SVN advisors are part of a brand that offers something completely different from what any local, regional, or national firm is offering. This is the SVN Difference. And this difference is what ultimately creates 9.6% more value for our clients.

Now that’s a tremendously powerful competitive advantage.

 

About SVN:

The SVN organization is a globally recognized commercial real estate entity united by a shared vision of creating value with clients, colleagues, and our communities. The SVN brand is comprised of over 1,600 advisors and staff in more than 200 offices across the globe in six countries. Our brand pillars represent the transparency, innovation, and inclusivity that enables all our advisors to collaborate with the entire real estate industry on behalf of our clients.  SVN’s unique Shared Value Network® is just one of the many ways that SVN advisors create amazing value with our clients, colleagues, and communities. For more information, visit www.svn.com. All SVN offices are independently owned and operated. To learn more about becoming an SVN commercial real estate business owner, visit http://www.svn.com/franchising-opportunities/