Pacific Northwest skylines have been transformed by the visionaries who operate in our region’s commercial real estate (CRE) and construction industry. While it has seen considerable growth, industry veterans know from experience that it is crucial to stay on top of one’s business, preparing for resilience (and even vitality) during periods of economic change.
This past summer, Schwabe, Williamson and Wyatt PC commissioned a survey and received insights from more than 700 CRE and construction leaders about the state of the industry. Schwabe then released in partnership with Kinesis – an organization that helps companies in the built industry maximize their potential through marketing and cultural transformation – a report summarizing the findings. The data shows that almost 75 percent of CRE and construction leaders have a strong degree of confidence in the local economy, the industry, and their individual companies. Key findings centered on opportunities for continued growth, but also on preparation for a market shift and talent management.
Growth for the future
The survey respondents reported a strong growing economy and population growth in the Pacific Northwest as advantages to doing business here. And the data shows that our region has several growth opportunities for CRE and construction businesses – namely technological innovation, regional growth outside of downtown cores, and increased diversity of projects.
Technology continues to allow for innovation that increases transparency and efficiency, enabling companies to grow their businesses – assuming they can harness technology to their advantage.
While mobile apps, innovative building materials (e.g., cross-laminated timber) and the internet of things are currently being used, the industry plans on digging into predictive analysis and real-time market comparable software in the future. While the cost of new technology can seem prohibitive, the data suggests that more and more, companies are embracing technology to facilitate growth. Portland will continue to see more projects; however, Hillsboro is identified as the next major metropolitan area outside of Portland for growth. Given the increase of companies in that area and the availability of land as compared to Portland proper, it is no surprise that this area is ripe for continued expansion.
When the survey respondents were asked what projects the industry was focused on, they indicated an increase in infrastructure, private-public partnerships, affordable housing, and data centers.
Twenty-five percent of respondents said they’d be working on fewer retail, hotel and amusement projects in the coming year.
Making the market work for a business
While confidence in the market is high for the industry, the data reflects room for concern. More than half of the survey recipients believe a market correction could arrive as soon as 2020. Not surprisingly, challenges to business like local politics, regulations and taxes are top of mind. The rising cost of doing business was the top listed concern for the industry. Coming in second was the ability to attract and retain good employees; preparing for the next downturn came in third.
To prepare for a market correction, industry players are watching their bottom line, diversifying their clients and projects, being more selective about the projects they take on, and implementing hiring freezes or layoffs.
This data suggests some tension between the current and future markets. With cost of business being high and concern over a coming market shift, controlling costs and watching the bottom line make sense. However, businesses are struggling to attract and retain top talent, which tends to make up a large part of the bottom line. The industry will need to carefully balance increasing efficiency, cutting costs, and investing in top talent to weather a potential shift.
Building a talent foundation
Talent management makes up three of the top five most commonly reported business concerns for this industry, including attracting and retaining strong employees, the cost of employee health care and other benefits, and training and succession planning challenges.
Despite more than 74 percent of the industry reporting a challenge with recruiting and retention of skilled talent, 90 percent of companies report that they have an employee-friendly culture. Another 84 percent report that they have good workplace conditions, perks and amenities. This tension may be a reflection of data that is self-reported, with a large number of respondents being from the executive level.
In Oregon, 58 percent of CRE and construction companies plan to hire more full-time employees in the coming year, which means the talent market will likely remain competitive. In order to attract and retain skilled talent and stay on track with growth and market shifts, businesses should consider exploring innovative methods of employee recruiting, training and retention – such as focusing on diversity or communicating their mission and values in the hiring process.
The Pacific Northwest is still in a period of rapid development, and if the data in this survey is correct, the region will continue to see growth, though tempered by market shifts. CRE and construction companies should take advantage of the benefits of the region to mitigate against a potential economic slowdown and best position their companies for the long term.
A full copy of the report can be downloaded at www.schwabe.com/state-of-real-estate-construction.
Stephanie Holmberg is the leader of the real estate and construction industry group at Schwabe, Williamson & Wyatt. She focuses her practice on construction law. Contact her at 503-796-2953 or firstname.lastname@example.org.
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