The War for Talent & its Effect on Real Estate

1. HUMAN CAPITAL
THE WAR FOR TALENT AND
ITS EFFECT ON REAL ESTATE
A Corporate Occupier & Investor Services Publication

2. 2
Occupiers are
seeking real
estate solutions
that offer the
best chance
to capture the
talent to drive
corporate
innovation.

3. HUMAN CAPITAL
CUSHMAN & WAKEFIELD 3
EXECUTIVE SUMMARY
Maintaining a competitive advantage in today’s business environment requires the
continuous innovation of new products and services. Companies across all
industries are competing fiercely for new ideas and new ways to engage customers
and prospects.While there are a host of business challenges, from the slow growing
global economy, to an increased regulatory environment, to new geo-political risks,
perhaps the biggest challenge facing companies over the next decade is labor.
Finding the right talent to help the organization compete and innovate is, and will
continue to be, a significant issue in the coming decade.
Real estate has a role in assisting the corporate enterprise with recruiting and
retaining labor.Whether through workplace designs that help foster greater
collaboration and give birth to new ideas, amenities that enhance work/life balance,
or locations that appeal to a broad array of workers, real estate’s role with respect
to the recruitment of labor has changed. Employees are demanding that certain
elements be part of their experience and occupiers are responding with new and
innovative ways to use real estate as a recruitment tool. Real estate strategies
focused on recruiting and retaining talent are also contributing to significant
changes in real estate market fundamentals across the U.S., and these changes
could have profound implications for where and how people work for a generation.

4. 4
HUMAN CAPITAL TOPS THE
CORPORATE AGENDA
1. HUMAN CAPITAL
2. Customer Relationships
3. Innovation
4. Operational Excellence
5. Corporate Brand and Reputation
6. Global Political / Economic Risk
7. Government Regulation
8. Sustainability
9. Global Expansion
10. Trust in Business
Source:“CEO Challenge 2014”,The Conference Board
THE HUMAN CAPITAL CHALLENGE
Occupiers are seeking real estate solutions that offer them the best
chance to capture the talent they need to remain relevant and competi-
tive in their industries. In The Conference Board’s 2014 annual survey,
The CEO Challenge, human capital ranked as the most critical business
challenge facing today’s global CEOs.The second and third most critical
challenges identified were customer relationships and innovation, respec-
tively. However, without the right talent in the right roles, corporations
will not be able to adequately address any of the challenges or threats to
their business.
LABOR COSTS FAR EXCEED REAL ESTATE COSTS:
Increasing labor costs are fueling concern over human capital. In a
company’s cost structure, the expenses associated with personnel
typically far exceed the expense of occupancy. Recruiting, training, and
compensating employees can cost an organization anywhere from
35%-55% of its total costs, whereas real estate costs typically range from
5%-15%.The consequences of an unsuccessful strategy that impacts over
35% of costs can be significant to the business. Getting the labor strategy
right is critical, and more and more corporations are putting that ahead
of real estate cost.Those businesses that remain focused solely on the
cost of their real estate when determining location are ignoring the
larger corporate agenda and the future viability of the enterprise.
CHANGING DEMOGRAPHICS
IMPACTING SUPPLY OF LABOR:
Businesses are also facing significant headwinds when it comes to the
availability of talent in the marketplace.With the first generation of baby
boomers retiring, a significant supply/demand mismatch is materializing in
the U.S. labor force.While baby boomers are leaving the working age
population, they will continue to demand a significant amount of material
goods and services from the economy. In short, the demand on busi-
nesses will continue to grow, while the ability of businesses to produce
will become strained.
“Corporations that
focus solely on the
cost of their real estate
are ignoring the larger
corporate agenda.”

5. HUMAN CAPITAL
CUSHMAN WAKEFIELD 5
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2000 2005 2010 2015 2020 2025 2030 2035 2040
Chart A notes the projected net annual change in the U.S. labor force (ages 18-64) from 2000-2040.While the millennial generation
will be entering the workforce and eventually grow to be the dominant age demographic (Chart B), the growth rate of the U.S.
working age population is slowing.This being the case, the U.S. economy is on the verge of a prolonged period where the new supply
of labor will not keep pace with demand.Thus, finding the right talent to fill vacancies in organizations will become more challenging
and significantly more expensive.This supply/demand mismatch will increase the competition for talent, which in turn, will drive-up
compensation costs and ultimately impact corporate profitability.
A: GROWTH OF WORKING AGE POPULATION SLOWING
(NET CHANGE IN U.S. POPULATION AGES 18-64)
Source: U.S. Census Bureau
Source: U.S. Census Bureau
58% Drop
Millenials
Gen X
Baby Boomer
Traditionalists
Gen2020
Millenials
Gen X
Baby Boomer
Gen 2020 (After ‘98) Millennials (‘77 - ‘97) Gen X (‘65 - ‘76)
Baby Boomers (‘46 - ‘64) Traditionalists (Before ‘46)
B: DEMOGRAPHICS OF WORKFORCE SHIFTING
(COMPOSITION OF U.S.WORKFORCE)
2010 2020
37%
51%

6. 6
DEFINING AN INNOVATIVE MARKET
Certain markets provide occupiers with a better chance
to support talent and innovation.The U.S. Department of
Commerce, in conjunction with the Purdue Center for
Regional Development and the Indiana Business Research
Center, has developed a methodology for assessing the
capacity of a region’s innovation capability.The innovation
“potential” of a region can best be determined by assessing
a distinct set of economic inputs and outputs that have the
potential to yield greater innovation within an economy.
Cushman Wakefield analyzed 61 real estate markets using
the U.S. Commerce Department criteria and compared the
top 20 to the U.S. average (see graphic below).
The best markets for occupiers tend to be those that
offer the least compromise between labor quality and cost.
There are markets that offer high innovation potential with
a below average costs. Austin,TX ranks the highest when
comparing innovation potential to rent. Other markets with
favorable innovation to cost comparisons include: Seattle,
Raleigh / Durham, San Diego, NoVA / Suburban MD, and
Manchester, NH.
Please see the back cover for more information on how the
Innovation Index is calculated.
KEY MARKETS FOR INNOVATION
INNOVATION INDEX SCORERENT
94.2LOSANGELES$36.90
93.1No NJ$31.00
93.1NEWYORK CITY$76.00
90.8HOUSTON$41.98
94.2ATLANTA$26.48
97.9NEW HAVEN$23.09
100.3BALTIMORE$27.35
102.4MINNEAPOLIS$26.61
105.1MANCHESTER NH$19.91
107.4SAN DIEGO$33.60
109.6SEATTLE$34.48
110AUSTIN$43.16
111.8BOSTON$50.99
112.7FAIRFIELD COUNTY,CT$55.74
116.4SAN FRANCISCO/OAKLAND$60.20
128.3SILICONVALLEY$36.75
90.4CHICAGO$38.08
97.1DENVER$31.94
99.7SALT LAKE CITY$30.16
101.4PHILADELPHIA$27.65
103WASHINGTON DC$58.35
107NoVA/SUBURBAN MD$37.36
107.5RALEIGH/DURHAM$26.36
109.7CENTRAL NJ$29.37
96.5DALLAS$26.05
97.8PORTLAND$27.04
100USAVERAGE$47.40
Source: U.S. Department of Commerce, Cushman Wakefield

7. HUMAN CAPITAL
CUSHMAN WAKEFIELD 7
REAL ESTATE MARKETS ARE CHANGING
The occupier war for talent has impacted real estate
property types and market dynamics. A preference for
urban-style living and working is dictating location
decisions, as occupiers seek to capture the new
urbanism trend that has developed in many U.S. cities
and markets. Demographic shifts have produced higher
than average population growth within major U.S. cities.
Millennials and Boomers, both of which have smaller
households on average, are seeking urban-type locations
to live, work, and play and corporations are following.
This new sense of urbanism has altered the real estate
dynamics within many core Central Business Districts
(CBDs) and given rise to submarkets that have long
been ignored by occupiers and investors alike. Previously
overlooked submarkets in cities such as Boston, New
York, Chicago, and San Francisco, among others, have
provided lower-cost alternatives to traditional CBD
locations. Seemingly overnight, many of these markets
have experienced significant office, retail, and residential
development in response to occupier demand and as a
result are now becoming increasingly more expensive.
RIVER NORTH (Chicago)
$38 Class A Rent
13.5% MarketVacancy
0 SF Under Construction
RIVER WEST
$20 Class A Rent
13.0% MarketVacancy
550,000 SF Under Construction
SEAPORT DISTRICT
(Boston)
$55.00 Class A Rent
4.8% MarketVacancy
MIDTOWN SOUTH
(NewYork)
$76.15 Class A Rent
11.1% MarketVacancy
2.4 Million SF Under Construction
S. FINANCIAL (San Francisco)
$60.00 Class A Rent $60.00
8.9% MarketVacancy 8.9%
3.5 million SF Under Construction
E. SOMA (San Francisco)
$60.00 Class A Rent
5.2% MarketVacancy
535,185 SF Under Construction
AUSTIN,TX
$43.00 Class A Rent
9.3% MarketVacancy
959,887 SF Under Construction
RISING INNOVATION SUBMARKETS
WHAT MAKES A MARKET INNOVATIVE:
Successful innovation requires a host of factors that allow
new ideas to be brought to market.Having the right human
capital is critical for innovation.However,talent alone does
not mean that innovation will occur.Other factors are
required for innovation to succeed.While Chicago,New
York,Northern NJ,Atlanta,and Dallas all rank high in
human capital,according to the index methodology they do
not have the right mix of other economic components to
rank higher,such as overall job growth,an increasing
percentage of high-tech employment,and venture capital
investment,among others.
A low index score does not eliminate a market from
consideration for corporate expansion. Innovation, as a
component of location strategy, must be assessed at the
industry and company level to ensure the right match
for the enterprise. For example, Houston has a low
overall index score, yet is the leading market for energy
related businesses and has built an infrastructure around
that industry that would be challenging to replicate.

8. 8
SUCCESSFUL PROPERTIES FOCUS ON THE EMPLOYEE EXPERIENCE
The most successful product types today are the ones that bring together the necessary components to make recruit-
ment work. Buildings and markets that are served by public transportation provide millennials and other workers better
access to the office without having to provide their own transportation. Nearby residential and retail provide an overall
employee experience, while the right workplace strategy shows employees that the company has an investment in how
they work.
SUBURBAN REAL ESTATE:
Leading owners of suburban property have realized that the best way to compete with urbanization and assist their
tenants in attracting talent is to bring urban elements to the suburban marketplace. Properties that help effectively move
employees from one aspect of life to another and support the employee experience are being sought by occupiers­─and
these properties do not have to be in an urban core market. In the war for talent, corporations understand that they are
hiring a whole person and the environment they provide should support that.
LIFE
24/7
Convenience
PLAY
Health, Retail,
Amenities
WORK
21st century
work style
EMPLOYEE
EXPERIENCE

9. HUMAN CAPITAL
CUSHMAN WAKEFIELD 9
CALL TO ACTION
OCCUPIERS
Determine the best markets today and in the future for talent recruitment and retention at a global,
regional, and local level.
Consider a workplace strategy as a way to contain occupancy costs before compromising on the quality of labor.
Know the importance of the employee experience to your current and future workforce.
Consider even slight differences between submarkets that can make or break a project.
INVESTORS
Integrate work, life, and play into existing and new developments.
Consider a reverse site-selection analysis that assesses the competitive advantages of the property, the
industries it is best-suited to attract, and the ideal strategy for maximizing its marketability and occupancy.
Ensure that the capital improvement budgets focus on making the right investments to attract and
retain talent in the industries being targeted for tenancy.
Consider ways to improve access to the property.
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“Real estate plays
a significant role in
recruiting, retaining,
and engaging talent.”
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10. 10
www.cushmanwakefield.com
For more information about this briefing contact:
Rick Cleveland
Managing Director
CIS Research Strategy
rick.cleveland@cushwake.com
Debra Moritz
Executive Managing Director
Head of U.S. Business Consulting
debra.moritz@cushwake.com
For more information about Cushman Wakefield’s
CIS platform and services, contact:
John C. Santora
President and CEO
Corporate Occupier Investor Services
john.santora@cushwake.com
CORPORATE OCCUPIER INVESTOR SERVICES
Corporate Occupier Investor Services (CIS) creates comprehensive
solutions for real estate portfolios, aligning real estate strategies to our
clients’ overall business priorities. Our clients range from multinational
corporations to owners/occupiers of single assets, in local markets and
across the globe. CIS adds value as a trusted advisor, leveraging all services
to span the entire life cycle of our clients’ real estate.
Global CIS teams collaborate through the sharing of best practices, use of
consistent tools and processes, alignment of goals and priorities through
industry-leading performance management and governance programs and
flexible, effective technology. CW partners with clients, enabling them to
focus on their core business, confident that real estate experts are attending
to every strategic and operational detail required to create, optimize and
protect business value.
CIS Services:
Account Management
Agency / Landlord leasing
Business Consulting
Transaction Management
Facilities Management
Lease Administration
Project Management
Property / Asset Management
Risk Management Services
INNOVATION INDEX DESCRIPTION
The U.S. Commerce Department’s Economic
Development Administration, in conjunction with
the Purdue Center for Regional Development,
the Indiana Business Research Center, and other
research partners, in 2009 developed the
Innovation Index.The index measures specific
inputs and outputs, that when present in an
economy, allow for increased innovation to occur.
The index compares 22 different economic
inputs and outputs for a defined region to for the
U.S., some of which include:
High-tech employment
Knowledge-based occupations
Education of population
Venture capital investment
GDP / Worker
Average patents issued
More information can be found at
www.statsamerica.org