{"id":1004581268,"date":"2022-05-31T22:05:43","date_gmt":"2022-06-01T06:05:43","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004581268"},"modified":"2025-02-27T22:18:25","modified_gmt":"2025-02-28T06:18:25","slug":"economists-view-how-employees-flight-to-quality-impact-cre","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/economists-view-how-employees-flight-to-quality-impact-cre\/","title":{"rendered":"Economist\u2019s View: How Employees’ Flight to Quality Impacts CRE"},"content":{"rendered":"

Thomas Edison is usually credited with the aphorism \u201cGenius is one percent inspiration and 99 percent perspiration.\u201d (Like many famous sayings, the origin is disputed with scholars now thinking that the originator was Kate Sanborn, a 19th century author who taught variously at Brooklyn\u2019s Packer Collegiate Institute and at Smith College in Massachusetts.) Regardless of its coinage, the kernel of truth in the saying is that good work is, well, work. <\/em><\/strong><\/p>\n\n\n

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READ THE DIGEST<\/a><\/div>\n<\/div>\n\n\n
\"\"<\/a>

Hugh Kelly<\/p><\/div>\n

In 2022 we need to reflect on this, I believe. We are apparently in the throes of a reconfiguration of work that is at the same time a reconceptualization of the way we support ourselves and build our careers. Although this reappraisal of work has a long pedigree, dating back to Adam Smith and David Ricardo in the \u201clabor theory of value\u201d and including social commentary such as Thorstein Veblen\u2019s The Theory of the Leisure Class, <\/em>it seems that we are at a pivot point as we emerge\u2014however haltingly\u2014from the COVID-19 pandemic. As with so many economic changes, perspectives about work\u2014both from the point of view of workers themselves and also their employers\u2014manifest themselves in the real estate world much more clearly than in academic studies.<\/p>\n

Let\u2019s first look at some data, and then look at an alignment of interests for workers in their role as occupiers of real estate, employers as those paying the rent for real estate, managers as value enhancers in building operations and owners seeking to maximize the risk\/reward ratio for their investments.<\/p>\n

Economists have long known that the decade of the 2020s was going to be different\u2014even without the startling challenges of a pandemic and now a shooting war on the European continent. Demographics mark this decade as the decisive period when the U.S. shifts from a fundamentally labor-surplus economy to a chronically labor-scarce one. The remarkable return of the U.S. unemployment rate to 3.6 percent in March 2022 is but one signal. Data from the Bureau of Labor Statistics JOLTS (Job Openings and Labor Turnover Survey) report showed significant churn for workers as of February\u2014with 11.7 million job openings listed, and hiring outpacing separations (quits, layoffs and discharges) by 600,000 jobs. The range of worker choices seems to be expanding at present.<\/p>\n

Meanwhile, Prudential Insurance\u2019s \u201cPulse of the American Worker Survey\u201d reveals that workers are raising their expectations of employers. More than two-thirds of workers expect to get a raise this year. In terms of benefits, 45 percent feel empowered to press for improvements in their packages. A clear majority are now evaluating jobs on work-life balance criteria. And six in 10 managers report mental health stress, with those overseeing hybrid workers indicating even greater difficulty. There is significant managerial skepticism about the durability of the remote work model, in contrast to what seems a popular consensus about a \u201cnew normal\u201d for workplaces.<\/p>\n

The unifying thread for workers, employers, property managers and building owners may be a \u201cflight to quality.\u201d This is actually a recurrent pattern in time of uncertainty and rapid change. When choices expand and the market becomes more competitive, narrowing pricing differentials make qualitative options increasingly valuable.<\/p>\n

I recently undertook a study of the Houston office market where this thread emerged as a vital pattern. Houston has one of the softest office markets in the country, with broker reports typically placing its vacancy rate in the mid-to-upper 20 percent range. Clearly tenants have ample choice here. Corporate churn is a major threat to property income. Yet owners clearly recognize that it is more economical to invest in retaining corporate users than it is to replace them. Rents in Houston\u2019s core submarkets\u2014in and around the inner I-610 loop, along the Katy Freeway and in The Woodlands suburban area\u2014are higher and vacancies lower than for the metro average. And Class A properties outperform Class B buildings on the same metrics. Quality is trumping cost, by all indications.<\/p>\n

Tenants, in turn, recognize that in a labor market where power has migrated toward workers, providing a high-quality workplace improves their ability to attract and retain the talent needed to support business profits. This means not only well-located buildings and well-designed spaces but also high-quality maintenance, HVAC systems and other \u201cwell building\u201d features and due attention to worker priorities. A broad understanding of what excellent human resource management entails falls ultimately to a firm\u2019s bottom line.<\/p>\n

Investors taking the long view will recognize that such factors are useful filters for making property selections in the fluctuating markets of 2022 and beyond. Such selectivity is not a pursuit of novelty. It is, rather, today\u2019s version of sound, basic evaluation and good prudential judgment in an ever-changing economic landscape.<\/p>\n

Read the June 2022 issue of CPE.<\/em><\/a><\/p>","protected":false},"excerpt":{"rendered":"

Hugh Kelly takes a deep dive into the implications of rapidly shifting workplace realities. <\/p>\n","protected":false},"author":1082,"featured_media":1004386532,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1521,37752],"tags":[],"class_list":["post-1004581268","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-digital","category-research-center-economy-ecommerce"],"acf":[],"yoast_head":"\nEconomist\u2019s View: How Employees' Flight to Quality Impacts CRE<\/title>\n<meta name=\"description\" content=\"Economist Hugh Kelly takes a deep dive into the implications of rapidly shifting workplace realities\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/economists-view-how-employees-flight-to-quality-impact-cre\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Economist\u2019s View: How Employees' Flight to Quality Impacts CRE\" \/>\n<meta property=\"og:description\" content=\"Economist Hugh Kelly takes a deep dive into the implications of rapidly shifting workplace realities\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/economists-view-how-employees-flight-to-quality-impact-cre\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2022-06-01T06:05:43+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-02-28T06:18:25+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2020\/01\/Hugh-Kelly.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"728\" \/>\n\t<meta property=\"og:image:height\" content=\"542\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Hugh F. 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