By Scott Reid
One of the largest challenges facing the business world in the upcoming decades will be recruiting the right talent to help organizations compete and innovate, while at the same time providing the necessary amenities to retain them, according to a recently released report by Cushman & Wakefield entitled “Human Capital: The War for Talent and Its Effect on Real Estate.”
In The Conference Board’s 2014 annual survey, The CEO Challenge, human capital ranked as the most critical challenge facing today’s global CEOs, even before customer relationships and innovation. According to the “Human Capital” report, 35 to 55 percent of an organization’s costs go to recruiting, training and compensating employees, whereas real estate costs typically range from 5 to 15 percent.
Meanwhile, the growth of the working-age population in the United States is slowing significantly, experiencing a 58 percent drop between 2011 and 2012, according to the U.S. Census Bureau. As the Baby Boomer generation retires, the economy is on the verge of a prolonged period where the supply of labor will not match the level of demand. The millennial generation will eventually fill this gap, accounting for 51 percent of the workforce by 2020, but until it becomes the dominant working-age population, recruiting skilled workers will be an expensive and challenging process.
At the same time, demographic shifts across the country have produced substantial population growth within major U.S. cities. According to U.S. Census data, between July 2010 and July 2011, city centers grew faster than suburbs in 27 of the nation's 51 largest metropolitan areas.
As such, recruiting talent requires real estate occupiers to locate in markets that offer urban-style living and working environments. According to “Human Capital,” buildings and markets served by public transportation provide workers better access to the office without having to provide their own transportation. In an April study released by The Rockefeller Foundation and Transportation for America, 54 percent of millennial respondents said they would consider moving to another city if it had better access to public transportation. Of the respondents, 66 percent listed high quality transportation as a top factor in deciding where to live. According to “Human Capital,” nearby residential and retail also provide an overall employee experience that is attractive to talent entering the workforce.
In the report, Cushman & Wakefield analyzed 61 markets for innovation capability, using U.S. Commerce Department criteria, and compared the top 20 markets to the U.S. average, creating an Innovation Index. According to the index, the best markets for occupiers are those that offer high innovation potential with below average costs. The highest ranking markets when comparing innovation potential to rent costs included Austin, Texas; Seattle; Raleigh, N.C.; San Diego; and Manchester, N.H. Their Innovation Index scores were 110; 109.6; 107.5; 107.4; and 105.1, respectively.
“Human Capital: The War for Talent and Its Effect on Real Estate” provides real estate occupiers with a “Call to Action” list that features steps to ensure the recruitment of talent at a reasonable cost. The steps include determining the best markets for recruitment; considering a workplace strategy as a way to contain occupancy costs before compromising on labor; knowing the importance of the employee experience to your workforce; and considering slight differences between submarkets that could end up being critical to the success of a project.