For more corporate occupiers located in emerging markets, the drive remains strong despite the widespread social, political and economic unrest in 2011, according to the latest research reported today by CBRE.
The need to revise the definitions of what constitutes an emerging market and identify which locations present the greatest opportunities were at the centre of CBRE's findings. The classification of the 'BRIC' nations as emerging is outdated; for many corporations, Brazil, Russia, India and China are now considered to be advanced, with Central and Eastern European markets perceived similarly. At the other end of the spectrum lie the less developed and often more volatile 'frontier markets', such as Iraq, Libya, Syria and most of Sub-Saharan Africa, where operational risk is far greater, and there are more challenging barriers to entry. However, often countries can no longer be categorized as 'emerging' in their entirety, given that the levels of development in most capital cities often exceed those in second and third-tier cities, according to CBRE. For example, remote areas of Canada and Russia, both developed nations, can pose significantly more operational challenges than the urban core. Emerging markets can therefore exist within the boundaries of stable countries, meaning that corporate real estate executives must consider sub-market characteristics when developing their location strategies.
Corporations are shifting their focus to the world's east and south: for many companies, Asia, Latin America and Africa are the current locations of choice for strategic medium-term expansion. However, the degree of variation and complexity within these broad regions means that a uniform approach is unlikely to be effective. In Asia, for instance, India is regarded as an 'emerged' market for many functions, with future potential focused on places like Vietnam, Thailand and The Philippines. Even here, sub-national differences between, say, north and south Vietnam, mean corporate would face considerably different challenges when looking to establish a presence on the ground.
"Our key conclusion is that widespread social, political and economic unrest will not deter companies from locating in challenging markets. However, in order to operate effectively in difficult territories, corporations must ensure they have the right strategies in place, striking a balance between risk controls and getting things done," said by Nick Lambert, Head of Complex and Emerging Markets at CBRE.
"Global unrest has raised questions as to what extent multinational corporations are equipped to operate in the more unstable, fringe markets. Clearly, the extent and nature of the disturbances has highlighted the need for corporations to carefully manage risk in areas of political and social instability. The overwhelming response from our clients has been positive: it seems that the opportunity presented by these markets can outweigh the risk if managed adequately. It appears there will be a continued exploration of the opportunities presented by "emerging" markets and perhaps a redefinition of their labels, albeit with corporations mindful of the challenges of entering and operating in these new frontiers." He added.
