In many sectors, the need to establish a physical real estate presence overseas has never been greater. Improved technologies and efficiencies have made the world a bazaar of economic activity and those without an international presence may be missing out on valuable opportunities.
“If you are in certain businesses such as communications, financial services, or the technology industry, you either have a global presence or your competition is passing you by,” says Ken Murawski, managing director of CB Richard Ellis.
Smart Business spoke with Murawski about the importance of establishing an international presence, how to decide between owning and leasing commercial real estate overseas and what types of services a quality real estate professional can bring to the table.
Why is establishing an international presence so important in today’s marketplace?
As we all know, the world has gotten much smaller over the past several decades as technology has progressed. Many companies today feel that in order to service their clients as they expand internationally, they too need to establish or expand their physical presence overseas. In the commercial real estate business, having people on the ground in such areas as India, China and Europe has allowed us to service our clients appropriately in those marketplaces as well as increase our own profitability.
Many of our clients have recognized the vast opportunities that exist for them in emerging marketplaces and want to participate in the expected growth, which is anticipated to be much greater than their existing market. I don't think this trend will slow down for quite some time, if ever.
What factors should be considered when deciding between owning and leasing commercial real estate overseas?
The answer to this varies from market to market. In some countries, the decision to lease versus own is a similar decision process to leasing or owning in the United States, meaning it is, in most instances, based upon a company's cost of capital. However, in China where the government owns the land, owning in the traditional sense is not an option. Doing business can vary greatly from market to market due to cross-cultural differences so it is very important to have local expertise and local influencers on your team if you are looking to enter a new market.
How should a company proceed when purchasing real estate internationally?
I think that anyone working to lease, build or buy commercial real-estate internationally absolutely needs to engage the services of qualified professionals in the specific marketplace they want to be in. If it is a United States company that doesn't have a qualified real estate service partner, they need to start locally by contacting a commercial real estate services firm with true international capabilities. This allows the U.S.-based real estate professionals to get a clear understanding of the company's needs and make the proper introduction to their foreign partner to ensure the client is in good hands and that any cross cultural differences are addressed.
What type of services does a quality international real estate professional bring to the table?
A quality professional representing a company that is looking at going international will always connect with local associates in specific foreign markets to ensure that they have accurate, current data as well as an understanding of such things as political climate, cultural differences, taxes, incentives, etc. The professional would bring high level analytical and financial capabilities, as well as a team of other professionals with expertise in such areas as project management, facilities management, transaction management, all with experience in the target market. It all depends on the nature of the assignment, but having all these service capabilities can be critical.
What does the current environment look like for international real estate?
It varies greatly by country and region. We are seeing many U.S.-based companies, particularly manufacturing companies, looking to the Asia Pacific area to establish an operating presence. With the political climate changing in China, it is an "untapped" market in many respects and given the vast population there, it offers huge growth potential for US companies.
KEN MURAWSKI is managing director of CB Richard Ellis Cincinnati. Reach him at (513) 369-1349 or Ken.Murawski@cbre.com.