The market for real estate and construction developers is characterized by shifting customer demands, new technologies and evolving talent requirements. To help businesses keep up with such current trends and disruptors, and position themselves to leverage emerging opportunities, Grant Thornton hosted a roundtable with CEOs from leading commercial, industrial and retail development companies.
During the course of an engaging discussion, attendees pinpointed three key issues shaping current market realities:
- Finding ways to meet ever-evolving customer expectations
- Adopting talent strategies to attract the workforce of the future
- Gaining a competitive edge by streamlining Canada’s regulatory environment
Create a compelling customer experience
Developers are well positioned to provide customers with the building technology they have come to expect. For instance, they’ve been investing in smart buildings in response to customer demands for improved sustainability performance. In addition, developers realize the cost, operational, environmental and reputational benefits associated with being green.
On the flip side, many retail developers are struggling to compete in today’s digital world. As a growing number of customers embrace online shopping, brick and mortar stores are seeing a decline in traffic. According to Retail Insider, more than 700 store locations across the country were set to close in early 2020.[1] To counter this trend, retail and commercial developers agree they will need to innovate to create more compelling customer experiences. This may see developers using their space to entertain visitors in addition to merely selling to them.
Rethink talent attraction and retention
Talent requirements in real estate development have shifted radically in recent years. While developers will always need skilled workers like construction managers and labourers, they must now also attract a wider pool of talent. As building technologies become more sophisticated, for instance, demand for people who know how to manage software controls will continue to rise. Similarly, growing reliance on the Internet of Things (IoT) for interconnectivity and analytics will translate into greater demand for data analysts.
To attract and retain these scarce skillsets, developers will need to rethink their talent strategies. According to roundtable attendees, this means finding ways to meet the needs of an increasingly mobile millennial workforce.
While this appears challenging, strategies are emerging to address some of the barriers. Certain developers are collaborating with commercial real estate development associations, such as the CREW Network and NAIOP, who are working to train and develop talent in the industry. Others have begun to enhance recruitment and retention efforts by conducting staff surveys to determine what types of perks, bonuses and benefits most motivate them. By meeting these needs, developers are gaining the capacity to foster the employee loyalty necessary to compete into the future.
Rationalize the regulatory environment
When it comes to identifying strategies developers can use to gain a competitive edge, attendees pointed to two core approaches: expanding market access by reducing red tape and trade barriers, and implementing a tax system that attracts investors.
Almost universally, commercial, industrial and retail developers agree that Canada’s regulatory environment has become unduly complex. Beyond a growing amount of red tape, it’s getting harder for many developers to achieve profitability. In some provinces, like Alberta and British Columbia, minimum wage hikes have increased expenses. In some cities, like Edmonton and Calgary, commercial property tax rates have gone up dramatically compared to residential rates. And in some municipalities, developers are now expected to build community infrastructure for new developments—such as schools and fire halls—without municipal assistance.
As these rules become more stringent, developers and municipal tax authorities should work together to find a balance that allows governments to collect sufficient tax revenue without making it harder for developers to do business in Canada.
Advancing through adversity
Although commercial, industrial and retail developers are facing new and unprecedented challenges, they remain optimistic about their ability to prevail amid adversity. By thinking creatively, remaining open to new ideas and working together, developers are laying a foundation for future success.
To help you in this endeavour, the real estate and construction specialists at Grant Thornton will continue to keep you abreast of changing industry circumstances so you can leverage opportunities as they emerge. To find out how we can help, contact us.
[1] Retail Insider, January 23, 2020. “Hundreds of Stores to Close in Canada in Early 2020 [Analysis],” by Craig Patterson. https://www.retail-insider.com/retail-insider/2020/1/hundreds-of-stores-to-close-in-canada-in-early-2020-analysis
