SoCal In Transition - It's Time to Talk About Talent
Part 2 of Southern California in Transition with Lew Horne
Southern California is in an Amazing Period of Transition.
The region is changing faster than I have ever seen during my 35 years as a professional in the market. In my last post, I identified some of the macro trends I believe are driving this change, one of the most important being talent.
A Destination for Top Talent
Today, Southern California stands as one of the great destinations for top talent. Thanks to the economic and professional opportunity available in the region, people are flocking to our cities in hopes of a better future. There are 13.3 million residents in the Greater LA metro area. Among them, more than 6.4 million are currently employed, making LA the second-largest labor market in the U.S., growing at a faster annual rate than New York, Chicago and San Francisco. And no surprise, the tech sector is playing an important part. In the most recent CBRE Tech-30 report, Los Angeles ranked seventh in the country with a 20% increase in high tech jobs while Orange County climbed more than 40% for 2015-2016 making it the fastest-growing tech hub in the U.S.
This has had a profound effect on Southern California’s economic landscape. While legacy associations may typecast SoCal as a media-centric region, today, we see an incredibly diverse lineup of organization ranging from manufacturing to trade and logistics to financial services and healthcare.
This shift is having a material impact on the commercial real estate industry with more than 42 percent of creative office space in Orange County being occupied by tech-related companies, and this demand is rising fast, leading to a rapid increase in commercial rents. And it’s not just Orange County. We’re seeing similar trends in San Diego and Greater Los Angeles.
Attract & Retain
Access to this top talent makes Southern California phenomenally attractive to businesses and investors, including the world’s biggest e-commerce firms and tech, media and entertainment heavyweights such as Apple, Netflix and Warner Music Group. With this influx, the region is cementing its status as the content-creation capital of the world. But access is one thing, actually being able to attract and retain this talent is something else entirely. In my experience as the leader of CBRE in Southern California, two factors are critical to building and maintaining a talent-rich organization: fostering a culture of opportunity and innovation; and creating an environment that people love.
I. Culture of Opportunity and Innovation
The best people want to be a part of something that is exciting. A recent study by SurveyMonkey found that tech companies (not surprisingly) are amongst the top destinations where talent wants to work, driven in large part by the opportunities these organizations provide and their commitment to innovation and growth. I’m a firm believer that these principles are not exclusive to tech firms, but are critical to any company looking to attract and retain the best people and succeed in the marketplace.
At CBRE, innovation and the goal of better serving our clients has driven us to expand beyond our historical roots in brokerage. Today, we boast deep service offerings across the commercial real estate spectrum, including data analytics, capital markets, and facilities management, among others. Just this month, we announced our CBRE 360 capability, a tech-enabled menu of customizable amenities and building services meant to enhance the office experience and boost value for tenants and property investors. The conversations around workplace are continuing to shift with a focus on flexible, fast and fun. This commitment to innovative growth has also driven more than 125 acquisitions in the last several years, expanding the value we can deliver to our clients and providing talent with new and exciting opportunities to further their careers.
II. Environments People Love
In addition to opportunity and innovation, the workplace environment is also critical to attracting and retaining talent. A recent CBRE research report – Live Work Play: Millennials Myths and Realities – found that 78% of millennials see the quality of a workplace as important when choosing an employer and as many as 68% will trade other benefits for a better workplace.
At CBRE, we’ve made our workplace standards and experiences a major focus. In the U.S., we started in 2014 with our office in Downtown Los Angeles, completely overhauling the space to be more conducive to the way we work, encourage creativity and collaboration and, most importantly, represent a place our people want to be in. Since then we have also incorporated concierge services in many locations to better support our professionals. In the past two years, we have reimagined our office in Glendale – this state-of-the-art space sits across Caruso’s Americana retail and entertainment complex which enables us to provide a multitude of services -- and in Woodland Hills with the leadership of David Josker, as well as in Ontario, Oxnard and Waikiki. And just a couple weeks ago, my colleagues, John Frager and Paul Komadina opened a brand new, state-of-the-art space in Westfield’s UTC shopping center in San Diego.
This commitment to creating a top office environment where talent can thrive is paying dividends. It’s helping position us as a top employer in the region, as evidenced by our recent inclusion in Fortune Magazine’s Great Places to Work in Southern California. And it’s providing insights that our clients can leverage, partnering with our Workplace teams to reimagine their own spaces.
There Are Challenges
Despite Southern California’s strong standing as a destination for top talent, there are distinct challenges we need to be aware of and work to address, namely the imbalance of education in our state and the cost of living.
As a University of Southern California graduate myself, I’m incredibly proud of my alma matter and the rich tapestry of public and private colleges and universities in the region. Today, there are 53% more people with advanced degrees living in LA and Orange County than the Bay Area, according to U.S. Census Bureau data. Yet, while Southern California excels in higher education, we struggle on the lower end, with Los Angeles and Riverside counties topping the list in the U.S. for the share of people (more than 20%) who don't have a high school diploma. If we want to guarantee we have a healthy pipeline of talent for years to come, we must ensure we are looking at our education systems holistically and inclusively.
“If we want to guarantee we have a healthy pipeline of talent for years to come, we must ensure we are looking at our education systems holistically and inclusively.”
Affordability also remains a challenge in Southern California. While opportunity abounds, cost of living has outpaced earnings. In 2016, Los Angeles was one of the few regions in America that saw residential rents increase faster than incomes, according to Apartment List. Based on local income-earning potential, four of the 10 least affordable large metros in the U.S. are in Southern California —Oxnard, Riverside, Los Angeles and San Diego. This will create a situation where talent will simply be forced to leave in search of a more affordable place to pursue their careers. One solution is high-density multi-family. Hollywood, Glendale and Downtown LA have shown us how increasing the concentration of development can create opportunity without placing a burden on infrastructure, the environment, quality of life, or the tax base. Where Los Angeles used to move out, we’re finally moving up.
Commitment to Growth
Southern California will always be sunny, but if our region is going to continue attracting and retaining top talent, we as a community need to grow, evolve, and be creative and entrepreneurial. And for all of this, we have to have a bold vision of future development and an ambitious plan to get there. This requires teamwork and a partnership with local businesses and government in order to grow in an organized manner.
*shared by Jeff Vertun