Weekly Newsletter Dec 21, 202021 Dec 2020
10 Trends for 2021
#1 (De) Globalization
When we highlighted De Globalization as a trend to watch in 2020, little did we know that the COVID-19 pandemic would accelerate the changes so dramatically. The factors we saw driving this process remain the same, but corporate and political priorities have changed in ways that pose an even greater challenge to the globalization paradigm that has dominated our thinking for most of the last century.
Heading into 2020, we highlighted that the pace of globalization had definitely slowed and that in some important respects it was beginning to reverse. Multinational companies were rethinking global footprints to find a new balance between cost-efficiency and business effectiveness. Consumer demands for greater social and environmental awareness from the companies they buy from were encouraging a shift in priorities, particularly towards reducing carbon footprints. Many parts of Western Europe and North America continued to struggle with the impacts of de-industrialization, which was evident in the strengthening of populist political movements and nationalist policymaking. All perfectly valid; but fair to say that the changes were adjustments at the margins of globalization, not a wholesale reversal.
Fast forward twelve months and the picture has changed dramatically.
Politically, tensions between and within the major trading blocs go well beyond the views of any specific politician or party. Europe is as far from a resolution to the Brexit debate as ever, albeit that some form of conclusion will have to be reached before the end of this calendar year. Tensions between America and China have hit trade between the two superpowers, but the issue is almost unique in the way it transcends U.S. party politics. Both Presidential candidates campaigned on a platform of policies to promote greater U.S. economic self-reliance, joining numerous countries from India to Japan in advocating various forms of economic nationalism. The response to coronavirus has itself become highly politicized. International travel restrictions and fundamental differences in policy measures have created conflict between countries; the fragmented approach to tackling the pandemic contrasts strongly with the more coordinated action seen during the Financial Crisis. The unseemly competition to secure supplies of protective equipment has given way to debates over access to a vaccine - none of which promotes a spirit of international collaboration.
Travel restrictions have also had a huge impact on global movements of people. Migration flows, international tourist visits10 and business travel have shrunk to a tiny fraction of pre-virus levels. All three can be expected to recover assuming the pandemic eventually subsides – but not necessarily to the levels seen previously. The financial and carbon benefits of reduced transportation (and international flights in particular) have been immense, even if the quality of some interactions via video conferencing has undoubtedly suffered. The United Nations-inspired concept of “Building Back Better” neatly encapsulates the idea that we should shape the process of recovery to address the challenges of the past.
By far the biggest global impact of COVID-19 will be its influence on supply chains. Debates about network efficiency are being rapidly replaced with a focus on resilience. Among the many memorable images of the crisis are empty shelves in grocery stores and business executives transporting car and electronic components out of China in suitcases. Research by Infosys concluded that 85% of supply chains were impacted in some way, and China’s pivotal role at the center of global supplier networks was highlighted early in the crisis. More than 40% of the Fortune Global 500 have a direct presence in Wuhan; more than 90% of the Fortune 100 have Tier 1 (direct) or Tier 2 (one stage removed) suppliers in the city. However, the crisis has revealed that global economic links are dependent on a relatively small number of specific countries.
As a result, we are experiencing one of the greatest shocks to the structure of the global economy in living memory. ‘Plus One’, the strategy of diversification away from reliance on China due to concerns over cost and political or economic stability, has been given a dramatic new impetus. Governments and the private sector alike are looking to bolster the security of their critical supply chains, which generally means focusing closer to home. Regionalization is typically a core component of the strategy, shortening the links in the chain while creating networks that provide flexibility and parallel capacity in case of supplier failure. Risk management now rivals or even exceeds efficiency as the priority in decision-making – or as one commentator neatly summarizes it, ‘just-in-time’ is being replaced with ‘just-in-case’. Allied to this will be a huge investment in technology. Robotics18 and 3D printing will be used to facilitate production in higher-cost locations, whilst Digital Supply Network technology will be deployed to help manage more complex, but more resilient, supplier relationships.
As we concluded last year, but now see unfolding before our eyes: “Manufacturing facilities (if not necessarily employment) will see renewed demand. Logistics networks will focus more on integrating local and regional hubs, rather than simply connecting efficiently to major ports that are the gateways from Asia. And the implications for real estate are profound”.
Avison Young is not just about offices, warehouse, and logistics - it is primarily about creating winning conditions for people, businesses, and the community to thrive. We are powered by people and in an excellent position to provide these values!
Israeli commercial real estate deals
- ELECTRA REAL ESTATE LTD is buying portfolio of properties at Tampa, Florida for $16 million.
- HAGAG LTD buys Old North Tel Aviv lot for luxury homes (Globes).
- CPI down 0.2% in November, home prices rose (Globes).
- More News
Commercial Real Estate Opportunities
- For sale 2,200M2 commercial building in Petah Tikva, in the center of Israel.
- For sale two floors (2,300M2) out of five, in a commercial building in the center of Tel Aviv.
- For Sale in Tel Aviv 600M2 floor, (one out of 4) + 13 parking spaces.
- For lease, in Holon, 1,500M2 office space ready to occupy
- For lease, in Alon Tower Tel Aviv 156M2 office space, high floor 5 rooms.
- For lease, in Or Yehuda, 600M2 office space ready to occupy.
- For lease, in in Petah Tikva 1,700M2 office space ready to occupy.
- For lease, in Kadima, commercial units in a new neighborhood commercial center.
- More News