“Flat” World Influences Demand for Commercial Real Estate
By David J. Rubenstein
At one point a few years ago, the word “outsourcing” became almost a curse word, and people feared that so many American jobs would be sent overseas that commercial buildings would soon stand empty. That could still be what you conclude when you start reading a book like Thomas Friedman’s book The World is Flat.
Friedman agrees that today you can almost go anywhere and reach anyone, anytime. He points out that anything you digitize, you can mobilize elsewhere, outsourcing to anywhere on planet earth. He writes that CAT scans on patients in the United States are increasingly being read and analyzed by experts in the Asian subcontinent. In New York, a financial analyst costs about $80,000. In India, the going rate for comparable talent is $15,000. In profession after profession, big chunks of the workday are being e-mailed abroad.
That even includes filling out IRS 1040s. “In 2003, some 25,000 U.S. tax returns were done in India,” Friedman writes. “In 2004, the number was 100,000. In 2005, it [was] expected to be 400,000.”
Yet as you read on, Friedman points out that there are equal and opposite forces at work as well. First and foremost, the companies that are outsourcing tend to be the ones lowering their cost structures, enabling them to better compete and expand in the global economy. As these companies grow, they are adding new jobs domestically (albeit jobs often requiring higher skill-sets than those outsourced). These new higher skilled jobs help counterbalance the loss of lower skilled jobs that have been outsourced. Secondly, as the U.S. outsources jobs to other countries, these emerging economies often demand many of the products and services (from basic consumer goods to high-end consulting advice) provided by many U.S. corporations. This overseas demand offers our domestic economy a significant boost.
The ultimate effects of the dynamic job market in a Flat World are still unknown, but savvy businesses will continue to follow these global trends and their influence on our economy. The result will no doubt impact the demand for commercial real estate in the U.S. market.
– Mr. Rubenstein is a Principal with The Miller Richmond Company
