Corporate decision-making slows with shaky economy.

An uncertain economy has caused the corporate real estate decision making process to slow down, according to Cushman & Wakefield executive vice- president, corporate services O.B. "Barney" Upton III.

"Corporations are less likely to commit to a lease or purchase transaction until they can determine the direction of the economy," said Upton. "Since these types of business decisions are five to 10 year commitments, or longer, and the cost is significant on behalf of a corporation, they tend to wait it out."

Upton also said real estate is just one of many expenses associated with a corporate move. "Technology infrastructure as well as salary and benefits all come into play," he said. "These costs can be quite substantial and run in to the millions. Consequently, the decision whether or not to acquire a new facility is an important one for the corporation."

"We will begin to see a recovery in corporate real estate activity when we see white-collar job growth," Upton said. Layoffs and rising unemployment have caused corporations to be faced with an overabundance of office space at a time when demand is low. Real estate is a lagging economic indicator, and it follows the job market, which has been weak for white-collar workers.

"Companies aggressively acquired space during the late 1990s," Upton said. "They are now being overly guarded concerning expansion or relocation plans. They are dealing with balance sheet issues relating to property acquired at the top of the market. In many cases, these properties are surplus to operational needs," he said.

In addition, Upton said the fallout from recent accounting scandals has also had an impact on real estate decision-making, especially with regard to such vehicles as synthetic leases. (A synthetic lease is a form of off balance sheet financing relying on the company's corporate credit to guarantee financing of the transaction.)

"The brakes are now on regarding activities such as synthetic leases," he said. "Most companies have a wait and see attitude until decisions are made by the FASB (Financial Accounting Standards Board), which will establish new standards for off balance sheet financing for real estate and other sectors."

Corporations are looking to outsource partners to save money on their bottom lines. "The utilization of leading edge technology, infrastructure, processes, market knowledge and research, and best practices, lead to financially prudent decisions by companies," he said.

"Companies today are putting energy and resources back into their core business," Upton added. "Real estate is not typically their core business."