Today, the role of Corporate Real Estate is increasingly important and many companies often approach real estate decisions with a shorter term administrative perspective. For many companies, recent economic conditions forced them to take immediate action and take a look at real estate for cost saving opportunities. In part one and two of this series, the discussion focused on two initiatives that can provide some benefit in the immediate and near-term:
- Reducing occupancy costs by right-sizing your real estate portfolio and;
- Capitalizing on current market conditions
Taking a longer term view of Corporate Real Estate
What are some tools and strategies that can be implemented with corporate real estate from a longer term perspective to improve business performance?
Strategic Planning: Corporate real estate should be a major factor in strategic planning. Understand the vision and the 3 -5 year goals of the organization and develop tactical CRE plans to align with corporate strategy and compliment the broader business goals. Corporate real estate planning can have significant impact on operations, expansion plans and merger/acquisitions activity.
Benchmarking: Set up Metrics to allow comparison among various business units and industry competitors and standards. This process can be valuable tool to identify opportunities for cost reduction and to maintain acceptable cost levels.
- Square Feet per Employee
- Occupancy Cost per Employee
- Occupancy Cost as % of Revenue
Workplace / Space Standards: Uniform space standards across the portfolio can create economies of scale, reduce build-out costs and control costs for furniture and equipment.
Alternative Workplace Strategies: Examining shared space, remote / mobile work strategies may be viable for certain operating functions or business units and can yield cost savings.
Lease Administration: The task of managing multiple lease obligations can pose a challenge, both financially and administratively. The cornerstone of a strong real estate program is reliable lease information. Clear, concise and complete financial data and critical dates are a key to solid strategic planning and the reduction of risk.
Facilities Management: Streamlining vendors, managing facility service agreements and examining energy management and sustainability (LEED) initiatives can provide a positive ROI long-term.
Economic Incentives: State and Local government entities offer incentives to larger employers willing to re-locate to specific cities, areas or communities. An on-going review of labor demographics and economic incentives may result in significant opportunities in relocating or establishing new employee bases.
Asset Allocation: An on-going review of market conditions and trends with your real estate service providers can reveal opportunities to adjust your portfolio among lease and owned space as well as take advantage of structured finance alternatives and sale-leaseback scenarios.
In summary, regardless of whether you have a corporate real estate department, re-engineering your corporate real estate function to be run more strategically can improve operational capabilities and effectively manage the costs associated with real estate transactions. The goal of making it easier to factor corporate real estate into senior management’s financial and operational decisions will serve as a foundation for better results.