Business real estate is not just an operational necessity; it is a strategic resource. But he rarely gets the attention of senior management. In many organizations, real estate remains a reactive second-tier function, focusing on individual projects and transactions rather than the broader strategic issues of the company. The choice of properties app or location and layout is done within the business units, based on short-term needs and based on generally accepted ideas. Proximity to headquarters can take precedence over customer and employee preferences. The five principles discussed below, not for real estate professionals but for the executives they guide them, highlight issues that senior managers need to understand.
- Manage your portfolio
The company’s real estate portfolio should be more valuable to the enterprise than the sum of its individual plots. To ensure this, managers need a broad understanding of the real estate situation that they will not get from the analysis at each site, which is usually the focus of internal employees and systems. Executives need a snapshot of a company’s presence: location, land and building types, use and condition of major facilities, lease terms and operating costs, and financial and environmental risks. Leaders also need a dynamic, fluid picture of where corporate strategy affects their property ownership, and how influence might change depending on which path they take.
When they compare a snapshot — spreadsheets, maps, and photographs — with a “movie” composed of robust scenarios of the company’s known and potential needs, the analysis is likely to reveal some inconsistencies. A company may have too much space in one place and too little in another, or the wrong type of space in certain areas. The analysis will also show which leases expire and when, their amounts and costs over time, and how the location and sequence of expiration can complicate or even block future action.
Armed with this knowledge, a leader can take advantage of portfolio opportunities that analysis at each site does not reveal. For example, offices that do not need to be located in the city center can be relocated to less expensive (although not necessarily remote) submarkets. Surplus premises can be sold, subleased, or vacated.
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- Increase flexibility
A flexible organization guarantees maximum flexibility in all of its property holdings – even if in some cases this means that in some cases you have to pay more up front. Flexibility can be financial (leasing instead of owning), physical (designing a modular space), and organizational (redeploying work).
- Develop intelligence
Unsurprisingly, leaders who are not trained in real estate strategies can rely on instinct or random chatter to make real estate decisions – and no wonder those decisions fail. Leaders need real estate information: accurate data synthesized into relevant information, interpreted in the context of corporate and competitive realities. This kind of information allows them to understand trade-offs and link real estate decisions to corporate strategy.
The backbone of real estate analytics is a database that includes square footage, occupancy costs, utilization, capital cost, utilization levels, and other important information grouped by business line, function, and location. Data warehousing can be large for a typical portfolio, with 50 or more unique fields for each of hundreds or thousands of properties. The quality and efficiency of the database increases with scale. So, leaders need a dashboard that only focuses on core principles and synthesizes key issues.
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- A team of professionals
The most efficient organizations are often the least concerned about their commercial real estate. Instead, they partner with firms that offer a full range of features and services. Such a partnership will be successful if both parties agree on two conditions. First, the organization must be willing to share some control over its property. Successful use cases in other central functions such as IT can pave the way for this location. Second, the real estate firm must agree not to focus solely on transactions, but to work towards long-term goals such as strategic advantage, reduced accommodation costs, and employee satisfaction.