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CoRE

Fundamentals
An Academic Lecture
Series From CoreNet Global

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Corporate Real Estate (CRE): What’s It All About?

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What is Corporate Real Estate?

A corporation's real estate, comprised of its
land, buildings, and work environments, can be
a powerful resource of strategic value.

BALANCE SHEET ASSET

MARKET ASSET

ORGANIZATIONAL ASSET

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Learning Objectives

• Describe the structure of the real estate organization

• Identify key activities associated with corporate real estate
operations

• Describe the internal relationship between the corporation and
CRE management

• Identify the three stratifications of the CRE executive’s corporate
role in fulfilling his or her departmental objectives

• Characterize key aspects of the CRE executive’s role in fulfilling the
strategic objectives of the company as a whole 4

The Broad Expanse of CRE Energy Manufacturing Public Sector Consulting Healthcare Agriculture Retail Transportation Hospitality Research Finance Technology Can You Think of Telecommunications Others? 5 .

The CRE Business World CORPORATION Business Key Objectives Support Units Business Plans Functions (BU) Metrics CRE Mission: CRE Department Management Portfolio Management Strategic Performance Management 6 .

CRE Management Organization Management Portfolio Management Performance Management 7 .

CRE Functional Management Corporate Real Estate Activities Transactions Leases Facilities Management 8 .

Organization Management Portfolio Management Performance Management 9 .

Organization Management Department Management Functional Management 10 .

Department Management CRE Organization and Staffing Busines Head of CRE or s Units Head of Share- (BU) Strategy holders Customer Portfolio Relations Strategist Client Client Outsourced Service Relationship Relationship Liaison Manager Manager 11 .

CRE Department Management Project Financial Management Management Organization & Staffing Legal and Outsourcing Contracting Management 12 .

Project Management • Benchmarking • Scenario cash flow analysis • Occupancy and cost measurement • Year-to-year comparisons • Location-to-location comparisons • Comparisons to market norms • Laddering leasehold maturities 13 .

14 . Perhaps most important. a company's real estate portfolio is viewed as a strategic asset that can make or break a company's anticipated financial performance.Financial Management Increasingly. CRE has a demonstrated impact upon the company's Return on Investment and shareholder value.

Outsourcing Management Assemble and coordinate various CRE in-house and outsourced specialist resources responsible for: Strategy & Portfolio Planning Design & Construction Workplace Strategy & Planning Operational Strategies • Establish project objectives and facilities requirements • Budget Development – capital and operating • Solutions Options and Site Selection Development • Decision Support and Approval Process • Project Delivery 15 .

Legal and Contracting Key components: • Selection criteria • Written. measurable directives • Leveraged agreements • Performance reviews 16 .

Location / Site Selection • Local knowledge • Space expectations and requirements • Negotiating incentives and infrastructure • Trends in the real estate markets • Competitors/Neighbors • Suppliers 17 .

Incentives 18 . Goals. Lease.Location and Site Selection Problem/Need/Assessment Example: Expansion Strategy. Objectives. Selection Geographical Target Areas Site Specific Criteria Commitment Financial Decisions Buy vs. Policies Search.

Organization Management Portfolio Management Performance Management 19 .

Portfolio Management Workplace Strategy Outsourcing Portfolio Optimization Financial Performance 20 .

that is. profit. • And increasingly important . 21 . • How it affects people. productivity.Workplace Strategy The profession of corporate real estate and workplace encompasses business strategy for successful companies . • How and where people work.the planet.

Sample Deliverable Outsourcing REAL ESTATE HOLDINGS Strategic (In-House) CRE Careers CRE Jobs Operational (Outsourced) 22 .

CRE & Service Providers Internal Level of Responsibility Real Estate CRE Team Service Provider Relationships with business ENTERPRISE STRATEGY Strategy Support: units (BU) and senior •Compliance •Policy Governance management Works with Service STRATEGY TRANSLATION Strategy Support: Provider to translate •Performance management •Strategic Sourcing corporate and BU strategy •Portfolio optimization to real estate and develop •Lease renewals processes for the delivery •Disposition strategies of services •Programming standards •Capital budget development •D&I financing alternatives Oversight of service TACTICAL EXECUTION Tactical implementation: provider and internal •Transaction management •Lease administration delivery teams •Project management •Contract/Vendor management •Facilities management 23 .

Portfolio Optimization and Balanced Scorecard Customer Financial Employee Growth Internal Business and Development Processes 24 .

Portfolio Optimization Growth Phase CRE Function Success Measure High Steady Downturn Growth State Customer Service Time-to-Market  Sourcing & Lease Administration Cost per SF or M2   Space Management SF or M2 per Person  Alternative Workplace Cost per Person  Occupancy Cost % Occupancy Cost- Reduction to-Revenue  25 .

Portfolio Management Analysis • Demand forecasting • Utilization and occupancy metrics • Sub-portfolio and cluster analysis • Supply and gap analysis • Market analysis • Financial analysis 26 .

Financial Performance Occupancy cost indicators Book values – to – market value relationships Balance sheet impacts Income statement impacts Cash flow impacts Investment ratios Share value impacts GAAP impacts Carbon Footprint 27 .

Organization Management Portfolio Management Performance Management 28 .

Performance Management Enterprise Alignment Balanced scorecard Strategic CRE Planning Sustainability 29 .

Enterprise Alignment Busines CORPORATION Support s Units Functions (BU) Key Objectives Business Plans Metrics CRE Role CRE Functions Define Evaluate Integrate Measure Requirements Existing Market Performance Facilities Opportunities 30 .

Strategic Planning Corporate HR CRE Trends Direction & Benchmarks Technology Government Regulations/ Codes/ CRE Environmental Team Infrastructure Business Unit/ Options Functional Unit Needs Business Competition 31 .

• What functionality. access to Workspace material handling suppliers • Constraints? 32 .CRE Planning Property Financial • How much should we own • What are our cost structures? versus lease? • What is our optimal financial • How much space do we Financial structure? have? • Do we have enough space – how much will we need in the future? Location Portfolio Occupancy Location Space • Are we in the right location? • Are we in the right type of • What are the labor pools. vacancies. building? economic incentives. transportation costs.

Space and Occupancy Strategic planning generates the right amount of space at the right time… the rewards are: • Reduced • Occupancy costs • Energy costs • Improved space utilization • Reduction in amount of surplus space • Office alternatives • Space standards • Leveraged resources • Improved work/life balance for • Talent attraction • Retention 33 .

CRE Planning Goals BUSINESS STRATEGIES CRE PLAN • Reduce occupancy costs Lower cost structure • Highest and best use analysis Improve operating margins Reduce Infrastructure • Economic development incentives • Alternative work place strategies Improve Operating Process • Sustainability strategies Minimize Infrastructure • Use of alliances • Assess non-core functions Reduce headcount • Outsource using alliance management 34 .

buy analysis Create operating flexibility • Use technology to Build flexible infrastructure replace/minimize space • Environmental risk • Promote virtual entities Higher market penetration • More customer face time through New market opportunities virtual office • Restructure distribution networks • Site selection to gain competitive Reduce headcount advantage. capability 35 .. cost. location..Align Goals and Strategies BUSINESS STRATEGIES CRE PLAN • Rigorous lease vs.

Sustainability NGO Monitoring Public Sector Activity Consumer Energy Material Behavior Emissions Waste Investor Peer Activism Water Effluent Enterprise Transportation Pressure Workforce Land-use Management Social Trends Biodiversity Compliance Influences Business Continuity Source: George Gosieski © 2007 36 .

CRE Success Factors • Know what you have. seize opportunities • Keep track of the situation • Communicate. communicate 37 . communicate.Continuous education and networking • Keep real estate strategy in mind – it provides goals and parameters • When you have the chance. know what you want • Stay up-to-date with the market activity .

CRE Communications CLIENT RELATIONSHIPS Communicating and building relationships with business units CRE ACTIONS Making recommendations to management and providing rationale for decisions 38 .

Technology Support • Benchmarking • Scenario cash flow analysis • Occupancy and cost measurement • Year-to-year comparisons • Location-to-location comparisons • Comparisons to market norms • Laddering leasehold maturities 39 .

Thank you for your time and attention What questions can we answer for you? Additional Corporate Real Estate Resource: www.corenetglobal.org 40 .