Corporate real estate (CRE) makes the difference within organizations that want to raise efficiency to the level of effectiveness.
We aspire to see the people representing CRE and workplace management inside the corporation playing a leadership role. That’s a big part of the CoreNet Global mission, to position CRE as a strategic asset and create value for the enterprise while preparing industry professionals to play a leadership role in the globally-networked enterprise.
Yes, we’ve still got a way to go before we can say we’re truly “at the table.” It turns out that “the table” isn’t just in the C-Suite. It’s also within the business units where CRE can step up and become a driver of the enterprise.
Approaching 2010 Vision
The fact is, more and more corporate real estate executives report directly to the C-Suite, along with higher-level roles supporting front-line business units. But it’s still a work in progress – some of us are more strategic than others, depending on our industry, organizational structure, company culture, or even the functions and disciplines involved. However, as more companies start to treat real estate as a strategic asset and not as a cost center, there’s plenty of evidence to support a strong case for CRE as a business driver.
Using the Gallup organization, we benchmarked against the globally networked enterprise and changing nature of work when we introduced Corporate Real Estate 2010 four years ago. Our Applied Research Center (ARC) has since validated that the “adoption rate” of the skills and practices that we need to thrive in the global enterprise is a healthy one.
Applied Validation
One ARC finding is particularly noteworthy. It’s the pervasiveness of the integrated portfolio or the linkage of all facilities around the world in a given corporation to its global business plan. There are two outcomes so far. One’s that location decisions are hardly ever made on a stand-alone basis any more; they’re linked to a company’s overall strategic plan. The second is that companies are increasingly performing portfolio-wide sale leasebacks, bringing CRE closer to the capital markets as a result.
Like workplace, the portfolio “fit” for CRE is a natural one.
Why are these worthwhile indicators? That’s because they directly create leadership opportunities for CRE within the corporate hierarchy. Why? Cost savings, risk reduction, flexibility, competitive advantage, productivity, shareholder value and profit are among the many benefits that CRE is today delivering through them. It’s evolution from efficiency to effectiveness.
The ARC has also shown that CRE is becoming a trusted advisor inside the company. Sure, many CRE departments are now “lean and mean,” but the fact they’re mostly smaller in size today isn’t limiting their effectiveness. ARC data underscore this. In the age of outsourcing, CRE apparently isn’t so much the order taker as it used to be. Now, it’s running strategic planning, client relations management with internal business units, and external alliance management with service providers.
Each is a higher-level function that is placing CRE at the C-Suite and business unit management table more regularly than ever before.
Each is also emblematic of the so-called “enterprise skill set” outlined in our seminal CoRE 2010 series. One of the strongest opportunities and challenges in our industry today is centered in this area, the need for more talent with general business skills that include but exceed real estate.
Opportunity X 7
Our tracking of trends and practices over the course of 2006 and 2007 reveals “Seven Leadership Opportunities for CRE” in no particular order of priority. Not only is there a strong compatibility or a ‘natural fit’ within each of these disciplines for CRE to be out in front, they also map back to the Corporate Real Estate 2010 set of critical competencies that any industry professional needs to master, in fact, to become a business driver . . . and a leader.
1. Sustainability. We predicted in 2004 that sustainability and corporate social responsibility would become part of the CRE focus by the year 2010, but not with the velocity that made it the year’s hottest industry issue in 2007. The opportunity for CRE to lead a growing mandate to reduce energy costs and emissions is shaping the response. But the CRE focus also extends beyond green buildings into sustainably integrated supply chain practices surrounding products and policies, as well as community reinvestment.
2. Workplace. Alternative workplace practices are going main stream. It means a wider number of companies are recognizing the value of flexible workplace practices. Space utilization has emerged as a leading solution to using less space and cutting the real estate spend. So has remote work. What used to be cutting-edge is now becoming more common. Flexibility improves productivity, and profit.
3. Decision support. Performance management, key performance indicators, metrics to plan and run the business, and many other ways of tracking or measuring effectiveness are now the fodder of C-Suite information used to make business decisions. The fact that CRE has always been good at collecting data, and now at sharing it across company business lines, makes it a natural leadership opportunity.
4. Client relations management. CRM is the tipping point at which CRE interfaces with the internal business units to provide decision support, develop strategic plans and support implementation. With outsourcing of so many formerly internal functions, CRM is one of the higher-stakes areas for CRE to add value.
5. Emerging markets. Globalization defines most multinational companies today, and emerging markets are integral to growth and profit. The direct link to location strategy makes it another sweet spot for CRE, which is often at the front line of emerging market entry and development in terms of infrastructure, supply chain, talent, and even mergers and acquisitions.
6. Mergers & acquisitions. Real estate remains one of the top three cost investments on the corporate operating statement (not so much the balance sheet any more because of leasing). So it’s no surprise that when an M&A is in play, the C-Suite often comes looking for CRE first to reduce costly duplication of portfolios and maximize on underutilized assets.
7. Risk management. The post-9/11 era thrust CRE into a risk management mode as enterprises quickly began to seek redundancy in key operating facilities and energy sources. CRE departments with established business continuity protocol can move to the forefront of the corporate chain of command as seen with an increasing number of examples stemming from crisis response.
You can look at each of these areas – and any number of other cases illustrating a healthy 2010 adoption rate - as fruit hanging on a tree. How low it’s hanging depends on your preparedness to seize the moment and manage to the literally boundless number of opportunities in front of CRE today in a management sense. Through our industry tracking over two years, it’s not the data we’re celebrating. It’s your drive.
Celebrate yourselves. You deserve all the applause for coming so far, so quickly! Leadership makes the difference. So can CRE. Carpe diem.
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