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Real estate organizations face difficult times
An economic shutdown was forced into motion by the COVID-19 pandemic. As a result, organizations across the globe will be analyzing their real estate portfolio to determine the right mix of need versus excess. How much of an impact can an organization’s real estate have on the bottom line? Usually, companies note staffing and employee costs as their biggest expense, and real estate is their second-biggest expense. These are the two primary areas organizations first look to cut. Companies turn to their real estate staff to make these difficult decisions. What leases are coming up for renewal that we can terminate early? Can we combine regional offices to together gain synergies? These questions and others are tossed to the corporate real estate professionals to answer —and answer quickly.
A few of the hurdles these professionals may face include shrinking or static budgets, staff reductions, a network of disparate systems not fully integrated, and conflicting orders from upper management. What tools or solutions can these corporate real estate professionals turn to, to address the often-conflicting goals set for them?
This post suggests that corporate real estate organizations should leverage an enterprise-level solution that can effectively manage the full life cycle of corporate real estate. Rather than discuss the benefits of various enterprise-level solutions like computer-aided facilities management (CAFM) or integrated workplace management system(IWMS), this article will reference these solutions together concerning potential benefits.
What could enterprise technology solutions offer?
I am a senior lecturer in the Jindal School’s Operations Management Area and director of the MS in Management Science program. Prior to these roles, I spent over 20 years of my career and research focused on corporate real estate technologies.
In the past 10 years, I have witnessed technology improve the ability of those in the commercial real estate industry and in corporate real estate departments to make more informed decisions and to act on those decisions in a more controlled manner. Some would argue, however, that the advances in technology have occurred faster than many organizations have been able to assimilate them.
One such advance is an enterprise-level facilities life-cycle solution. In a nutshell, these solutions are a software platform that organizations can utilize to efficiently and effectively manage their real estate portfolio. This includes such functional areas as workspace optimization, building maintenance, sustainability tracking, financial management, and more. A more detailed look at these functions are noted below. There are software companies that have a branded enterprise solution in this space. However, most organizations that acknowledge having such a solution are more likely to have a collection of “best of breed” applications that are not fully integrated.
Why should it matter for a corporate real estate organization to have an enterprise view of its real estate portfolio? The answer is that this view gives the organization the ability to have transparency throughout the portfolio — from lease negotiations to asset disposition. No real estate decision should be made without first understanding what other actions are taking place in the portfolio, which, in turn, will impact the successful execution of that decision.
Maybe it is best to step back and discuss what functions to include in a proper enterprise facilities management solution. Presented here are a few top-level functions:
Lease Management:
The ability to track key data elements per lease and to properly track all lease negations via workflow management. Triggers can be set for each lease to ensure no key milestones or conditions are neglected. All new, modified or expired leases should naturally flow into space management.
Space Management:
This function gives real estate managers the ability to define space standards and track all space under lease or ownership. Graphic representation of any space can be leveraged through integration into computer-aided design (CAD) systems, geographic information systems (GIS) and stack-planning software that outlines, floor by floor, all the available space in a building and details occupancy. Before acquiring or disposing of any space, real estate managers should carefully analyze existing space to determine if more is necessary.
Strategic Planning:
One of the tremendous benefits of linking multiple transaction and space-management systems together is the ability to see the impact of historical decisions from end to end. This affords management the ability to make changes in strategic plans to improve outcomes based on past performance.
Facility Work Order Management:
As a byproduct of space management, the proper management of work orders by space or common area allows managers the ability to monitor the history of work performed. This information provides evidence and support for new equipment purchases or justifies relocation from a space. Management can automatically schedule work orders to perform routine emergency testing or warranty-driven equipment updates.
Collectively, companies can use these systems to:
- Create long-range and annual facility plans
- Generate financial forecasts
- Monitor asset acquisitions and disposals
- Manage proper workspace configurations
- Maintain all architectural and engineering plans
- Track maintenance performance, and
- Identify potential “green” opportunities to save costs while meeting new energy efficiency standards.
If, as I mentioned at the beginning, many organizations already have necessary systems in place to achieve an enterprise view of their portfolio, and yet they don’t have that view, what is holding them back or is missing for them to achieve this portfolio view?
Usually, it is the lack of an effective link or hook into each system, so that information from one system is connected to another source of information. To quickly remedy this situation, companies should huddle with their in-house IT teams or invest in expert assistance that will integrate their programs and create an optimal enterprise system. By allowing management the ability to see the complete view of real estate, organizations can better allocate resources during difficult operating conditions — like those we find ourselves in now!
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