Corporate Real Estate Moves from Back Office to Strategic Function

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More than a third of finance executives in a recent survey, conducted by CFO Research (a division of CFO Publishing LLC) and IBM and released this week at the CoreNet Global North American Summit in Washington, D.C., say that their companies are planning growth that will result in more facilities being built in North America.

In the survey, nearly half of the finance executives overall expected that a change in their company’s operations (business growth, expansions) will increase their corporate real estate expense over the next three years. And, 36 percent expect that the number of real estate assets they maintain in North America will increase.

Additionally, these finance executives say that the corporate real estate function is a key strategic component that links human resources, globalism, technology and the workplace. CoreNet Global is a premier professional association dedicated to corporate real estate executives.

Outside of the U.S. and Canada, respondents are targeting China and Central/South America (other than Mexico) over the next three years as areas of growth.

Corporate Real Estate Moves from Back Office to Strategic Function

“In the past, real estate may have been treated almost as an afterthought in a company’s business planning,” says Angela Cain, CEO of CoreNet Global. “Today, it’s likely that the CFOs who relegate real estate to the back office do so at their own peril,” according to the report.

“The notion of corporate real estate as a back office, or secondary operation, is not consistent with the way that modern corporations plan and execute their growth strategies,” says Cain. “As the study demonstrates, corporate real estate is the hub of many central corporate functions, and affects the overall organizational brand, human resources, finance and technology.”

More than half of finance executives place corporate real estate among the four largest components of corporate operating costs. And, they cite a number of real estate strategies they will employ to manage those costs, including improving the utilization of real estate assets, adapting the portfolio to changes in the size or type of workforce and adapting facilities to the the type of work (telecommuting, automation, globalization).

“A majority of companies have shifted their focus to programs that fuel corporate growth–a shift that nearly half of executives agree is best achieved by optimizing their corporate real estate portfolios,” says George Ahn, vice president of Smarter Infrastructure at IBM. “This opportunity for increased facility utilization serves to underscore the profound strategic and financial impacts that the corporate real estate management function can contribute to overall business performance.”

The report cites several areas that are central to the company’s growth strategy or business priorities and that demand the expertise and involvement of corporate real estate:

The workplace: How, when and where people work – empowered by technology, diversified by location – is central to corporate real estate, and also to the company’s bottom line.

Corporate real estate technology: The report found that “although CRE strategies are becoming more and more integrated into corporate strategies, a majority of respondents report that the technology they use to track and manage their real estate assets may not be keeping pace.”

New capabilities including space forecasting, advanced modeling and decision support will become central to increasing the value of corporate real estate.

Lease accounting changes: Nearly half of finance executives are prepared or already started their preparation, while “two-thirds believe that the proposed changes to lease accounting standards will make it more important than ever to optimize real estate portfolios.”

Right-sizing the portfolio: ”In balancing growth and cost management, finance executives say they will pursue a range of real estate strategies to better match facilities with both changing work practices and economic conditions.”

Source: www.corenetglobal.org.

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