How Corporate Real Estate Can Boost Your Company’s Share Price

“Second behind labor, facilities investments and operational costs represent more than 30% of corporate annual spending, offering a huge opportunity to reduce total costs through small percentage improvements.” (Source: Gartner 2009)

Ok, as the CRE professional, you’ve been given the “keys to the company car” by being tasked to manage your company’s real estate portfolio.

You want to be a hero, right? You want to move your company’s share price in the right direction and win wide acclaim from senior management, right? You may be able to do it by:

•  Centralizing the real estate and facility management function – Centralizing can produce savings of 25-50 cents/SF and lead to greater management efficiency…not to mention expanding your personal empire.
• Harnessing data across the enterprise of occupancy costs down to the invoice level – Through the evolving technologies of “cloud computing,” leveraging information held within your ERP, IWMS and other silo-ed systems, you can analyze portfolio financial performance and implement cost saving initiatives.
• Creating appealing work environments and alternative workplace solutions – Boosting employee retention (the cost of losing an employee is often 50% of their salary) by designing appealing space and having employees work remotely makes them happier and more productive.
• Shorten the cycle of integrating acquisitions – Quickly cataloging the newly combined portfolio allows you to dispose of non-core or redundant assets…”the most cost effective building in the portfolio is the one you don’t have because you no longer own it.”

No single initiative is going to have a measurable impact but as part of an overall strategy they can be “mind numbingly” positive. Consider this:

• Company A has a portfolio of 50,000,000 SF
• Their calculated occupancy costs are $125/SF (rent/taxes, fit-out, maintenance/energy, reception/mail room, and property management)
• They set a realistic goal to reduce costs by 5% ($6.25/SF)
• They implement a strategy that has a projected annual net savings of $312,500,000

So, if a realistic reduction of 5% can generate $312.5M in savings, do you think it would get the CEO’s or CFO’s attention? How much would this positively impact your company’s earnings per share?

The answers are “yes” and “a lot.” And, it just might get you a ‘nicer office’…oh, that’s right, a ‘bigger bonus’ because you now work from home.

What are your suggestions for ways corporate real estate can impact EPS?