“CRE Information System Tools are Cool but Data Integrity and Business Processes Rule”

April 28, 2010

Over the past few years many corporate CRE departments have delayed information system investments despite a critical need for analytical tools to develop strategies that benchmark portfolio/facility financial performance, reduce occupancy costs and achieve greater efficiencies.

This pent up demand will inevitably result in IT spending to address this need in the coming year. When you head into the market keep in mind a quote from eBiz Strategies’ Phil Wales, “the tools are cool, but the processes rule.”

Meaning, there are a lot of potential RE/FM point solutions, IWMS systems and ERP platforms that boast impressive value propositions. But, when you begin your evaluation (and you should), concentrate on improving your data integrity procedures and internal business processes BEFORE you decide on a technology/software solution by: 

  • Developing a multi-disciplined project team of professionals from CRE/facilities, finance/accounting, operations, outsourced FM providers, IT and procurement
  • Conducting work sessions to document critical CRE tasks (acquisition/disposition, lease administration, work orders, moves/adds/changes, space management of occupancy/vacancy, maintenance, and departmental dependencies)
  • Refining the workflows to gain greater efficiencies, data input adoption and improve internal customer satisfaction
  • Cataloging systems you’re currently using and determine ones that are working well while you begin to articulate/prioritize the functionality “must have” and “would like to have”
  • Talking to CRE industry leaders to determine their suggested approaches to the use of systems
  • Soliciting requests for information from 10-12 vendors – they may contribute industry best practices
  • Working with your procurement professionals to champion a formal process and narrow the list to no more than five firms and issue requests for proposals
  • Scheduling online demonstrations
  • Inviting 2-3 finalists to make formal presentations of how their system will address your new and improved processes
  • Selecting a finalist to lock down the project scope of work, price, timeline, escalation procedures, deliverables, GO LIVE date, etc.

A consultant can play an important role facilitating the overall process and an implementation partner is crucial to the project’s success but, be sure you dedicate an internal resource who can commit 50-75% of their time to move the process along.

Throughout the systems selection ‘journey’ keep in mind that, “the CRE tools that are available in the market possess some powerful features and broad functionality but, it’s collecting reliable data and improving the critical business processes that should rule” in what you ultimately deploy.

What have been your experiences about improving processes and sourcing CRE information solutions?


A Recession’s Impact on Future Corporate Real Estate Strategies

April 23, 2010

Like the great depression of the 1930s the current recession we’ve been in for the past couple of years has forced senior management to establish the discipline to reduce all operating expenses that, we believe, will fundamentally change the way companies will manage their corporate real estate in the future.

We’re now operating in an era where “having to do more with less” isn’t always a bad thing. The recent initiatives put in place intended to reduce operating expenses out of sheer necessity could have a very positive effect when the inevitable rebound occurs.

Initiatives that are highly likely to become permanent CRE strategies include:

  • Emergence of alternative workplace strategies and mobile workforces – reduces the need for space; contribute to energy efficiency by using less; eliminates commute times; enhances workforce job satisfaction; and recruits more tech-savvy employees.
  • Implementation of sustainable design practices – promotes use of innovative energy efficiency techniques; reduces emissions; and, contributes to corporate social responsibility objectives.
  • Reliance on occupancy cost reductions – senior management’s use of performance metrics analytic tools will establish new, lower benchmarks for costs/SF that will drive future leasing and ownership decisions and property/space management strategies.

For the most part, challenging economic times can take a devastating toll on the way companies view essential employees, maintain levels of quality services/products and manage their workplaces. But, for those companies with the foresight to create innovative solutions can help their organizations survive the toughest of times and achieve profitability which, will enable a faster recovery and contribute to longer-term success.

It’s hard not to view the economic downturn as a bad thing. But, it’s the CRE professional who can make the most out of a tough situation by effectively managing one of their organization’s largest operating expense and contribute to a brighter financial performance of their company’s real estate holdings.

What initiatives have you put in place out of necessity that you believe will remain as an integral part of your CRE strategy?

The Corporate Real Estate Information Gap in Effective Portfolio Management

April 15, 2010

You may have heard the phrase “mind the gap” referring to warning passengers about the space between the train and the platform on London’s Underground subway; the “gap” between a golfer’s ears as the most important distance in playing great golf; or the “generation gap” dividing parents and their children in relating to one another.

The most important “gap” in effectively managing corporate real estate portfolios is the “information gap” between a company’s financial systems and the many disparate point solutions managing leases, work orders, maintenance, space and energy.

Many of the Integrated Workplace Management Systems (IWMS) that have emerged over the last decade are helpful in capturing location information and automating repetitive workflows but do little with the financials found deep within the profit and loss, balance sheet and cash flow statements. The problem is compounded when a company has an international portfolio without standardization across countries and their Business Units to capture consistent data.

There is a fundamental “gap” in meeting senior management’s need to access a summary level source of actionable business intelligence ‘dashboards’ that measure the financial performance of their owned assets and leased facilities.

Help is on the way. There is an emerging technology to fill the gap utilizing “cloud computing” where organizations will aggregate information across the portfolio from existing, siloed systems and measure occupancy costs from their IWMS, work order, lease, space, energy management systems and data warehouses while accessing data from their financials about debt service, depreciation, operational income and tangentially related facility expenses.

For the first time, organizations can compile their real estate financial performance, conduct critical analyses and develop strategic initiatives to reduce costs without the need for the deployment of new information systems. The benefit to organizations will be:

  • Reliable, comprehensive information across the enterprise
  • Cost effective IT expense when compared to the value of the information gained
  • Ability to predict the future outlay of capital and reduce occupancy costs
  • Provide critical information to shareholders, investors and regulators about the financial performance of one third of their total operational costs

How are you filling your “CRE information gap”? What would be the ‘holy grail’ solution in collecting information for you and your organization? How would access to comprehensive financial performance information change the way you manage your company’s CRE holdings?

“Pulling the plug on facility energy usage through ‘demand response’ can have a staggering effect on reducing occupancy costs”

April 8, 2010

Facility energy usage accounts for approximately 30% of the total corporate real estate occupancy costs making it one of the biggest buckets to address when reducing costs.

The two primary ways to attack energy costs are operating efficiency to reduce energy usage and implementing a “demand response” plan. The emerging energy management and smart grid technologies that enable demand response strategies are transforming the way the corporate occupiers use and pay for energy.

Many energy management technologies can:

  • Save and even earn money through incentives, improving bottom line financial performance
  • Help communities by preventing blackouts and brownouts
  • Benefit all energy users by helping to stabilize energy prices
  • Reduce the need to build more carbon-emitting power plants
  • Contribute to a green energy future

Demand response is a quite different concept from energy efficiency alone. Services (lights, machines, air conditioning) are reduced according to a preplanned load prioritization scheme during the critical timeframes.

This innovative approach will allow CRE/facility executives to shift from an event based demand response towards a more 24/7 based demand response where the company will benefit from incentives for controlling load all the time.

One advantage of smart grid applications is time-based pricing. Customers who traditionally pay a fixed rate for kWh and kW/month can adjust their usage to take advantage of fluctuating prices.

The impact on pricing and costs are staggering. It is estimated that a 5% lowering of demand would result in a 50% price reduction during the peak hours.

Studies have found that even small shifts in peak demand would have a large effect on savings to CRE/facility organizations and avoided costs for additional peak capacity. A 5% drop in peak demand would yield substantial savings in generation, transmission, and distribution costs – enough to eliminate the need for installing and running some 625 infrequently used peaking power plants and associated power delivery infrastructure. This would yield an annual savings of $3 billion translating into a present value of $35 billion over the next two decades.

With the ability to use technology to assure smarter energy consumption that equates to occupancy cost savings, what’s not to love about demand response strategies?

How are you addressing a reduction in energy costs?

The “Royal Flush” in Outsourcing Non-Core Competencies: Integrated Facility Management Providers

April 1, 2010

As a CRE executive you have been ‘dealt a hand of cards’ by senior management to reduce occupancy costs and contribute to bottom line savings.

While the CRE department budget is being cut to fund initiatives, technology and additional staff forcing you to, ‘do much more with less without a card up your sleeve.’

The best way to ‘play your cards’ may be to out-source non-core competencies to integrated facility management firms to leverage their expertise and derive significant value. The benefits could be:

  • Collaborating/leveraging an advanced level of expertise, innovation and industry “best practices”
  • Creating a single point of contact and continuous service vs. project to project basis
  • Aligning critical occupancy cost category reduction strategies with service offerings
  • Accessing bundled services beyond traditional property/facility management
  • Benchmarking occupancy costs, space utilization and environmental sustainability among peers
  • Enhancing internal employee satisfaction by standardizing operations and processes
  • Utilizing vendor technologies
  • Applying performance-based, percentage of cost reduction fee arrangements

The Results?

Immediate savings of 10-15% – initial transfer to outsource vendor can access greater manpower

Increased focus – CRE management time used overseeing facilities can be dedicated to strategic initiatives

Increased flexibility – cut costs by eliminating fixed overheads and physical plant ownership

Whether you go for a ‘straight flush’ and out-source the traditional soft services (cleaning, waste management, landscaping, business support, reception, and mail room), hard services (preventive/reactive maintenance, non-stop control room and small repairs) or take advantage of evolving expertise in energy conservation (Reduce Energy Costs and Consumption/Waste) there are clear advantages.

But, when you can engage global IFM providers like Sodexo, Jones Lang LaSalle, JohnsonControls, CB Richard Ellis, UGL-Unicco and others, the payoff is a ‘royal flush’ by accessing true integrated service offerings such as:

  • Map Service Offerings to Occupancy Cost Categories
  • Benchmarking Facility/Portfolio Operating Cost Performance
  • Workplace, Building and Portfolio Efficiency
  • Energy Management/Procurement
  • Environmental Sustainability “best practices”
  • Green Building Design, LEED Certification and Construction PMO
  • Carbon Footprint Management
  • Space and Move Management
  • Work Order Processing/Call Center

With so many benefits and the opportunity to positively impact your organization’s financial performance, what’s with the ‘poker face’ and holding you back from going ‘all in’ with IFM providers and ‘winning the pot on the table’?

The best part is that it’s a ‘sure bet.’