The dictionary defines ‘convergence’ as, “the process of coming together or the state of having come together toward a common point.”
We are surrounded by examples of convergence – in electronic media where all modes of communication and information are continually reforming to adapt to the enduring demands of technologies, “changing the way we create, consume, learn and interact with each other” – MP3 players, computers and cell phones have converged to become the ‘smart phone’ that is your lifeline to the world.
For CRE professionals there is a far more profound convergence underway bringing together:
- The intensifying focus real estate will receive from the C-Suite as a result of the FAS13 changes coming into effect in January, 2012 that will capitalize future rent obligations bringing millions/billions of dollars onto the balance sheet;
- The increasing need for organizations to reduce real estate related operating expenses thru lower occupancy costs; and,
- The desire among corporate leaders to achieve environmental sustainability through LEEDS certified design principles, effective energy management and building efficiency.
Each of these elements on their own offers unique challenges but, the combination of them will create a sense of urgency CRE departments will be forced to embrace or they will lose opportunities to contribute meaningful value to the organizations they support.
As your CRE department approaches the August budgeting process for the upcoming fiscal year, be sure to carve out some time for your staff to develop a strategy in response to the convergence occurring in your industry today.
Some steps you might consider to help you get started could be:
- Assign a member of your team to research the accounting standards being developed in the new FAS13 guidelines and anticipate the balance sheet impact of future rent obligations
- Make a comprehensive assessment of the information systems you’ll need to provide real time reporting and the actionable business intelligence you’ll use to support strategic decision making
- Develop a concise listing and source of the data of your top ten occupancy cost categories (rent, utilities, taxes, insurance, churn, maintenance/cleaning, TI, management fees, etc.), create/benchmark key performance indicators, set goals for cost reduction improvements and implement initiatives to achieve them
- Research available case studies on the impact of LEED certification has on building efficiency and make inquiries within your organization about how the CRE department can participate in overall corporate social responsibility initiatives
- Schedule a meeting with your organization’s CFO/Controller to layout your strategy to overcome the impact and leverage the benefits of the CRE convergence
In light of these current dynamics in play, what are you doing to position yourself and your department to lead your organization through the convergence occurring in today’s corporate real estate?