The Most Cost Effective Facilities in My Company’s Corporate Real Estate Portfolio are ________

How would you complete the sentence?

  • The office locations where we’ve maximized the space through an ideal balance of occupancy vs vacancy to support our current and projected headcount
  • The buildings that use alternative workplace design principles of hoteling and ‘hot desking’ making them 100% occupied, 100% of the time
  •  The facilities that are ranked highest along our financial performance benchmark

A good answer could be “all of the above” but, the best answer is, “the locations we no longer own/lease because we eliminated the need for them.”

The following are three featured practices and technologies you could implement to make better use of essential facilities and free up capacity in others that give you the option to consolidate multiple locations, dispose non-core assets through sales or exercise options not to renew on those facilities that are no longer needed.

Space Utilization

There are a couple of approaches to optimize space occupancy and vacancy utilized to the point where you have “swing space” for growth and the right amount of space for your current headcount. The first is the no tech, labor intensive ‘walk the floor’ technique with drawings in hand to determine who is sitting where and what spaces are available. Not a very effective approach but, you’d be amazed how many CRE professionals still use this practice…and you know who you are.

The second is to access space management systems (CAFM capabilities of ARCHIBUS, Centerstone, Planon, TRIRIGA, etc.) that automatically calculate occupancy/vacancy in real time based on moves/adds/changes and link CAD drawings with the staff listing database.

By adjusting your acceptable level of utilization you can determine which spaces you can consolidate into facilities that have more attractive rent rates or owned facilities that are more efficient to operate and either opt not to renew the lease or sell the surplus asset.

Hoteling/”Hot Desking”/Conference Room Booking

Another very effective way to achieve a higher rate of utilization and minimize the overall need for space is to employ tenants of alternative workplace strategies of hoteling or “hot desking” where employees are assigned temporary spaces to be used only when needed or having smaller cubes/offices and more meeting/conference space.

Again, technology can play a vital role to manage room reservations. One system by Agilquest is among the more sophisticated that interfaces the room/office inventory and a company’s email and calendar functions. By utilizing space on as needed basis a company can dramatically eliminate its overall need for space and reduce its portfolio footprint.

Financial Performance

The final approach highlighted in this post is to evaluate the overall financial performance of facilities within your portfolio and assess whether or not they meet, exceed and fall below acceptable occupancy cost benchmarks.

Once you aggregate your overall operational costs, leasing and ownership expenses you could utilize information systems to develop an optimum Cost/SF metrics and readily identify those facilities in your portfolio that could be subject to cost reduction, consolidation, or disposition based on a financial performance benchmark.

Dashboarding and reporting tools found within Integrated Workplace Management Systems (IWMS) systems, your own ERP or an integration of systems using cloud technologies can give you the ability to categorize the financial performance of facilities of deemed “essential” and remain in the portfolio or “non essential” and be removed.

These are just a few approaches you could take to justify the reduction in your overall occupancy costs of office, manufacturing, distribution/warehouse, and retail locations.

The most effective way is to identify leased or owned properties that can be eliminated entirely and become among the “most cost effective facilities in your portfolio.”

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3 Responses to The Most Cost Effective Facilities in My Company’s Corporate Real Estate Portfolio are ________

  1. Larry, you’ve posted a provocative question and discussion. Well done.

    To expand on it, the cost effectiveness of a particular building should include an analysis of how well that building supports the workforce it houses. After all, that is the main purpose for the infrastructure. One may then contend that a facility that is used 30 to 50% of the time may not qualify as very effective at all (cost or otherwise), given that people have clearly opted to work the majority of their time some other place.

    I have also come to realize that the word “utilization”, or utilization %, has many meanings. Two fundamental ones are the “programmed utilization” (the number of people assigned to desks divided by the number of desks available), and the “actual utilization” (the number of people who actually show up to a desk divided by the number of desks available. CAFM/IWMS systems can address programmed utilization, but do not address actual utilization. This is one area of value that AgilQuest brings to the table: measuring the actual utilization of a portfolio consistently, continuously, and systematically over time and integrating with the IWMS/CAFM systems for the programmed use of space – now a customer gets the whole picture: Budget (programmed utilization) vs. Actual (actual utilization). It’s just the kind of information a CFO loves to have!
    John Vivadelli, CEO
    http://www.agilquest.com – Make Your Workplace as Agile as your Workforce”

  2. Great question and tickler to all. The other way to evaluate it is to find out the value of the real estate and do a comparison of that to other locations. Are you in the most cost effective location? No matter how much space in square feet, are you paying the most appropriate rate per square foot? If you own the real estate, an analysis of that property should be made to insure the organization is maximizing the asset with your use and how you are using it. I have experienced first hand the unintentional, waste and excess that organizations are not even aware of until they consult a property management and leasing brokerage team to find out the “street value” of their home and is overhead. It can shocking and rather embarrassing. Hence, not too many CEO or CFO folks have the stomach to do it!! I think there are tons of opportunity out there in Corporate America for our industry to identify waste. Now is surely the time. If not, when?
    Thanks,
    Linda@ManagerLabs.com

  3. Lorraine Plass says:

    Cost per SF and SF per workforce are about efficiency. Effectiveness is about workspace that is well located, functional and is sized appropriately to attact and retain the best talent, and enable the workforce to be productive in either heads down or collaborative work. Many organizations do not know how to baseline that value in order to define a cost effective facility.

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