As the first decade in the 21st century draws to a close the “CRE3 Forum” offers some insight on trends and changes the corporate real estate industry might anticipate in the coming decade.
While it is likely many of the cited dynamics will occur, some may not and others will emerge but, the most important thing to consider for you as a CRE professional is that change in our industry will happen and it’s your job and responsibility to find out how it will affect your organization. It is more likely there will be a convergence of trends creating complex issues that will impact your role to deliver efficient facilities in the right place at the right time at the right cost.
The companies of which you are employed are counting on you to be the subject matter expert on corporate real estate ready to anticipate and act on the inevitable changes associated with occupancy costs, sustainability and technology among others that are coming in the next few years.
Focus on Occupancy Cost Reduction to Achieve Corporate Profitability and Optimize Financial Performance – In the wake of the challenging economy over the last few years, the discipline developed out of necessity to lower operating expenses will lead companies to profitability faster as the economy inevitably recovers. In the coming years, the scrutiny of costs and cost reduction will motivate organizations to take a much closer look at the financial performance of its real estate holdings and lease commitments which will increase the importance of real estate and its ability to enhance the value of all corporate assets on the balance sheet.
Integrate Sustainability into Corporate Real Estate Strategy – The ‘green washing’ by many ‘do-gooding’ companies of the last decade will be replaced with environmental sustainability being integrated into every aspect of corporate operations…especially in the built environment. The results are in, sustainable facilities are not just the right thing to do, but green design principles, energy/waste reduction initiatives and sustainability practices have a significant impact on the business bottom line. As a majority of corporate CEOs embrace corporate social responsibility initiatives as part of their business strategy, sustainability will become the foundation in the development of a corporate real estate strategy.
Regulatory Compliance Brings Real Estate Front and Center – One of the most profound changes we will encounter in the coming years will be associated with the pending changes in lease accounting procedures which will capitalize future rent obligations. While early drafts called for the changes to come into effect in January, 2012 they are more likely not be utilized until 2014. However, the realization of many organizations on the extent of the total cost of leased facilities will elevate the importance of ‘all things real estate’ up to the C-suite. Trust us; it will be good for our industry. Bringing real estate front and center of senior management will create opportunities for all of us to get our justified ‘seat at the table’ to deliver more value to an asset class that will finally get its’ due by senior management. Though, an inability to answer some of the questions being asked by our superiors related to occupancy costs and rent obligations may be at some professional’s peril. It will provide a platform for more investment in resources and technologies that will give the management of leased and owned real estate the prominence it deserves.
Thirst for Information Will Enhance Need for Technology – The critical need to gather and disseminate actionable business intelligence will compel companies to utilize ‘cloud computing’ technologies which leverage real time and historical information throughout the enterprise. Silos of data will be integrated from point solutions, IWMS platforms and financial information held in the ERP. The key will be to automate repetitive processes, summarize the total cost of occupancy information and tie cost tables together into executive dashboards broadly distributed to those who can most impact the results. In addition to a growing need of real time reporting, there is an already emerging trend in a greater use of energy monitoring systems that will shape behavior to drive down the usage (and therefore expense) of electricity which accounts for one of a facility’s largest cost categories. Importing/exporting data through a myriad of wireless devices will continue to grow as the sophistication of remote data point collection increases. Data miners, disseminators and analysts will play an increasingly valuable role within organizations to quench the thirst with a fire hose amount of information available.
Recruit/Retain Employees with Alternative Workplace Strategies – With the massive layoffs and staff reductions of the last decade, companies who begin to hire are in a ‘buyers market.’ As the economy begins to surge forward it will be vital to retain key employees and recruit top talent. There will be a growing need to create office environments that appeal to employees who favor highly productive office spaces which cater to the individual in a team environment through an innovative use of alternative workplace strategies. This approach will not only attract key resources but, the efficiencies will contribute to achieving energy/waste reduction and sustainability initiatives.
Service Providers as Valued Trusted Business Advisors – As facilities and real estate departments continue reducing in size, CRE professionals will rely on consultants, service and technology providers to augment their available resources with a seamless delivery of workplace services. The vendor selection criteria will include the ability to partner and deliver the greatest value at the lowest cost and expand the use of sustainable work practices to address corporate social responsibility objectives. Outsourcing non-core functions will migrate to those providers who can take on the greatest number of occupancy cost categories, deliver/share measurable cost savings and generate a 3-5X return on investment.
Corporate Real Estate as a Career – As the industry evolves so too must the professionals who manage the portfolio or provide services. The CRE professional of the future will have a greater understanding of financing, reporting, regulatory compliance, technology and leveraging best practices. This may require additional education but, most assuredly will demand focused energy and time to access available industry thought leadership and apply the knowledge gained. Trade associations and research consortiums will play a more active role to provide distributed information that can be used by professionals to do their jobs more efficiently and contribute a higher level of value to the organizations they support.
Political Landscape Impact on CRE Industry – While talking politics may be taboo in some settings it is not a four letter word. The 2012 presidential campaign and the political shift to the left and then back to the right over the past few election cycles will impact tax policies, regulatory compliance and reporting. CRE professionals will need to liaise with their internal legislative affairs staff to keep abreast of existing and pending legislation which may affect the way they manage their portfolio, address lease v buy decisions and operate facilities.
The adage of “the more things change, the more they stay the same” no longer applies. It will be replaced with “the more things change in the CRE industry, the more we must change with them.” Meaning our industry must become innovators to manage leased and owned facilities more effectively, and with a greater sense of economically efficient sustainability. In doing so, we will do more for: the organizations we support; the personnel in the workplaces we create; and, the environment of which we are stewards.
We hope you will persevere to learn what others are doing and apply industry best practices. The one takeaway from this post is to encourage you to consider scheduling a facilitated, off-site session of your department along with members of related departments, key representatives of your vendors and service providers to have a ‘group think’ about business processes, trends and technologies. And, how you could ‘get on the same page’ to work together for the common good.
And, it is our hope that you have a personally and professionally prosperous new year and a great start to the next decade.
What changes and trends do you believe our industry can expect to encounter in the coming years? And, what steps are you prepared to take to address them?