Transcript CoRE Fundamentals An Academic Lecture Series From CoreNet Global Corporate Real Estate (CRE): What’s It All About? What is Corporate Real Estate? A corporation's real estate,

CoRE
Fundamentals
An Academic Lecture
Series From CoreNet Global
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Corporate Real Estate (CRE): What’s It All About?
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What is Corporate Real Estate?
A corporation's real estate, comprised of its
land, buildings, and work environments, can be
a powerful resource of strategic value.
BALANCE SHEET ASSET
MARKET ASSET
ORGANIZATIONAL ASSET
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Learning Objectives
• Describe the structure of the real estate organization
• Identify key activities associated with corporate real estate
operations
• Describe the internal relationship between the corporation and
CRE management
• Identify the three stratifications of the CRE executive’s corporate
role in fulfilling his or her departmental objectives
• Characterize key aspects of the CRE executive’s role in fulfilling the
strategic objectives of the company as a whole
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The Broad Expanse of CRE
Energy
Manufacturing
Public Sector
Consulting
Healthcare
Agriculture
Retail
Transportation
Hospitality
Research
Finance
Technology
Telecommunications
Can You Think of
Others?
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The CRE Business World
CORPORATION
Business
Units
(BU)
Key Objectives
Business Plans
Metrics
Support
Functions
CRE Mission:
CRE Department Management
Portfolio Management
Strategic Performance Management
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CRE Management
Organization
Management
Portfolio Management
Performance
Management
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CRE Functional Management
Corporate Real Estate Activities
Transactions
Leases
Facilities
Management
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Organization
Management
Portfolio Management
Performance
Management
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Organization
Management
Department Management
Functional Management
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Department Management
CRE Organization and Staffing
Busines
s Units
(BU)
Head of CRE or
Head of
Strategy
Customer
Relations
Client
Relationship
Manager
Client
Relationship
Manager
Shareholders
Portfolio
Strategist
Outsourced Service
Liaison
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CRE Department Management
Project
Management
Financial
Management
Organization
& Staffing
Legal and
Contracting
Outsourcing
Management
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Project Management
• Benchmarking
• Scenario cash flow analysis
• Occupancy and cost measurement
• Year-to-year comparisons
• Location-to-location comparisons
• Comparisons to market norms
• Laddering leasehold maturities
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Financial Management
Increasingly, a company's real estate portfolio
is viewed as a strategic asset that can make
or break a company's anticipated financial
performance.
Perhaps most important, CRE has a
demonstrated impact upon the company's
Return on Investment and shareholder value.
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Outsourcing Management
Assemble and coordinate various CRE in-house and outsourced specialist resources
responsible for:
Strategy & Portfolio
Planning
Design & Construction
Workplace Strategy &
Planning
Operational Strategies
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•
•
•
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Establish project objectives and facilities requirements
Budget Development – capital and operating
Solutions Options and Site Selection Development
Decision Support and Approval Process
Project Delivery
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Legal and Contracting
Key components:
• Selection criteria
• Written, measurable
directives
• Leveraged agreements
• Performance reviews
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Location / Site Selection
• Local knowledge
• Space expectations and requirements
• Negotiating incentives and infrastructure
• Trends in the real estate markets
• Competitors/Neighbors
• Suppliers
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Location and Site Selection
Problem/Need/Assessment
Example: Expansion
Strategy, Goals, Objectives, Policies
Search, Selection
Geographical Target Areas
Site Specific Criteria
Commitment
Financial Decisions
Buy vs. Lease, Incentives
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Organization
Management
Portfolio Management
Performance
Management
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Portfolio
Management
Workplace Strategy
Outsourcing
Portfolio Optimization
Financial Performance
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Workplace Strategy
The profession of corporate real estate and workplace encompasses
business strategy for successful companies - that is,
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How and where people work,
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How it affects people, productivity, profit,
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And increasingly important - the planet.
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Sample Deliverable
Outsourcing
REAL ESTATE
HOLDINGS
Strategic
(In-House)
CRE Careers
CRE Jobs
Operational
(Outsourced)
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CRE & Service Providers
Internal
CRE Team
Level of Responsibility
Relationships with business
units (BU) and senior
management
ENTERPRISE STRATEGY
Works with Service
Provider to translate
corporate and BU strategy
to real estate and develop
processes for the delivery
of services
Oversight of service
provider and internal
delivery teams
STRATEGY TRANSLATION
TACTICAL EXECUTION
Real Estate
Service Provider
Strategy Support:
•Compliance
•Policy Governance
Strategy Support:
•Performance management
•Strategic Sourcing
•Portfolio optimization
•Lease renewals
•Disposition strategies
•Programming standards
•Capital budget development
•D&I financing alternatives
Tactical implementation:
•Transaction management
•Lease administration
•Project management
•Contract/Vendor
management
•Facilities management
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Portfolio Optimization and Balanced Scorecard
Customer
Financial
Employee Growth
and Development
Internal Business
Processes
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Portfolio Optimization
Growth Phase
CRE Function
Customer
Service
Success Measure
Time-to-Market
High
Growth
SF or M2 per Person
Alternative
Workplace
Cost per Person
Occupancy Cost
Reduction
% Occupancy Costto-Revenue
Downturn
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
Sourcing & Lease
Cost per SF or M2
Administration
Space
Management
Steady
State

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
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Portfolio Management Analysis
• Demand forecasting
• Utilization and occupancy metrics
• Sub-portfolio and cluster analysis
• Supply and gap analysis
• Market analysis
• Financial analysis
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Financial Performance
Occupancy cost indicators
Book values – to – market value relationships
Balance sheet impacts
Income statement impacts
Cash flow impacts
Investment ratios
Share value impacts
GAAP impacts
Carbon Footprint
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Organization
Management
Portfolio Management
Performance
Management
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Performance
Management
Enterprise Alignment
Balanced scorecard
Strategic CRE Planning
Sustainability
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Enterprise Alignment
Busines
s Units
(BU)
CORPORATION
Key Objectives
Business Plans
Metrics
Support
Functions
CRE Role
CRE Functions
Define
Requirements
Evaluate
Existing
Facilities
Integrate
Market
Opportunities
Measure
Performance
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Strategic Planning
Corporate
Direction
HR
Technology
CRE
Team
Business Unit/
Functional Unit Needs
CRE Trends
& Benchmarks
Government
Regulations/ Codes/
Environmental
Infrastructure
Options
Business
Competition
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CRE Planning
Financial
Property
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How much should we own
versus lease?
How much space do we
have?
Do we have enough space –
how much will we need in
the future?
Location
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Financial
Portfolio
What are our cost structures?
What is our optimal financial
structure?
Occupancy
Location
Space
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Are we in the right location?
What are the labor pools,
economic incentives,
transportation costs, access to
suppliers
Workspace
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Are we in the right type of
building?
What functionality, vacancies,
material handling
Constraints?
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Space and Occupancy
Strategic planning generates the right amount of
space at the right time… the rewards are:
• Reduced
• Occupancy costs
• Energy costs
• Improved space utilization
• Reduction in amount of surplus space
• Office alternatives
• Space standards
• Leveraged resources
• Improved work/life balance for
• Talent attraction
• Retention
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CRE Planning Goals
BUSINESS STRATEGIES
CRE PLAN
• Reduce occupancy costs
Lower cost structure
Improve operating margins
Reduce Infrastructure
• Highest and best use analysis
• Economic development incentives
• Alternative work place strategies
Improve Operating Process
Minimize Infrastructure
• Sustainability strategies
• Use of alliances
• Assess non-core functions
Reduce headcount
• Outsource using alliance
management
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Align Goals and Strategies
BUSINESS STRATEGIES
CRE PLAN
• Rigorous lease vs. buy analysis
Create operating flexibility
Build flexible infrastructure
• Use technology to
replace/minimize space
• Environmental risk
• Promote virtual entities
Higher market penetration
New market opportunities
• More customer face time through
virtual office
• Restructure distribution networks
Reduce headcount
• Site selection to gain competitive
advantage... location, cost,
capability
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Sustainability
NGO
Monitoring
Public Sector
Activity
Investor
Activism
Workforce
Trends
Energy
Emissions
Water
Effluent
Material
Waste
Enterprise
Land-use
Biodiversity
Consumer
Behavior
Transportation
Management
Compliance
Peer
Pressure
Social
Influences
Business
Continuity
Source: George Gosieski © 2007
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CRE Success Factors
• Know what you have, know what you want
• Stay up-to-date with the market activity - Continuous
education and networking
• Keep real estate strategy in mind – it provides goals and
parameters
• When you have the chance, seize opportunities
• Keep track of the situation
• Communicate, communicate, communicate
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CRE Communications
CLIENT RELATIONSHIPS
Communicating and building
relationships with
business units
CRE ACTIONS
Making recommendations to
management and providing
rationale for decisions
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Technology Support
• Benchmarking
• Scenario cash flow analysis
• Occupancy and cost measurement
• Year-to-year comparisons
• Location-to-location comparisons
• Comparisons to market norms
• Laddering leasehold maturities
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Thank you for your time and attention
What questions can we
answer for you?
Additional Corporate Real Estate Resource:
www.corenetglobal.org
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