This article is written by Arush Mittal from Hidayatullah National Law University. This is an exhaustive article which deals with the corporate real estate strategies that are valuable to a business.
A lot of companies believe that corporate real estate strategies are a method to use cost-reduction strategies. Since the real estate accounts for the second or third largest expenditure in a business, cost-cutting strategies by using corporate real estate strategies seem like a satisfactory approach. By using this approach, there is increased productivity in the business that is valuable to the business. It is extremely important to consider the impacts of corporate real estate strategies on fulfilling the corporate goals instead of tracking the efficiency of the operation.
This article states a few corporate real estate strategies that should be used in a business to make it more valuable.
Corporate real estate strategies
In various organizations, corporate real estate management has been based on transactions for many years that are focused on reducing the costs in the short term. However, in reality, the strategies involved in corporate real estate management is much more than that.
The traditional approach of corporate real estate strategy involved short-term results and cost minimization, but in the modern era, it looks at a long-term strategy that adds value to the business. The changing business environments and outward pressures from the market have led the companies to indulge more in the non-core operations.
The returns that a business receives from the supporting act may be lesser than the returns obtained from the core activities of the business, but these supporting activities provide other forms of value to the business and help the business to grow. The corporate real estate strategy is such a supporting activity that is valuable to the business.
Due to the rapid shift in the various business needs and technological capabilities, the corporate real estate strategies are expected to deliver a better and a faster value than before. The corporate real estate strategy should focus on implementing strategies that would enhance the employee workplace experience and that are also cost-efficient in nature.
Few of the corporate real estate strategies that are valuable to the business are as follows:
Promoting sales and marketing
The corporate real estate can add great value by choosing those client-friendly locations for the business that would attract the most number of customers, investors, employees, other stakeholders to that organization for certain business activities or even recruitment. By promoting the sales and marketing of the corporate real estate, there would definitely be a value addition to the business. The design of the building may also support the business value and the company branding. This strategy is widely used by a lot of corporate real estate businesses.
Increasing the asset value
This corporate real estate strategy states that the properties in the business should be viewed as capital assets, and these assets should be optimized and managed to grow and thereby adding a significant financial contribution to the entire organization. The main objective of this strategy is to maximize the value of a property portfolio that is currently in use, select desirable locations, and also redeveloping obsolete properties. By increasing the asset value of the business would, in turn, add value to the business. This is the most common strategy that is used by corporate real estate businesses.
Delving into innovation
An approach that would lead to innovative thinking is the main goal. The emphasis on increasing innovation shall not be the aim of the corporate real estate business, but rather the aim should be on the facilities that would support and encourage innovative thinking. Space inhibitors play a major role in innovative thinking. These space inhibitors apply their innovative thinking and plan spaces by providing insights into the size, type, and workplace design that creates a unique and inspiring working atmosphere for the organization. These innovations are the key to the extravagant financial returns, in turn, adding value to the business.
Productivity and employee satisfaction
This strategy of the corporate real estate business aims at increasing the employee satisfaction by making decisions in relation to site selection, environmental standards, facility amenities, and workplace design. The business organizations caring for the employee and deciding in the workplace that would increase the productivity and satisfaction of the employee can definitely expect to increase the financial returns of the business by lower rates of absenteeism, innovation, efficiency, and greater production. This strategy is very useful for the corporate real estate as it takes care of the employee that has a direct addition to the value of the business.
The concept of flexibility can be seen at the location as well as the facility’s workspace in a corporate real estate. Business organizations have understood the advantage of flexibility in the workplace and hence they are reforming the work teams and allowing the employees for more flexible working hours. The strategy has created a new set of requirements for adaptability and flexibility in the office environment. The organizations should be ready for any change in the market. If such a change takes place, then the organization should be flexible enough to vacate or exit the market without any further delay. The flexibility at the workspace and workplace is the key to a successful corporate real estate business. The organizations should focus on a strategy that provides a flexible workspace that matches with the business’s duration needs. This would help in value addition to the business and also support the organization’s core strategy.
The most familiar strategy used in corporate real estate is reducing the costs. The reduction in cost has an immediate and the most direct impact on the financial activities and performance of an organization. An important activity that is related to the strategy of cost reduction is outsourcing.
Outsourcing provides maximum returns in the case of real estate services. Outsourcing is a business practice where a company hires the individual of another company to provide services, handle operations, or perform tasks that the employee of the previous company would do.
There are various other methods that a company can consider for reducing the costs of the business such as:
- Occupying green buildings
- Co-locating business units
- Choosing location by considering Government incentives
There can also be a reduction in costs by negotiating for lower rates in real estate utilities and services. By increasing the quality and the timing of the maintenance of facilities, the capital expenditure and expensive repairs can be easily avoided.
How to create a strategic plan in corporate real estate?
There are various ways to create a strategic plan in corporate real estate. Some of the ways to do so have been listed below:
Laying the groundwork
The heads of the corporate real estate teams should set and define a vision of the function they are going to perform. An insular view shall be avoided by engaging with the business partners early. Those activities should be considered that do not support the vision any longer so that the resources can be free to support new initiatives.
The team of the corporate real estate must collaborate with the stakeholders and particularly the Chief Financial Officer. This should be done in order to set out a particular timeline for the process of strategic planning and obtain the commitment to such a plan. This strategy would ensure the funding of corporate real estate initiatives. The teams of corporate real estate need to design the plans that are tracked and managed through the year as even the best-laid plans may be upended due to some short-term priorities.
Identifying the areas requiring improvement
The leaders of corporate real estate need to evaluate the current capabilities of the function. There is a need to understand the strengths and weaknesses of the corporate real estate team, that could be done through business partner feedback and self-assessment. The corporate real estate must not just focus on hitting the metrics but should also consider the impact on fulfilling the corporate goals. This is an important step as it helps the business to identify the areas where improvement is required.
Understanding business goals
The heads of the corporate real estate must understand the business goal by collaborating with the executives and senior managers to understand the goal of the long-term strategy. Then the external forces such as technological, regulatory, and economic factors could be assessed and determine how they would affect the real estate activities.
The corporate real estate teams must look at the overall objectives of the business and offer their assistance when the managers of the corporate functions are unable to understand the requirements of their real estate. It is very crucial to have a confident relationship with the customer manager. This leads to a constructive conversation around workspace forecasting and occupancy planning. Both of these methods play a critical role in facilitating business goals.
Achieving real estate objectives
The leaders of the corporate real estate must leverage their knowledge regarding the capability of the team to evolve the business goals into functional objectives. After the team understands how to fulfil the goals, they must identify the metrics to assess the risks involved in the plan, determine the resources that are required, and measure the progress. The end goal after achieving all the objectives is to prioritize a list of strategic initiatives that would also include the metrics.
Communicate the plan to stakeholders
The strategic plan of the group must be aligned and committed to the function of the corporate real estate and also be communicated to various stakeholder groups. There should be a dashboard that connects the workplace performance and portfolios, with the outcomes of the business. These dashboards must contain the metrics that would compel to target internal audiences and hence support the proposition value of the corporate real estate teams. After the senior leader gives his/her input, the strategic plan is delivered to the business-unit leader, then to the function’s leadership team, and then to all the staff members. It is very important to deliver a consistent message through the organization to make sure that the employees do not receive any kind of conflicting information.
Monitoring the progress
After the implementation of the plan, the employees of the organization have to measure the progress of the corporate real estate against the objectives that they had defined in the first place. There should be a periodical reassessment of the guideline relevance so make sure that the changes in the corporate real estate strategy, as well as the local needs, are reflected. The asset management task list must be re-evaluated to add or eliminate any task, as required. This step is extremely crucial as it reassures the business partner about anything that would typically hinder the execution of the whole strategy and are risk-averse.
This article has dealt with the corporate real estate strategies that are valuable to the business and has discussed six of them. Then this article further delved deeper into the question of creating a strategic plan for the corporate real estate and also elaborated about six important methods answering the raised question. While all the strategies that are mentioned above, add value to the business that is carried out by the corporate real estate, it should be kept in mind that the decision which is made regarding the management of the corporate real estate is linked directly to the strategic objectives of the business that is carried on across the different levels.
The staff that are present in the corporate real estate must possess the knowledge of the core business. These staff must also understand the best way to communicate the contribution made by the organization in a language comprehensible by the top decision-makers. The strategies involved in the corporate real estate must be implemented with extreme care as it directly affects the value addition of the business. Appealing strategies in corporate real estate leads to an efficient and valuable business.
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