Poor management: How old approaches to real estate hurt your company

Consider the traditional transactiondriven CRE professional. When given a mandate like “we need to secure 20,000 square feet of class B office space in Memphis, Tennessee,” the first thing a traditional CRE professional will do is to concentrate on executing the project as a single transaction. Traditionally, the mentality for most professionals in corporate real estate has been to focus primarily on acquisitions and deal making rather than on long-term portfolio management.

The lack of a longitudinal and strategic portfolio management orientation at most companies is understandable given the dearth of management tools and processes made available to CRE professionals in the past.

However, as companies start to realize the potential in leveraging their portfolio of assets, management of acquisition, utilization and disposal of assets has become a much more important competency. Especially in challenging economic periods when companies may need cash injections into the business, asset releases from corporate books can be a boon to the cash flow needs of the CFO.

A better planned, cost-controlled and coordinated property portfolio with a clear strategic plan needs to be in place to provide the business with cash flow and ensure the ongoing use of corporate real estate is not disrupted. In the absence of a centralized portfolio management orientation, lease management and associated service decisions are left to local/regional managers and/or lower-level staff. This often results in sub-optimal decisions that lead to higher ongoing operating costs. It is not uncommon that such companies lack visibility to the true costs of excess real estate or a view of their global real estate portfolio utilization.

Without global visibility, the corollary also holds—it is nearly impossible to visualize and quantify the potential savings opportunity from real estate portfolio optimization and centralization of related services. Visibility is only one aspect of optimizing related facilities services. Visibility allows organizations to quantify spend in various categories and begin to get a sense of the potential to capture economies of scale in certain spend areas.

But to truly capture maximum savings potential requires deep supply market intelligence, at both a national and local market scale, to achieve the optimal mix of the most competitive prices at the highest possible service levels.