Getting real estate back under control is a challenge not for the faint of heart, but the potential financial benefits, not to mention the impact on employee productivity, morale and brand perception, are substantial. Following are three major steps you can take to recapture control of your assets and relieve the real estate hangover.
Strategic re-alignment—commit to a comprehensive real estate management approach. To be successful, organizations need to confront important questions about workplace and facilities strategy. This starts with a comprehensive review of the demand for space. “Do we need the space at all?” is the first question for the organization to confront. This discussion should be coupled with defining or refining the corporate position on work style, planned workforce requirements, the role of mobility, and ultimately workplace density and configuration. Depending on the outcome of this strategic exercise, challenging traditional paradigms of demand for space can result in a new footprint that delivers enhanced collaboration and improved workspace environments, while also resulting in as much as a 40 percent reduction from typical space footprints. To challenge the demand, however, organizations need to build a central database that captures all leases and facility services contracts in order to bring real estate-related spend within the scope of professional management. This enables central visibility of the portfolio in scope and its cost control in conjunction with the business demand for use of space.
Once overall space demand is clearly defined, it is imperative to mandate and incentivize corporate real estate teams to partner hand-in-hand with procurement and operations. By encouraging CREs to take a more strategic, long-term view of portfolio planning and utilization, procurement teams can create better policies and strategic plans to support the sourcing of property service and management supply chains to leverage economies of scale between CRE teams and suppliers.
Force multiplier: De-fragging the real estate portfolio. Driving savings on facilities services contracts can yield savings of 10 to 20 percent on existing spend. But the real force multiplier is in reducing the total footprint and completely eliminating recurring cost streams. Recall that for every $100 million in real estate expenditures ongoing operating costs amount to $40 million annually. Not only do organizations net upfront cash benefits from disposing of assets, but they eliminate recurring cost streams as well. Consolidating multiple locations in one city or region or deploying policies to enable flexible working reduces square footage while also resulting in workforce benefits like increased morale, enhanced collaboration, better work-life balance and improved productivity.
Optimize facilities management. Part of the reason that organizations overpay for facilities services is that management of services contracts is frequently left up to local office managers or even administrative staff. This includes everything from janitorial services to waste management to security and even lease management. Because these contracts are often handled in local silos, there is no global visibility to services contracts, and often no visibility to important items like leases and the terms they contain. Common mistakes that result from this approach include one-off deals, leases that do not support planned future corporate changes or activities, etc. The first step to improve facilities management is to start with service specification. This means looking at specifications in terms of outcome-based metrics rather than prescribing exactly how a service should be performed. Focusing on outcomes and service levels allows for more supplier innovation and incorporation of supplier best practices rather than suppliers working inefficiently to fulfill service requirements.