Omatsuli Tuoyo : Why We need to Digitize the Real Estate Industry 2018
Real estate is traditionally managed in local silos rather than with a comprehensive, bigpicture approach. Few firms have performed a truly strategic analysis of their real estate portfolio and most have little visibility to the amount of waste—and the substantial potential pay-off—from right-sizing their portfolio. Research shows that in a typical working day, corporate employees use an average of only 35 percent of office space (DEGW Time Utilization Study, 2010-2011).
This underutilization of space, combined with the overhang from the bloated real estate portfolio, highlight the first major opportunity: shedding unneeded real estate and yielding immediate cash flow benefits from the asset sales. In addition to the one-time cash benefits from the sales, the release of unneeded real estate delivers ongoing benefits by eliminating $40 of ongoing annual operating costs for every $100 of real estate.
The second opportunity is to optimize the operation of the remaining portfolio by centralizing a firm’s real estate management capabilities. Today, most firms manage real estate in a highly transactional, decentralized way, leaving local managers to manage properties individually with little visibility to the overall portfolio and service providers. Typical symptoms of fragmented, suboptimized real estate management include a lack of centralized cost control, unleveraged supplier capabilities, and poor or incomplete benchmarks to understand if costs ranging from security to maintenance to janitorial services are optimal.
The resulting real estate hangover, however, is correctable. The first step is analyzing and right-sizing the real estate portfolio to support corporate strategy and employee work styles; and second, taking a comprehensive, strategic approach to optimizing ongoing real estate services management by combining the economies of capabilities between suppliers and operations. Addressing these two major areas can help mitigate a major area of corporate waste and drive significant financial benefit.