The ways corporates, in other words, companies with no core business in real estate, manage their real-estate activities,
According to a recent article by Drees & Sommer, in Germany, corporates are the biggest holder of real-estate properties and have the greatest demand for space. No wonder that Corporate Real Estate Management (CREM) has become a significant management discipline in recent years.
What has been done in the past few years? What are the corporates’ strategy and what are challenges they face? Two Drees & Sommer experts, Thomas Häusser and Christoph Zimmer, who deal with these kinds of topics and in their assumptions, treat CREM and Facility Management (FM) in the praxis of corporates as equal.
Thesis One: CREM Is Not yet Strategically Involved When It Comes to Disinvestments
For an active and value-oriented real estate management disinvestments are an excellent tool to reduce too rigid and unprofitable capital commitment. However, with a property quota of about 75% in Germany, it seems that in practice corporates might pay too little attention to disinvestments.
As a rule, real estate in industrial enterprises has a serving function. If disinvestments are made, they are usually driven out of the core business and the integration of real estate management usually takes place at a later stage.
To provide a better structure for transactions it is rather appropriate to use real estate management expertise and to set clear processes with tightly defined quality gates in the run-up to a disinvestment. Moreover, the real estate portfolio should be professionally managed and continuously optimised. When CREM is involved strategically, it could initiate a site consolidation through active portfolio adjustment, thus generating:
Thesis Two: Sustainability Is Often Just a Marketing Issue
Real estate has become a considerable factor in the corporate sustainability reports. Sustainability management is certainly an important marketing subject. However, it should not be left to the lip service: the marketing activities must instead be based on the results of a professional sustainability management. The ways corporates meet sustainability requirements vary strongly: from simply fulfilling the statutory regulations to establishing a well-formulated sustainability strategy.
For corporates, it can be reasonable to integrate the sustainability management into the portfolio management right from the start. This can be done by establishing the corresponding control variables, which enables reliable statements on the ecological status of the properties as well as carrying out a sustainability monitoring and benchmarking.
Thesis Three: Proactive Property Management Still Fails Due to Poor Transparency
Service level agreements and key performance indicators are the standard tools of each Facility Manager, both on the contractor and the customer side. Detailed cooperation models with bonus and malus regulations are targeted but are rarely implemented due to the insufficient data transparency. Controlling the real estate portfolio in the sense of an active portfolio management is the most challenging task. The key lies in leaving out the non-relevant information and the creation of a comprehensive data concept, from the object level to the portfolio level.
Facility management and portfolio/asset management have different demands on the criteria for a sustainable property management. Therefore, early warning indicators regarding portfolio abnormalities are required. Relevant questions in this context are the following: how can a long-term budget planning be adjusted based on the current assessment of the building? When do rental contracts expire? What are the bandwidths for the rents and operational costs in the market? And finally, how do the space requirements develop in the core business?
Thesis Four: IT and Digitisation in Real Estate Management Are Still in Their Infancy
There is much more to digitalisation than just the right CAFM solution. Data, software and process models should accompany the whole real estate cycle in the proper depth of data and align with the information needs of the individual stakeholders.
Also, in future, the sources of the various data will be found with diverse data suppliers. In the sense of “Single Source of
The short-term solution is the use of business intelligence solutions. These are methods and processes for the systematic analysis of data in electronic form. Under the motto “Real Estate Intelligence“, corporates could combine the information and control-relevant data in an overlapping system and make it accessible to
Thesis Five: Property Management Is Not Properly Set at Many Corporates
Corporates are often pragmatically oriented towards the necessities of the core business. Facility management is the top priority and an integral part of the real estate functions. Construction, lease management, or transaction management build further functions. An ideal-typical structuring along the property value chain could help to clarify the interfaces between the owner, service provider, and user.
Regardless of whether property management should be the entry point into commercial and thus value-oriented real estate management, facility management often lacks upstream value creation stages and clearly defined management structures. The focus is still on reducing the operational costs, while the uncovering of the asset potential through an active portfolio and asset management is left behind by many corporates. For more on these thesis’, click here.
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