Tuesday 20th June 2017

In this, part two of our look at the article by Drees & Sommer on German corporate real estate management, the remainder of the thesis’ will be discussed: 

For a look at theses one to five, click here.

Thesis Six: Innovative FM Approaches Still Fail Due to Political Resistance

Corporates are faced with the central question of whether they can allow innovative action to be taken within their real estate management. While there are usually no obstacles for technical innovations, for example using innovative maintenance concepts, and these are even encouraged by core business the organisational themes continue to reach their limits.

In many cases, it would be useful to change the viewpoint: instead of concentrating on outsourcing in the short term, the respective managers should proactively discuss how real estate management can develop on a long-term strategic path.

One should critically question the existing business model regarding the three dimensions – the performance model, the organisational model and the service provider model – and deal with internal stakeholders to find solutions for political resistance in a timely manner so that the further development of real estate management is not being threatened. 

Thesis Seven: Not Enough Attention on Part of Board Management Members Is Opposed to the Efficiency of Real Estate Management

Even if a company decides on higher value, smarter real estate management there is a good load of questions remaining. How it is, and how it should be, integrated into the Group’s structures varies in practice and depends on the overarching goal of property management. If the property is a significant balance sheet, it is usually allocated to the financial division. Though it seems not to be easy to establish clear organisational positioning within the company, in the past some customary to the market business models have evolved. However, these can only be realised if the necessary management attention is achieved, for example, by a “power and specialist promoter”.

There Exist Different Alternatives

Real estate management may clearly assume the ownership function with complete budget responsibility. Also, the integration into a global shared service centre may create the centralization of real estate management. Or the property management may be designed as a pure policy & guidance function, which supports the users in an advisory capacity and devises the strategic framework for real estate activities. 

Thesis Eight: Missing Contract Award Strategies at International Level Are the Result of Untapped Potentials

Real estate management as a secondary process is regularly put to the test when it comes to outsourcing potentials. In the past, supplier structures which also allow international cooperation models have been developed. However, international outsourcing and the allocation of real estate services to a few selective service providers are the exceptions rather than the rule.

It is above all the lack of transfer strategies that stands in the way of a successful acquisition of external service providers. It is important that a company should define clear performance profiles. For example, facility management services should be separated from asset management or property management services. Furthermore, it should be clear which portfolio is being assigned to which regions. Calls for tenders should have the necessary size in relation to the performance content and the quantity of services to obtain enough offers on the provider side. International calls for tenders should consider the possibilities and limitations of local markets. To successfully draw up international strategies, one needs to know the different models and their combinations, adapted to the maturity of the supplier markets.

Thesis Nine: Operational Risks Are Still Deliberately Accepted

To prevent the long-term depreciation of the real estate, more sustainable maintenance strategies are required. However, low-margin core business areas are the obstacles hampering the necessary investments. In the additional consequence, the state of the property contributes to the operational risks by the maintenance backlog.

Besides the lack of budget, the causes include the qualitative shortages. Missing or insufficient operator’s responsibility in relation to company’s operations, organisation, processes and delegation. When the operator’s responsibility is not under control, it is often the case that risks are directly exposed to management. That’s why companies should concern themselves with these issues well in advance. For more on these thesis’ click here

About Drees & Sommer

Drees & Sommer is an innovative partner for Consulting, Planning, Construction and Operation in public and private sectors. In addition to its headquarters in Stuttgart, Drees & Sommer has 41 national offices worldwide.

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