Corporate Real Estate – How can it support revenue growth?

As corporate boards continue to look for additional revenue-generating opportunities throughout their enterprise, the real estate function is coming under the microscope. The question is: How can you leverage additional revenue by cleverly managing your global real estate portfolio? A recent survey by Jones Lang LaSalle indicates that while 69% of corporate real estate executives claim that their procurement function is actively involved in choosing outsourced service providers, 58% [and that's a high percentage!] say they are concerned that lack of experience on the part of procurement officers entails risk. More specifically, the concern is that by focusing predominantly on price, the folks in procurement may be missing opportunities to increase value through strategic partnerships. A good point, and one that we are not surprised to hear about. Shared Services have been steadily expanding to include procurement over the past 3 to 5 years, and yet we rarely see examples of the procurement function recognized as a significant contributor to value add. The JLL report cites five key risk areas, as a result of procurement's cost bias [you can read about them here]. In truth, this is a call to the industry to wake up to the potential of procurement's influence on Operations, and the need to expand its skill-set to include strategic evaluations of its work. I am sure we'll get there. In the meantime, three of the risk factors I found particularly interesting concern, first, the calculation of "workplace productivity" – frequently evaluated in cost per square foot terms, which neglects the contribution to business performance it entails. Density, the report warns, is not the same as productivity. With 74% of companies expecting their real estate executives to drive workplace productivity, it may be time to educate your board. The second point I found interesting is the clear correlation between breaking down functional silos and achieving the reward of "true workplace transformation". Specifically, the report mentions that "formal collaborative organizational structures such as shared services" are likely to increase as workplace productivity increases in importance as a strategic focus. What this means is that we can expect real estate functions to shift into shared services models to support this kind of collaboration. The third point I wanted to make relates to the high growth markets that we're all getting very excited about. While portfolio growth is predicted to be strongest in emerging real estate markets, these also operate very differently from the more mature markets we are all familiar with. First, there's far less transparency, and second, you need to be more culturally sensitive to local opportunities. This is going to be an important issue, as nearly 20% of respondents warned that the greatest challenge facing corporate real estate executives lies in not being able to support business expansion in high-growth markets [read: emerging].

Corporate Real Estate – How can it support revenue growth?

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