The Journey of Corporate Real Estate. Navigating your way to strategic success in Europe

Transcription

1 The Journey of Corporate Real Estate Navigating your way to strategic success in Europe

2 Defining Success for Corporate Real Estate in Europe: Real estate is typically the second or third largest cost on a company s balance sheet, but often one of the most neglected line items. Your real estate can impact the success of your business, influence where you do business, who you employ and how productive your employees can be. In addition, corporate real estate challenges are now clearly global with increasing requirements for governance, transparency and compliance. Over two short papers we explore the different paths to optimising your Corporate real estate (CRE) function which can ultimately drive greater speed to market, enable productivity and enhance profitability. Key Success Factors for CRE in Europe: attributes, skills and behaviours for a high-performing CRE team How do I get on the right path? how to implement CRE transformation and optimal CRE organisational structures 2 The Journey of Corporate Real Estate

3 Tough questions to ask 1 Is your real estate delivering optimal value to your business? Does your CRE organisation align with and support your business strategy? 2 Does your CRE team have the appropriate access to talent, expertise, best practice and innovation? 3 Does your CRE leadership have the vision, entrepreneurial perspective, corporate awareness and business influencing skills required to have strategic impact and deliver value beyond tactical delivery? 3 The Journey of Corporate Real Estate

4 Increasing demands on CRE Traditionally CRE has been focused on cost and tactical demands to respond to business requirements for space. However this focus has shifted. Increasingly CRE is under the scrutiny of the C-suite executives, CEO, CFO, COO, CRO and real estate executives are tasked with many more strategic issues from this audience. (see figure 1 below) Aligning CRE to business drivers has become a significant objective and requirements to prove value, effectiveness and ensure a strategic contribution to the business have become the norm. F1: Increasing strategic demands being placed on CRE Enhancing productivity of the real estate portfolio 67% Transforming the quality of the workplace 64% Presenting scenarios and solutions to the business 62% Bringing more flexibility to the portfolio 53% Enabling remote or mobile working 51% Driving the sustainability agenda 52% Aligning CRE with business drivers and functional areas 53% Delivering a platform for growth in select markets 39% Attracting and retaining talent 41% Question: How are the demands of senior leadership/c-suite on the CRE team changing in the following areas? Base: 251 respondents (those who responded that demands are increasing) 4 The Journey of Corporate Real Estate

5 Structuring for Success Since the 2007/2008 global financial crisis put corporate real estate firmly into the limelight as one of the biggest costs and value drivers on the corporate balance sheet, the importance of staffing and managing the function effectively has amplified. The impact became too great, and the risks too great, that the CRE function could no longer be ignored. Peer group pressure is also driving change as more European corporations optimise their real estate function, and reap associated financial and productivity rewards. As CRE has experienced greater strategic engagement and business demands increase and diversify, an evolution in CRE skills has been required. But this change also necessitates an increase in respect, credibility and power of the CRE function. CRE executives are finding that it is extremely difficult to support and enable these business objectives unless they maintain some degree of control and central coordination across their real estate. However it is possible to identify some universal parameters of success, which will lead to a high-performing CRE function. CRE has gone from playing a supporting role to being an absolutely essential strategic driver of success. Every function is making demands, and we must deliver. Jaime Cabezas, Director of Corporate Real Estate, BBVA 5 The Journey of Corporate Real Estate

6 JLL 7 C Framework: Key success factors for CRE in Europe Connectivity CRE needs to interface seamlessly with IT, HR, Finance & Procurement Competency management CRE mist actively manage talent and all internal and external resources effectively Content and data management Data and analytics are crucial to drive better decisions and improved performance Credibility and Mandatee CRE must be empowered from the top - credibility is required to drive transformationn Client relationship management CRE needs to act as a business partner to internal clients, with clear communication vitall Clarity of purpose Responsibility of the central real estate function must be clearly defined and measured Change agent Leadership skills and vision are required to challenge and change the business 6 The Journey of Corporate Real Estate

7 1 Credibility and Mandate For CRE teams to deliver optimal value to the business they need to be empowered from the top. Without credibility and mandate, delivering improvement and change becomes infinitely more complex. A mandate doesn t have to mean centralised command and control. Even if the role of your CRE function is advisory, a strong link to overall corporate strategy needs to be evident to the wider business for the function to be credible. By mandate we mean that CRE must be able to set key strategic goals and objectives that align real estate to business drivers. In addition, the mandate must have relevance through enforcement. Regardless of the degree of centralisation, CRE must be empowered. A lack of C-suite commitment was highlighted as one of the major constraints hindering EMEA CRE Executives in JLL s recent Global CRE survey (figure 2) F2: Major constraints hindering CRE from enhancing its strategic position 50% Financial constraints 31% Data analytics 33% C-suite commitment 26% Fragmented team 29% Skills and knowledge Question: In your opinion what are the top two constraints that are hindering CRE from enhancing itself as a strategic value add to your organisation? Base: 251 respondents 7 The Journey of Corporate Real Estate

8 2 3 Clarity of purpose Clarity of purpose may sound obvious, but is frequently ill-defined and poorly communicated. Clear and measurable objectives for CRE well communicated to the wider business provide an important framework in which the function can operate. Change agent In order to deliver substantive savings, and greater value from real estate, traditional orthodoxies will need to be challenged. Presumptions around how much space is used, where this space is, how much it costs and how it is occupied will all need to be challenged. In order to drive and manage this change, CRE teams must become empowered change agents. Soft skills, leadership and vision are required and a need to challenge the business. F3: The key requirements of CRE teams Forward thinking/challenging status quo 25% Presenting real estate options and scenarios 25% Business acumen/understanding of broader business 14% Providing data and insights 13% Focused on innovation 4% Efficient stakeholder management outside CRE 8% Improving the internal reputation of CRE 4% Adding new skills (e.g. change management etc.) 3% Improving CRE team communication/relationship skills 3% Question: Rank the importance of the following CRE attributes to your organisation. Base: 251 respondents Note: In this table, responses include the top-ranked attribute only. Totals may not equal 100% due to rounding. 8 The Journey of Corporate Real Estate

9 4 Client relationship management Given the background of change, client relationship management is a further crucial success factor for a high-performing CRE function. CRE needs to act as a business partner to internal clients, managing a complex map of stakeholder relationships effectively. 5 Content and data management The advent of Big Data is also having a deep and profound impact on how CRE is managed. Data and analytics is highlighted by the industry as one of the biggest constraints and requirements facing CRE. Without full oversight of real estate, workplace and workforce data, the ability to identify opportunities, drive change and measure outcomes is severely constrained. Content and data management and more specifically portfolio data management is the essential foundation stone on which all strategy, savings and value creation can be built. 9 The Journey of Corporate Real Estate

10 6 Competency management In addition to knowledge assets, a high-performance real estate function must also manage the array of competencies at its disposal to maximise business impact. Competency management can include a wide range of factors including talent, vendors and service providers all of which can play a crucial role in achieving CRE success. Proactive management of talent, CRE skills mix and fully leveraging partners is an important accelerator of CRE performance. 7 Connectivity The final success factor for CRE in EMEA is connectivity. As well as managing internal clients and competencies, an effective interface with IT, HR, Finance and Procurement is essential. CRE success is increasingly being linked to broader workplace and worker productivity objectives, which require seamless interaction with other business services. Our recent research (figure 3) shows that many CRE teams are not yet attaching enough importance to this attribute. 10 The Journey of Corporate Real Estate

11 So who manages CRE these days? Traditionally CRE has been managed by real estate specialists, with a focus on the technical skills and attributes required to manage portfolios and assets. But the world is changing. The demands and requirements of the CRE leadership role are becoming much more complex and varied than has been the case in the past. More and more CRE leaders are coming from a non-real estate background and from inside the existing business often these individuals have established the credibility, the soft skills and the management and communication skills required to earn the trust of senior leadership. This should act as a warning sign to existing CRE leaders of the importance of a high-performing real estate function with the appropriate skills and talent base. What good is CRE if we are completely divorced from the rest of the business? It is only by seamless connection to other functions that we can trigger real change. Tanja Severin, Head of Transaction Management, Siemens Real Estate 11 The Journey of Corporate Real Estate

12 Procurement and CRE Procurement is also increasingly gaining an active role in CRE management, with 67% of EMEA CRE Executives in our global survey reporting that procurement is involved in CRE decision-making on either a permanent or ad hoc basis (Figure 4). However the relationship between procurement and CRE is still developing and requires a carefully balanced strategy. 59% of respondents in our survey reported limited knowledge of CRE within their procurement function. So there is a need for CRE to form a closer dialogue with procurement and the wider business of the negative business impact of flawed decisionmaking. The costs of failure can be high. The challenge is to find the balance between procurement and CRE. That means difficult decisions, but it s important we make them. Philippe Larpin Global Facilities Manager, Gemalto There are examples across international markets of negative business impacts where businesses have pushed through poorly considered real estate strategies. In France, a recent case saw an international insurance company that focused too heavily on cost and relocated their HQ, but were later forced to reverse their decision and back track due to lost clients and lost employees. CRE is a value-impacting business decision that can have direct and tangible impacts on attraction and retention, brand and business productivity. It is not just a purchasing decision. 12 The Journey of Corporate Real Estate

13 Harnessing Value and Managing Risk Increasingly CRE is being asked to work in the core business, not the support business. The transition from tactical, operational-focused portfolio management to a genuine strategic partner of the core business requires a step change in attributes, capabilities and approach. The impact and value of real estate is far greater than a line on the balance sheet. In the first report in this series we have assessed some of the key success factors and skills for a high-performing CRE team. A truly effective CRE team supports and facilitates growth, and attracts and retains talent. There is value within real estate which has a direct impact on performance and business productivity. This means ineffective CRE management is a significant potential business risk that needs to be managed accordingly. The risk of inaction is that the business falls behind and CRE teams are reduced to irrelevance. In our next paper on the journey of CRE we look at how to implement an optimal real estate strategy and high-performance CRE structures, along with some real examples of international corporations CRE journeys. 13 The Journey of Corporate Real Estate

14 F4: The role of procurement in CRE 2% Other 3% We hire external procurement consultants 31% Involvement on an ad hoc basis 5% No internal procurement team 41% Knowledge about CRE 23% No involvement of procurement 59% Limited knowledge of CRE 36% Involvement on a permanent basis Question: Is your internal procurement team actively involved in CRE? Base: 251 respondents 14 The Journey of Corporate Real Estate

15 Contacts Jeffrey Schuth Head of Solutions Development, EMEA +49 (0) Guillaume Savard Head of Consulting & Transaction Management France +33 (0) Ralf Heuser Head of Corporate Solutions Germany +49 (0) Tom Carroll Director EMEA & UK Corporate Research +44 (0) Copyright (c) JLL IP, INC 2014 No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.