Jun 07, 2013

Promoting Synergy in Your Corporate Real Estate Portfolio

By Don Catalano

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Corporate Real Estate

The old adage that no man is an island applies equally well to your corporate real estate portfolio. While many companies look at each of their locations individually, taking a holistic view of all of your locations across both geography and building type can help you to find synergy. Comprehensive analysis can save you money, reduce travel time and increase the efficiency with which each site operates.

 

Managing Multiple-Site Relationships

If your business leased 100 locations from one owner and 10 from another owner, would it make sense to consolidate those other 10 locations into properties owned by the first owner? Conversely, would you want to diversify your corporate real estate portfolio so that you are not overly dependent on one landlord? Looking at your locations holistically lets you see what your overall relationships are to your landlords. You can then make decisions like changing your internal systems to conform to that owner's systems for easier communication, negotiating for a discount on all of your spaces due to the breadth or your business relationship or, on the other hand, targeting some sites to be diversified into another owner's buildings.

Setting Up Hubs and Spokes

Logistics managers understand the importance of having centrally located depots and warehouses. For example, a distribution facility that is located to take advantage of the rail yard and Interstate freeways in Sacramento can easily serve Reno, San Francisco and California's Central Valley. Las Vegas, Los Angeles, San Diego, Portland and Salt Lake City are also all within a day's drive. It's also convenient to ports in Stockton, Oakland/San Francisco, Los Angeles/Long Beach and Portland.

You can apply the same logic to all of your corporate real estate portfolio. It's not just that regional warehouses serve retail stores and local distribution centers. It's also that offices serve warehouses and retail locations and large retail locations serve smaller ones. Applying the same hub-and-spoke logic and analysis to your locations can help your business to increase responsiveness, decrease travel time for its executives and reduce its overall shipping costs.


Comparing Operating and Occupancy Costs

Looking across your entire portfolio, you can make comparisons that help you to figure out which buildings are efficient and which are not. For example, according to data from the NOAA, Cleveland, OH and Hartford, CT both have the same average temperature of 25.7 degrees in January and roughly similar snowfalls of 57.6 and 49.6 inches, respectively. Given two similar sites, if your natural gas usage is significantly higher in Cleveland than in Hartford, it could indicate that your building is poorly insulated, has a malfunctioning mechanical system or that you are being overcharged by your landlord. The same applies in summertime for St. Louis and Washington, DC, both of which have similar rainfall levels and temperatures within one degree of each other.

You can do the same analysis with your corporate real estate occupancy costs. For instance, as of the second quarter of 2013, LoopNet data shows that the average asking rent for office space in Raleigh, NC is $17.09. In Denver, it's $16.94 -- less than a 1 percent difference. If you have similar offices in both markets and their rental rates aren't roughly the same, it could also be a sign that you're paying too much. 

Understanding the relationships between all of your sites helps you increase the value of your corporate real estate portfolio to your company's bottom line. Whether you're negotiating better pricing from your landlord or tracking down energy inefficiency, it all starts with looking at the the forest of the portfolio instead of the trees of the buildings.

 

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Don Catalano

Don Catalano

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