For many companies, corporate real estate strategy is usually thought of in the same breath as cost-cutting strategy. Given that real estate is frequently the second or third largest cost for an organization, a simplistic view that looks only at reducing cost might seem like a good-enough approach. However, a more strategic view also takes real estate's revenue boosting potential into account.
Corporate Real Estate Strategy and Growth
Every dollar in revenue that your company earns involves some sort of corporate real estate, somewhere. In fact, 56 percent of senior finance executives, as polled by CFO Magazine, believe that their corporate real estate strategy is directly tied to supporting their company's growth. Furthermore, others look at increased corporate real estate expenditures as being a necessary response to a desire to grow. Ultimately, whether it's a cause or an effect, good corporate real estate strategy and increased profits go hand in hand.
The modern collaborative economy might be driven by technology and culture, but it is supported by real estate. Workers can't form teams without team-friendly spaces and they can't bring in a designer for an ad-hoc marketing planning session if the designer isn't in a nearby space. As such, the new fluidity of roles and relationships in workplaces requires a new corporate real estate strategy that delivers flexible spaces that are large enough to hold multiple disciplines in one place.
Strategic Cost Cutting
While growth is a crucial strategic factor in considering your company's real estate portfolio, cost cutting also a powerful tool that you can use to improve your company's bottom line. However, an effective cost cutting strategy doesn't start with analyzing P&Ls. Instead, cutting costs starts at the building level. Without effective management at each property or site that is committed to managing expenditures, companies miss many of the best opportunities to reduce ongoing occupancy expenses.
Cost cutting initiatives in corporate real estate work best when they are supported by data. Unfortunately, CFO Magazine reports that almost one-third (32 percent) of companies are still using desktop software -- like Excel -- to track their corporate real estate portfolios. These tools are not specifically designed for the task, usually not integrated into the company's larger enterprise software suites and prone to human error.
The solution to the problem starts with using specialized software or modules within ERP suites that are designed to handle corporate real estate data. For the software to work, though, the real estate, IT and financial management departments must all have interconnected systems and, on a human level, understand each others' businesses enough to be able to effectively communicate.
A More Holistic View
Just as real estate data should be managed holistically, the best corporate real estate strategy direction is to also take a broader view of the portfolio itself. As an example, consider the impact of shrinking spaces by allowing more remote work:
- Smaller, more flexible, spaces reduce management responsibilities for the real estate department.
- These spaces cost less, positively impacting the financial results calculated by the finance or accounting department.
- They allow workers to be more productive at client sites, potentially increasing customer satisfaction and sales.
- Workers prefer the ability to work from home or from a client site, potentially reducing turnover and work loads for the human resources departments.
Given that your company's portfolio affects almost every aspect of its operations, the best corporate real estate strategy is the one that involves the most stakeholders.
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