Real estate, without a pinch of doubt, is the most critical asset for every organization, which represents not only the physical space where the work or the product is produced but it also is a representation of culture and the location where customers interact firsthand with the brand.
In return, the quality of corporate real estate impacts productivity largely on brand perception and employee morale. However, when you see the larger picture, it is surprising that most organizations are obstructed with way too much real estate. And most of the times, it is of the wrong quality to support modern work styles and brand perception.
Most organizations have more real estate than it needs and this excess creates a substantial drag on financial performance.
There are comparatively old work paradigms that are outdated and no longer make sense in most cases, as work has become more mobile, technology-enabled and collaborative.
Mobility: The amount of work in any organization or companies providing solutions & services is increasingly performed outside of the traditional office. It is safe to say that more than 50 percent of office workers work from alternative locations on a regular basis.
Collaboration: Right from the mid-sized firms out of Silicon Valley start-ups to more traditional organizations, each one of them are exploring new workspace designs in order to foster collaboration between employees resulting in fewer traditional offices, more open, reconfigurable workspaces.
Space efficiency: On top of the affecting factors, organizations are taking a leadership role and are leveraging new workspace models. These models include hoteling for potential mobile workforces and reconfigurable space. This is a trend where firms are doing more with less that contributes to the decrease in demand for space per worker.
Let us understand the difference between the Traditional model and Optimal model of corporate real estate
Traditional model:
- The traditional model of interacting with real-estate is more transaction-driven. It largely focuses on transaction-specific metrics like purchase price per square foot.
- The long-cycle times and waiting period are tolerated in this model.
- The facilities services specifications are majorly dictated by activity-based metrics which may not be up to the mark. This includes vacuum floor every other day using specified equipment and a specified number of passes versus service-level based agreements.
- More than required focus and attention is put on detailed hourly rates and fees.
Optimal model:
- This model prefers strategic planning and apt portfolio management approach.
- The optimal model portrays the total cost of ownership orientation; property costs plus ongoing operating cost, applying benchmarks and market intelligence.
- It focuses on the strategic plan, and also plan for quick execution.
- The focus is on managing overall space as the number one cost driver. It is after then it is determined about the optimal service portfolio based on per square foot service level requirements.
How to get the real-estate under control
In order to be broadly successful, organizations should develop a need to confront important questions about workplace and their facilities strategy. This has to start with a detailed review of the demand for space. Whether or not your organization needs the space at all should be the major point of discussion. Add to this defining or refining the corporate position on work style, planned workforce requirements, the role of mobility, and ultimately workplace density and configuration, and you will have your answers in front of you.
As a company, you should optimize your facilities management. This is a major part of the reason that organizations pay more for facilities services; management of services contracts is frequently left up to local office managers or even administrative staff.
Right from janitorial services to waste management to security and even lease management, everything is left of admin staff. As these contracts are often handled in local silos, there is no global visibility to services contracts. This leads to no visibility important items like leases and the terms they contain.
Other commonly found, but often ignored mistakes that arise from this approach include one-off deals, leases that do not support planned future corporate changes or activities, etc.
There are two major areas an enterprise should focus on:
i) Controlling demand-forecast
- Ensure proven benefits
- Leverage it across sites
- Carry out risk-based management
ii) Increasing enterprise capabilities
- Introduce open book costing
- Increase spend visibility
- Carry market intelligence application
Conclusion
The corporate real estate is critical, but a poorly managed asset most of the times. Companies also often overlook the major importance of enterprise IT solutions for real estate industry that provides in-depth, comprehensive insight into the world of data-driven real-estate.
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