Posts Tagged ‘real estate portfolio’
|International Best Practices for Lease Administration
Wednesday, December 7th, 2011
By Jeff Tosello, Principal
I get asked all the time from clients: what are the best practices for capturing our international real estate portfolio? Maybe I’m just a little confused or too cynical but my immediate response is usually that there aren’t any. Even if there are, the reality of what you can do is usually more of a factor than what somebody thinks you should do.
So let’s look at what you should and can do and see if we can carve out something real and actionable rather than a hypothetical model that just sits on the planning table indefinitely.
Similar to the original data and document gathering that you did when the domestic portfolio was compiled and centralized, you’ll have to first get an idea of the total listing of properties, preferably by country. This is sort of a chicken and egg scenario because often there is no target listing of what you should be getting a copy of. This entire process relies heavily on senior level sponsorship and good relations and communication with local country managers or the on the ground personnel.
Lease translations are next and that’s almost an entire article in itself as there are many different ways to go about this and a huge disparity in costs depending on how you go about it. You’ll want to plan this out carefully before even beginning to translate.
Once locations are identified and documents are translated, you’ll need to plan what data to capture and how and how often updates will be made. Note: Whenever the other shoe drops on the FASB/IASB ruling, international leases are going to need to be included.
CresaPartners Lease Administration compiled a comprehensive International Lease Administration Integration Checklist into our modular service menu. If you need help with this and are not sure what makes the most sense for your company, feel free to contact me. We can help you build best practices that work!
Tags: corporate real estate, international, real estate portfolio
Posted in Lease Administration | Comments Off
Seven Real Estate Cost Reduction Strategies
Wednesday, August 18th, 2010
By Jack Burns
There are many ways to consider cost savings, but there are seven in particular that you might want to focus on today. You can implement the following cost saving strategies yourself, but you will see quicker results if you utilize your service providers or other consultants.
1) Eliminate Surplus Space – Shadow & Swing Space
Even with reported vacancies through CoStar and other tracking services in the mid teens to low twenties in many areas, the true vacancy rates are often much higher. Typically a company will track a 5% – 10% vacancy to allow for churn. But today, many corporations may have 15% to 30% vacancy in their portfolio. This shadow space tends to be spread throughout a building or portfolio and is not easily assembled to dispose of through a restructure, sale, or lease/sublet. Through a planning exercise, study what it would take to unlock these spaces and dispose of them quickly. It may require spending capital to rework existing spaces to accommodate a consolidation, but many times the payoff will be outstanding.
2) Appeal Property Taxes
Most properties reached record values 4 years ago, and the real market values have now plummeted in many areas. If you own property today you must evaluate the real tax value. Make an effort to seek a reduced value to reduce the tax basis and even seek abatements on current tax bills.
3) Own Instead of Leasing (new FASB Regulations)
When making real estate decisions today you must consider the impacts of impending Financial Accounting Standards Board (FASB) changes. These changes may make the impact of renting the same as owning relative to how the property is placed on a company’s balance sheet. If ownership is a possibility, the payback will be beneficial with both a longer depreciation period and the ability to segregate cost for construction and investments.
4) Renegotiate Leases Early to Take Advantage of Low Rates (Blend & Extend)
This is old news and I am afraid that in many markets the window for this opportunity is closing quickly as vacancies are reduced and landlords become more confident in the market’s ability to recover. However, your advisor needs to test the options by completing a Rent Gap Analysis which will quickly assess if the trade off for additional length in term is worth the potential reduction in rent that could be achieved.
5) Implement Workspace Strategy for Increased Cost and Space Efficiency
Let’s face it: The best way to reduce costs is by owning or leasing lower cost real estate solutions. This is a great strategy, but many times may result in a need to locate in an area that may not be conducive to your business operations. However, using less real estate is the #1 opportunity to reduce costs. Workspaces can only get so small before they serve no functional purpose. However, a mobile worker strategy or a work from home policy will allow most companies to reduce space significantly. Typical work groups that can adapt mobile or work from home solutions include: sales, professional services, consulting, call centers, shared services, accounting, procurement, support HR functions, and other support functions. Development, R&D, engineering, management, and other similar functions many times do not work well in a mobile or work from home basis.
6) Real Estate Cost Allocation through Chargebacks
Within many corporations the true chargeback for use of space is not properly captured. This results in many business units not recognizing the cost of their use of facilities. If true costs are recognized and allocated to business units, P&L statements may allow these units to be more realistic about how they use space when they are hit with the chargeback for the space. This will require the implementation of a good CAFM system and utilization of internal or external resources to properly record who is occupying specific spaces and tracking those consistently.
7) Internal and External Benchmarking
How do you know you are doing well? Benchmark against outside firms and internally between business operations or divisions. Competitive advantages always drive good behavior. Good measures for benchmarking include total cost of facilities as a percentage of revenue or as a percentage of SG&A, total cost per employee (include contractors), total cost per seat, or cost per cubic foot in storage. Get involved with smaller focused groups to compare metrics, or look to larger organizations like CoreNet Global, IFMA, or REEB to compare your cost and space metrics against others. Make sure to compare yourself to more progressive industries and not just those in your area of business practice.
Do you agree with this list of seven cost reduction strategies? What other strategies would you add to the list?
Tags: corporate real estate, cost savings, real estate portfolio
Posted in Corporate Services | 1 Comment »
Towards Optimal Efficiency
Wednesday, January 6th, 2010
B
y Vik Bangia
For the past twenty years, the mantra in the real estate service provider world has been “cost savings.” Most service provider firms in this industry say they’re experts on delivering real estate solutions that result in bottom line savings. Whether the savings is related to occupancy expenses, energy, or operating expenses, their stated goal is to reduce real estate spending. However, with any line of thinking, what starts small often goes to extremes, and what has transpired in this industry has damaged both client corporate real estate (CRE) organizations and service providers alike.
In the zeal to cut costs, CRE organizations made several missteps over the years. In the 90s they over-outsourced their real estate departments and dramatically reduced headcount; often losing institutional knowledge along with the layoffs. Service providers, in a similarly zealous effort, made recommendations that reduced short-term spending but neglected long-term implications especially in the changing economic times and challenges such as the 1990s recession, turn of the century dot-com era, and our recent (and continuing) economic crisis. The result was a glut of office space, scope creep on outsourcing engagements, and a push by corporations to compress service provider fees. This has commoditized the real estate services industry and made it more difficult for corporations to get what they needed all along, sound advice.
Instead of looking back at what could have been done differently, I’d like the industry to look forward about how to think differently about what cost savings really means. And as usual, I don’t turn to the readily available commercial real estate publications. Instead, I go back to the basics and open up my college physics book.
In physics, the optimal performance of any system is a range in which the system performs best. In corporate real estate, for simplicity, if you define this range as a line, the optimal efficiency of a corporate real estate department is achieved by bringing the organization closer to the line (see graphic below). Working against optimal efficiency are certain internal and external factors. External factors, among others, may include: the economy, competition, politics, regulatory issues, and public perception. Internal factors, among others, may include: vacancy, demand for space, attrition, asset value, and the company’s own business strategy.
In traditional real estate brokerage, an assumption tends to be that every optimal transaction creates an optimal portfolio. But a true real estate advisory approach considers the real estate portfolio as a “system” in which the optimal efficiency of the whole is paramount, and individual decisions are made with the system efficiency goal in mind.
This system framework is created by recommending and implementing the right combination of outsourced support services, CRE organizational design, internal processes and workflow, best practices, communication, internal customer relationship management, and both internal and external benchmarking.
The system then looks to define the optimal framework for decisions by developing space standards, communication and reporting protocols, financial and business controls, and performance measures.
In 2010, consider your real estate portfolio as a system which should be managed with a system view to efficiency. If you’re thinking about a new real estate service provider relationship, be sure to ask questions of your service provider candidates that go beyond the traditional day-to-day or deal-by-deal approach. If you’re looking for questions to ask, write me at vbangia@cresapartners.com.
Tags: cost savings, optimal efficiency, real estate portfolio
Posted in National Accounts | 1 Comment »
