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Why A Real Estate Strategy Is Essential For Business Success

Michael McDermott, Consulting Manager, Strategic Consulting

RE Strat Business Success

The gap between corporate objectives and real estate strategy can result in at best, missed
savings opportunities and at worst, a real estate portfolio that limits company growth. The
solution for overcoming this gap is to change the mindset from “nice to have” to “essential
for business” by highlighting the substantial benefits:

  • Transform real estate from an inhibitor of change into an enabler of growth
  • Enable a quicker decision-making process that incorporates established company strategy in real estate decisions
  • Reduce real estate cost and prevent poor space utilization be evaluating ongoing business unit requests against the strategy
  • Expedite comprehensive planning of financial expenditures by location and department
  • Optimize the performance of each facility against stated company space utilization, business enablement or revenue goals
  • Improve talent attraction and retention through a strategy-led workplace that encourages employee wellness, enables collaboration and promotes company brand
  • Promote regular realignment of the real estate portfolio during contractual lease renewals and resizing opportunities
  • Improve flexibility in the real estate portfolio to meet the occasional bumps in the road
  • Enhance risk mitigation through thoughtful capital placement on justifiable matters

 

What Success Looks Like

Companies frequently use the What, Where, Why strategy components to enact change across the organization. In one recent example at a major health insurer in New York, company leadership used a real estate strategy as a strategic differentiator – that is, letting the real estate be a contributor to organizational success. Initially, the portfolio of more than 30 offices lacked the flexibility, attractiveness to talent and efficiency needed to realize corporate objectives.

Cushman & Wakefield developed a strategy starting with the What, which was to align the portfolio with existing long-term goals to better support work activities while realizing cost savings from efficiencies in increased space utilization. The Where focused on tactical, location-based suggestions including consolidation, relocation and placement of hard-to-fill occupations in growth markets. The solution was to identify functional redundancies, separate client-facing functions from support and reallocate critical operations to markets of high value. Lastly, Cushman & Wakefield provided the Why by quantifying the investment and identifying each recommendation’s opportunity to affect positive change.

The real estate strategy was aligned with healthcare industry changes and relied upon internal resources that would ensure the plan was implementable. The approved recommendations resulted in productivity improvements, better deployment of employees allowing for growth in customer-facing clinical space, and access to target labor markets. The client’s long-term benefit is expected to yield increased market share from maximizing accessibility to potential patients, thereby increasing overall revenue goals.

In another example, a major utility faced the challenge of providing consistent, reliable electric service to markets with varying levels of demand. Being part of a highly-regulated sector, the company also faced aging infrastructure that was unable to provide critical service to its customers every day. Company leadership recognized that they needed a strategy to realign their portfolio to provide better customer service and attract the best up-and-coming talent to their industry.

Cushman & Wakefield helped the company formulate how to think long term about their real estate portfolio of almost 500 properties (more than 5.1 million square feet) ranging from office parks to unimproved land. A strategy was developed in the form of a playbook that laid the groundwork for how capital should be allocated over 10 years to achieve operational performance, employee experience and talent attraction goals. At the core of the playbook is the What built on the foundational questions of “What does the best possible workplace look like for our employees?” and “Where and how many workplaces should there be?” Research included leadership interviews, an employee survey and a space utilization study. The collected data was then compared against benchmarks and established industry best practices from leading peer companies.

The Where question asked where to operate certain business groups and where to locate both critical and service center facilities. C&W carefully considered which business groups could and could not be mixed together and conducted network optimization modeling to analyze current day frequency and quantity of service tickets to test service center locations for the optimal customer support. The playbook ends with a discussion on economic logic – the Why – to support the recommendations. The answer for the company was an updated footprint that reduced wasted dollars on inefficient or redundant locations, improved the employee experience, and attracted and retained the best talent in the industry. These three major achievements also had a trickle-down effect contributing to the goal of providing great customer service.

The above is an excerpt from our So You Think You Have A Strategy? guide. To gain additional commercial real estate strategy insights and see the entire case study download the full report here.

McDermott_Mike-150x150Michael McDermott is a Consulting Manager, Strategic Consulting for Cushman & Wakefield.

 

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