By Tyler Courtney
Vice President, Portfolio Solutions
I was recently asked what my primary objective would be through the first 90 days working with a potential client. My response was simple: ensure that real estate is an integral part of corporate strategy. While it seems easy enough, the main reason real estate is either underrepresented or ignored in strategic discussions is that it requires considerable collaboration. Too often, strategy is set prior to engagement of the corporate real estate department, but top companies are able to use the intersection of many corporate functions to drive the strategic vision. While CRE may not always have a seat at the strategic table, the seven strategies below provide a guide to allowing real estate to become a competitive advantage of your core business.
Build collaboration across functions
Real estate works best when all stakeholders collaborate. Rather than scrambling to figure out which group failed to perform a certain task, establish clear roles and responsibilities. Turn the challenge of real estate into a key driver of collaboration within the organization. Creating a strategic real estate committee can be a key part of this process, drawing from HR, IT, strategy, finance, operations and legal. Doing so will provide you with an expanded version of your core team that is responsible for long-term planning. This should allow you to go beyond current market conditions and apply your strategy seamlessly, no matter whether the market is up or down at the time.
Develop space standards for common facility types
You need to have an idea of your basic parameters (class, SF/person, location), and your desired lease duration requirements (3 year or 15 year, flexibility or control). By setting up corporate standards for each facility type, smart companies are able to ensure consistency throughout the portfolio and optimize spend by function. Not doing so can lead to interoffice confusion and a general lack of direction in the real estate selection process. This is where the aforementioned collaboration can be immensely helpful. Bring lots of knowledgeable voices into the discussion in order to determine what’s best for your company, and then revise the list as necessary when changes occur.
Streamline your approval process
It’s no secret that most markets around the globe – Atlanta included – have tilted in the landlord’s favor. If you want to get the best deal possible, do whatever you can to reduce layers of bureaucracy from the decision-making process. Many reactive companies are now forced to abandon leverage in favor of simply procuring space. Rather than losing out to nimble competition, streamline your processes to ensure you’re not losing out on your top-choice locations.
Go beyond lease expirations
Make sure your organization is tracking all critical dates (expansion options, termination/contraction options, renewal options), rather than just lease expirations. Evaluate your facilities prior to these critical dates in order to maximize leverage when it comes time to negotiate. Any options you’ve negotiated into your lease document can prove to be valuable bargaining chips down the road. A contraction option that you no longer need could have significant value to your landlord if they have plans to sell or refinance the property. Similarly, a termination option is a good time to ask your landlord for any necessary improvements and take a look at the market. Your lease administration or technology platform will play a key role in tracking and maximizing critical date-driven savings, so make sure you’re using a system that fits your needs.
Think holistically about savings
You should look to find a partner who goes beyond square footage and rental rates, and takes a deeper look at your company. You’ll want to identify tangential areas that may be overlooked in the organization but could drive savings – areas like alternative workplace strategies, efficient lighting retrofits and lease audits could be the difference between your performance and that of your competitors.
Develop a standard lease wish list
Lease standards vary from location to location, but a tenant’s underlying goals remain fairly constant. By working with legal counsel and your broker, savvy tenants are able to ensure the critical lease clauses are identified and given proper weighting in a lease negotiation. This won’t guarantee the lease ends up entirely in the tenant’s favor, but all critical issues will at least be addressed. Items that are frequently controversial should be discussed early on, typically in the proposal stage when leverage is greatest.
Track your progress
Over the long term, tracking and continuously improving will be the most important step in any process. It will help you know if what you’re doing is working and hopefully demonstrate concrete progress. First, establish a baseline by collecting historical data. Then, create goals and objectives to guide your day-to-day activities. Finally, develop key performance indicators to keep close watch on those metrics that matter to your underlying business. It’s important to ensure that consistent, quality data is and will remain available to support any KPIs. The best KPIs are those that can be tracked, benchmarked, and improved upon over the years, helping to optimize the portfolio.
The key to making real estate a competitive advantage is implementing systems that improve collaboration, process, and proactivity. The value of each department typically depends upon the stage at which they are engaged and the extent to which they collaborate. Rather than scrambling from problem to problem, it’s crucial to be deliberate in identifying the key drivers of value within the real estate organization. When executed properly, your organization’s real estate portfolio transforms from a reactionary unit to a key strategic advantage.