Journal of Corporate Real Estate

Published by Emerald
Print ISSN: 1463-001X
Purpose This paper has the purpose of looking into the role that financing and abandonment options play in the value of Chinese real estate development projects. Design/methodology/approach The paper is based on library research, which is used to support and extend the authors' personal knowledge and experience. Findings The paper finds that financing and abandonment options create important value in the real estate projects of China, and produce enormous profits for the developers. Practical implications The paper indicates that the Chinese government should improve the legislative and regulatory frameworks to control excessive value produced by the financing and abandonment options, and restrict the ability of developers to amass social wealth by exploiting legal loopholes. Originality/value The paper examines the financing and abandonment options embedded in Chinese real estate development projects, measures the specific value of the two options based on a case study, and analyzes some factors affecting the value of the two options.
This article is the first of twice-annual discussions that will appear in Journal of Corporate Real Estate addressing corporate real estate-related decision-making and structures within the context of current capital market conditions.Reasons for the topic are, the author trusts, obvious:—improvements in the financial condition of US companies, coincident with dramatic increases in property investment value, work together to advance the notion that occupied real estate be considered as a strategic and affirmatively managed capital asset of the company—capital market liquidity now directed at American (and, increasingly, European) real estate has significantly changed the assumptions underlying financing choices and performance measures of corporate real estate—the fact that a majority of the world's investment-grade real property still rests in the hands of corporations has focused real estate capital market attention on this enormous and untraded segment of equity and debt opportunity.Examples of forward-thinking real estate financing vehicles and transactions are today more common in the USA than elsewhere, due to the long-running strength of the American economy, the size and liquidity of US capital players, and the performance of its national property markets. But this experience is migrating globally; inventive corporate real estate financing is either being carried to or duplicated in Canada and Europe, and foreshadows practice in Asia and South America.The intersection of institutional capital markets and corporate property holdings as a solution simultaneously to investment needs and to cost-effective occupancy goals has worldwide relevance.Why write twice a year? Because the ingredients of this subject are shifting. Every six months is just often enough to deal adequately with the pace of change in the business environment, real estate supply/demand and capital market conditions, and not so frequent as to bore reader (and author) with old news or theory restatements.This inaugural discussion lays a broad foundation: economic and financial drivers to the current corporate thinking on occupied real estate; general description of capital market players and vehicles; and the definition of terms common to this subject. Subsequent papers will more deeply explore real-world examples of the corporate/capital market mix. Unfortunately, the amount and constancy of information vis à vis external corporate real estate financings are still limited: there is no public reporting system or protocol; operating financial statements shield financing specifics; and direct capital market/corporate property transactions are still relatively infrequent. Nonetheless, I will (with help from my operatives) root out what data are available, and interpolate as necessary. Authors will also opine regarding trends and likely futures, and guest editors direct from corporate real estate and real estate financial markets will be invited to weigh in.At day's end, these writings are meant to promote discussion among the corporate real estate community as well as capital providers regarding what's out there, who's doing it, and the best future for corporate real estate financial decisions anywhere in the world.
The dynamics of the real estate industry, contrary to other customer oriented businesses, remains largely a product/supplier-driven marketplace. Businesses as real estate occupiers seek a procurement process that efficiently, and with a minimum of transaction costs, permits the identification, comparison and acquisition of not only usable space but also the 'operational infrastructure' (fixtures, furniture, equipment and services) which render the space productive.The Internet is driving a more perfect marketplace which smooths some of the frictional elements extant in today's real estate acquisition and outfitting process. A new 'infomediary' will enter to create and manage a more objective and effective marketplace via Internet technology, supported by human knowledge and experience. Providers of space and operational intrastructure will be aggregated, then matched, with users/buyers, giving time and cost benefits to both sides.
This paper discusses office design in the ?new economy?. Office buildings of companies seem to be dominated by colourful materials, luxurious facilities such as gyms or lounge areas and gimmicks such as jukeboxes and pool tables. Employees ?float? around in these offices wherever and whenever they want. Such work environments seem very attractive and productive. Still, the meaning and relevance of such ?fun offices? can be questioned. In this paper the authors try to explain where this informal and casual office style comes from, relating it to labour market developments and changes in organisational culture. Secondly, they discuss the merits of ?fun? office design. How does it affect people?s creativity, their ideas about work and the distinction between work and private life?
The 11th September terrorist attacks on America continue to affect the corporate real estate industry, and this paper is intended to address a number of those ongoing effects. It first discusses property insurance coverage in general and then proceeds to analyse whether damage from acts of terrorism is covered under pre-11th September and post-11th September property insurance polices. It also addresses the current status of proposed US Government intervention as a terrorism insurance backstop. It then describes the strategies which certain clients located within the areas directly affected by the terrorist attacks implemented in order to be able to gain immediate access to alternative space. Finally it examines selected lease clauses to which landlords and tenants should pay closer attention in light of the terrorist attacks, including operating expense provisions, force majeure provisions, waiver of subrogation provisions, use prohibitions and alteration provisions.
Surveys of corporate real estate executives in North America and elsewhere in the world indicate significant shifts in their thinking in the aftermath of the terrorist attacks on the World Trade Center and the Pentagon. Aside from the predictably much greater concern with planning for emergency escape from buildings, executives indicated that the greatest shifts in their thinking centred around issues of security of information technology and communication systems; greater use of teleconferencing and video-conferencing (reducing travel); and more new ways of working such as homeworking, satellite and neighbourhood work centres, and hotelling. Along with such changes in practice, executives also indicated the desire to create stronger communities within their organisations, even as they also expect further to disperse their activities across locations. There is a slight shift in preference away from downtown locations and a much higher overall concern with occupancy control over the spaces that they occupy. In North America especially, there is a shift away from occupancy of high-profile named buildings. Overall the surveys indicate that corporate real estate executives are moving ahead with distributed work-location strategies, increasing their reliance on virtual technologies for collaboration, and re-thinking the branding of their physical assets and the nature of community in their organisations. All of these changes further indicate the increasingly integrative role of corporate real estate within wider business strategy and a closer alignment of corporate real estate activities with human resources, organisational development and information technology.
This paper introduces section 404 of the Sarbanes-Oxley Act of 2002 to corporate real estate (CRE) executives and identifies some of the effects that this new legislation has on the management of CRE operations with respect to financial reporting controls. While section 404’s reach includes all financial reporting, this paper focuses on capital projects and describes one method for establishing necessary financial reporting controls through a Management by Projects approach.
The intent of this paper is to provide an overview of the principal provisions of the Terrorism Risk Insurance Act of 2002 (the ‘Act’),1 which became law in the USA on 26th November, 2002, and the practical effects which the Act has had on the state of terrorism insurance coverage as it had evolved between 11th September, 2001 and the passage of the Act. The Act voids some of the exclusions which had made their way into insurance policies (particularly post-9/11) relating to losses from certain ‘acts of terrorism’ (as defined by the Act) and requires insurers meeting certain criteria to ‘make available’ terrorism insurance coverage to their insureds. The Act also establishes a temporary federal reinsurance programme which provides a system of shared public and private compensation for insured losses resulting from certain certified acts of terrorism. From the standpoint of the average insured, however, the practical impact of the Act has been far less dramatic than may appear on the face of it. As The Department of the Treasury explained in its Final Rule,2 one of the main purposes of the Act was to address market disruptions that resulted in the aftermath of the September 11th terrorist attacks on the USA and to ensure the availability and affordability of property and casualty insurance for certain risks associated with acts of terrorism. In addition, the Act was designed to provide a transitional period for the private insurance markets to stabilise, thereby allowing insurance companies to resume pricing terrorism insurance coverage. The Act also sought to build capacity in the insurance industry to absorb any future losses, while preserving insurance regulation and consumer protections in the individual states.
The use of 501 c. 3 ‘conduit’ ownership and financing vehicles has emerged as an effective financing tool for the real estate needs of many tax-exempt healthcare and higher education institutions. ‘conduit’ vehicles offer low-cost, third-party ownership and financing solutions to other not-for-profit 501 c. 3 healthcare and higher education institutions that do not wish to use their own debt to finance real estate assets or that wish to preserve working capital and bond debt capacity for activities that more directly support their core mission. When applied to specific types of property assets and properly structured and documented, these transactions can achieve both off-balance sheet outcome under all applicable FASB accounting rules and ‘off-credit treatment’ from the rating agencies reviewing these transactions. However, these balance sheet and rating agency outcomes are highly dependent on a number of considerations tied to the facts and circumstances of each specific transaction. The purpose of this summary is to describe the features and benefits of conduit transactions, along with their unique accompanying financial, accounting and rating agency issues.
Purpose The purpose of this paper is to introduce the concept of timescape and examine its impact on corporate real estate strategy, i.e. the people, process, space and technology elements of strategy. Design/methodology/approach This paper utilises a qualitative approach to analyse secondary data in order to develop a conceptual framework of timescape for corporate real estate strategies. Findings Time is an integral part of strategic corporate real estate management. There are seven key elements that make up the timescape for corporate real estate strategies. Research limitations/implications This is a conceptual paper and future empirical research should be conducted to validate the propositions made in this paper. Practical implications The paper clearly identified the need to incorporate timescape into corporate real strategy formulation. The discussion on the impact of timescape on corporate real estate is useful in providing the impetus for managers who operate in a hyper‐competitive global business landscape to review their existing strategies. Originality/value This paper is high in originality as it pioneers the concept of timescape for application within corporate real estate management.
The concept of outsourcing is a recognised business planning strategy; senior corporate management and facilities services have been progressively outsourced in the UK for many years. However, transforming an outsourcing business plan into an effective and balanced operating contract remains challenging. Getting your outsourcing project properly positioned in the business, procuring the right integrated facilities contractor and then subsequently mobilising and managing the contract can be a difficult journey to navigate. This paper describes how to approach the principles and practicalities of outsourcing noncore services and how to make sure that some of the principal pitfalls along the road of the outsourcing project are avoided. It finally offers some ideas on how to get the most out of a project in the long term.
The pervasive impact of information technology, and the shift to a new economic paradigm has resulted in new ways of working. Successful organisations today are looking for work environments that unlock creativity, support collaboration, and ensure that the ideas of staff and collaborators are absorbed back into the intellectual capital of the organisation. Organisations have changed dramatically, but the physical settings have been slow to respond. The challenge for the real estate market and facilities professionals is to respond to a business model that supports both individual and collaborative working; provides for flexibility of tenure; and affords adaptability of both space use and function. A new real estate offer is emerging that provides both space, services and amenities, to support the tenants business over the life of a customer’s needs. Leading edge developers are now more concerned with creating a diversity of users, by providing space for a symbiotic clusering of firms in specific market sectors with their supporting supplier services and customers. Tenants to respond to continuous change are increasingly looking to reduce the amount of core space they own, with the majority of their portfolio consisting of flexible space on short-term leases to absorb the demands of individual projects, and outsourced space on a ‘just in time’ arrnagement for support functions. The paper concludes that the property industry today is changing from traders in real estate to an emerging role as value stream integrators and total service providers over the life of the tenant organisation.
This paper is concerned with International Accounting Standards (IAS) and their impact upon existing accounting practices for property within the UK. It also anticipates the wider international and European demands for IAS. There are two primary points to consider. First, the European Union (EU) has stated that it expects publicly listed companies quoted on the stock exchanges of EU member states to adopt International Accounting Standards by 2005. Others are encouraged to do so, with an implication that this will become mandatory at some future date. In earlier papers, the authors examined the recent changes within property accounting and the role played by property professionals within that process. This paper examines the requirements of international standards within the context of the British position as explained earlier. Differences are noted, the contrasting debates analysed and suggestions offered for corporate real estate professionals to consider. Secondly, unlike British Accounting Standards, IAS do not recognise property professionals or any professional organisation representing them, such as the International Valuation Standards Committee (IVSC), and none of their regulations are represented within the standards. This situation is examined, and commentary provided upon the repercussions and possible solutions.
This paper is concerned with accounting for leasehold property. While property professionals are familiar with commercial and technical aspects of leases, recent proposals offer serious implications beyond the notional historical reporting of an entity’s financial position. Current proposals issued by the ASB will markedly impact upon the financial position reported by businesses holding leasehold properties, with consequent effects upon their reported profitability and their ability to raise finance. This paper examines the current position, whereby leases are regarded as either a finance or an operating lease. It then examines the conceptual framework in which accountants view the existing lease reporting provisions, examining the unease the current provisions cause. Finally, it discusses the most recent proposals and offers a commentary upon responses to them. It concludes with a warning to the owners and users of leasehold property to be ready for change - or to make their voices known.
The paper proposes to outline the rules, regulations and generally accepted accounting principles that must be followed when recognising and valuing property in UK financial statements. Its aim is to give the professional surveyor or corporate real estate adviser a clear understanding of the underlying principles involved and also the rules and conventions that must be followed. A plethora of new regulations has led to a range of new practices that must be understood by those advising upon corporate property matters. Not least of the reasons are the direct effects property matters now have upon balance sheets and profit and loss accounts. The aim of this paper is to offer corporate real estate managers an overview of the accounting framework in which they must offer advice to businesses. Traditionally, non-property companies have tended to relegate property matters to advisers, who found themselves excluded from the key strategic decision-making processes of the company, despite the large amounts of capital frequently tied up in their premises. The rise of facilities management and new forms of serviced office structure began to increase awareness of the issue. However, recent changes to accounting standards by the Accounting Standards Board (ASB) will impact directly upon the balance sheet and profit and loss account. In short, property issues directly impinge upon a business?s ability to report profits. Even so, relatively few property-related views were put forward as part of the consultation process in the creation of these new standards. The area that has achieved most notice recently has been desire for accurate and consistent valuation and depreciation of assets - including the management and maintenance of properties, and the selection of the property valuer. The basic premise behind such changes was to make accounts more visible and to demand clear logic and rationality of sensible business decisions. The paper deals solely with firms operating as manufacturers or service providers, with no interest in their property except as a place to do business, and an asset held as part of that business. Neither investment properties nor leased properties are discussed here, for reasons of space.
Corporations with surplus real estate can often obtain substantially higher returns from the property if they maximise their leverage with public jurisdictions surrounding the property. Goodrich Corporation was able to work successfully with the Port of San Diego and the City of Chula Vista, California, to create a win-win-win public-private partnership. Goodrich ended up with a smaller, more efficient corporate facility, while the public entities realised the opportunity for substantially higher-valued re-use of a large tract of bayfront property. This paper reviews the key points to be aware of in conducting and structuring such a transaction, as well as the potential pitfalls.
Corporate mergers, acquisitions and major divisional consolidations put high-profile, fast track demands on corporate real estate and facilities groups to: (1) reformulate site and facilities portfolios to support new global business goals and objectives; (2) implement the programs and projects needed to restructure these portfolios; and (3) take a global approach to site and facilities utilisation and management for the new merged entity. This paper will set out a comprehensive framework and process for determining and evaluating merged or consolidated site and facility plans, deciding on optimal strategies, and scoping out the tasks needed to make it all happen.
An increasingly sophisticated body of theory and practice has emerged over the past 20 years about the impact that strategy plays in driving corporate business success, as well as the role that real estate plays in that strategy. In the context of three case studies, this paper will discuss the theory and application of the Strategy Alignment Model, which is a framework for directly linking real estate initiatives with core business strategy and for measuring results as organisational outcomes. Among a number of topics will be discussed the theoretical underpinnings of the model, as well as its application to such diverse yet interrelated issues as placing companies in locations that enhance recruitment and retention of the best people; building layouts that promote communication; communication; and workplace concepts, on and off site, that support new ways of working
This paper explores the findings emerging from the inaugural conference of a new network called the World Wide Workplace Web, an international forum for future real property leaders mainly within public sector real estate organisations. It focuses on the challenges of defining and demonstrating value added in the field of public sector corporate real estate. What is perceived as value added within the public sector CREOs? Is the meaning of added value evolving in the eyes of the customer? How are public sector CREOs partnering with customers to establish value, demonstrate their performance against customer expectations and continuously improve the way business is conducted in light of the feedback received? The paper is applicable to both public and private sectors, but refers frequently to a public sector context.
Shareholder value must remain central to the attention of corporate real estate officers (CREOs), even though senior executives have a number of competing agendas. One reason for this is that shareholder value is a vital performance indicator for any important ancillary service; another is that CREOs can help to improve shareholder’s wealth in a unique way. It is well known that occupancy costs directly affect the net earnings of the firm and thus the extent of any surplus it can generate over the annual charge for the use of capital. Occupancy costs also influence how large that charge for resources should be in the first place. Firms pay investors for the use of capital but, in efficient capital markets, the cost is only related to the risk that investors cannot remove by holding a basket of shares. This risk is the intrinsic variability of the cashflows derived from the activities of the firm. This variability is in turn influenced by the amount of company borrowing and by the ratio of fixed to variable costs. Even after allowing for the effect of gearing, the investor’s likely returns are determined by the amount of fixed costs required to generate sales revenues. This is important to CREOs because occupancy costs are a large proportion of most fixed costs. CREOs can therefore influence shareholder value both by the volume of all occupancy costs and by the proportion of fixed costs or leverage that their decisions incur. An indicator of the degree of real estate leverage (DREL) could therefore be a very valuable tool for CREOs. It would also give them more influence in key financial decisions and should raise more interest in real estate issues among shareholders and senior executives.
Based on a case study of the new Swiss Re headquarters in Munich, Germany, this paper outlines key design and planning principles integral to achieving an outstanding project result, both from the functional and the architectural point of view. A special focus is given to various simulation techniques which in very early planning stages helped to evaluate important planning options and which were instrumental to the project’s success. The new headquarters of Swiss Re Germany were inaugurated in winter 2002. The consultancy firm of the author was extensively involved in the project.
Workplace agility is emerging as the highest priority for the providers of workplace services and infrastructure. ‘Agility’ means continuously improving work and the infrastructure that enables it. An agile workplace is one that is constantly transforming, adjusting and responding to organisational learning. Agility requires a dynamic relationship between work and the workplace and the tools of work. In that relationship the workplace becomes an integral part of work itself - enabling work, shaping it and being shaped by it. This paper focuses on defining workplace agility and discusses the triggers that prompt agile workplace making. Strategies for creating agile workplaces are discussed and the idea of ‘rehearsing’ change is introduced. This paper is excerpted from ‘The Agile Workplace’, which introduces the business and technology forces that drive and enable agile work. The report includes chapters about change management, organisational responsibilities and performance metrics.
Flexibility has become a matter of survival for many organisations as we embark on the twenty-first century. In the real estate field, flexibility has historically meant some combination of different forms of procuring, planning, constructing and financing space. This paper argues that such approaches are necessary, but not sufficient. Senior managers need more robust adaptive strategies that exploit knowledge management tools to model, under conditions of uncertainty, the real estate and human resource implications of different workplace decisions. These facets of workplace strategies are the knowledge infrastructure that enables agile organisations to cope successfully with chronic uncertainty.
In their recent client engagement experience and benchmarking research, the authors have found that successful management models for corporate real estate (CRE) organisations begin with integrated, robust processes, and not well designed organisational charts. As corporate missions can quickly change focus from high growth to cost reduction, the key to successful integration of all CRE elements is engaging in a strategic planning process that not only aligns the facilities infrastructure with the core business, but also drives CRE organisational initiatives relative to processes, people and enabling systems. This paper attempts to capture a practical framework for CRE managers to evaluate changes to the core business and determine what implications these changes will have on both the CRE portfolio and organisation.
Purpose – The purpose of this paper is to present a model for consideration of real estate and facilities management (RE/FM) alignment to business needs and to validate the model based on questionnaire surveys carried out in a number of countries around the world. Design/methodology/approach – The model for RE/FM alignment is inspired by the work of the fathers of the Balanced Scorecard in their book called Alignment. The model includes a number of criteria for alignment between business needs, facility solutions, FM services and FM resources. Three multi-year questionnaire surveys were conducted using the same methodology: the surveys have been carried out in three rounds in different languages: English, Portuguese and Danish. The respondents were senior professionals in the area of FM and real estate/property, mostly working at strategic levels, and representing countries in Asia, Australia, Europe, North America, and South America. The results of the different surveys were combined and then analyzed, using both statistical analysis and tests to validate the results. Differences in the priorities of the alignment criteria in the different regions are described and analyzed. Findings – A main result of the surveys is that all of the alignment criteria were seen as relevant and useful in nearly all countries, but the accorded priorities to the different criteria varied significantly for some of the alignment variables in the different regions. The highest degree of agreement was on “capacity”, being the most important criteria for the alignment between supply and demand of facility solutions in relation to business needs. One of the main differences in agreement was between the importance of strategy versus cost in the alignment between “facility solutions” and “FM services”. Originality/value – Alignment of RE/FM to business needs is an essential management task and an important tool for RE/FM executives to create added value to their core business. However, there has so far only been limited research into such an alignment concept applicable to FM and an implementation model.
The Corporate Real Estate Portfolio Alliance performed extensive research into corporate real estate portfolio management and developed a number of new practices and analytical methods. A number of papers in this issue of the Journal of Corporate Real Estate resulted from the research. This paper provides an overview of the corporate real estate organisations and researchers involved, the research methodology and its findings.
The following article reports the results of a global benchmarking/trend survey conducted among 127 senior level real estate and facilities executives from North America and Europe. The results reveal a collective five-year vision for the workplace, exploring trends occurring in several key areas that impact space utilization and workplace design. Findings compare selected trends in North America with trends taking place in Europe. Areas examined include expected changes in the use of information technology, anticipated growth in new work styles such as telecommuting, collaboration and work-at-home, and the inevitable impact these will have on real estate and workplace design. The findings show that organizations expect work to become more collaborative (both ace-to-face and virtually), information technology ill enable growth in distributed working, and the workplace will be re-designed to support collaboration rather than individual work activity. The research is followed by an interview with Marilyn Simeone, Vice President of Corporate Services for Merrill Lynch, who describes how the company is leveraging these directions of change to create more efficient, innovative workplaces in North America that meet the changing needs of employees as well as the company.
What makes for effective corporate real estate and facilities management (CRE/FM) organisations? Beyond reporting structure and sourcing decisions, the CRE/FM organisation must consider the relationship of four strategic design issues: (1) Relevance to the enterprise, (2) Process and measurement, (3) Knowledge and information, and (4) Credibility and accountability. This paper provides an overview of these key issues, which must be considered in designing organisations responsible for corporate real estate and facilities management.
This paper analyses the inherent risks associated with corporate real estate (CRE). First, the author looks at corporate risk in general and at the context in which CRE decisions are made. Next, the types of risk generally inherent in CRE usage are examined, beginning with development risks and then grouping other risks into three categories: financial, physical and regulatory CRE risks. Possible risk management strategies are offered, to reduce the risks associated with CRE usage: due diligence, avoidance, insurance, hedging and diversification. Lastly, conclusions and recommendations for accounting for risk in corporate real estate management (CREM) are provided. The discussion of the risks inherent in CRE usage offers a starting point for future and more detailed discussions of the risk in CREM and provides a new perspective on the management of CRE assets.
For many non-property investment organisations real estate asset management is seen as a non-core activity and they seek to shift this responsibility onto some one else. In response to this increasing demand, corporate real estate service providers have emerged. Some have come from the traditional investment property management sector - others from elsewhere such as accounting firms. These service providers understandably vigorously promote the advantages of outsourcing, but there have also been reports of outsourced services not delivering the claimed benefits or other more serious problems with the practice. This paper addresses this situation by presenting presents the results of a comprehensive mail survey of outsourcing practices and experiences amongst a wide range of organisations in New Zealand holding a substantial property portfolio.
Purpose – This study examines whether or not holding a greater percentage of real assets significantly impacts the risk and risk-adjusted return of U.S. based multinational companies. Design/methodology/approach – A series of rolling Two Stage Least Squares (2SLS) regression models are used to analyse the relationships among corporate real assets, systematic risk (beta), and risk-adjusted return. Findings – The results of this study show that U.S. based multinational companies do have lower betas. However, U.S. based multinational companies’ cross border real asset holdings do not affect diversification and do not provide significantly higher risk-adjusted returns to stockholders. Originality/value – This study builds upon the prior work of Seiler, Chatrath and Webb to consider multinational firms. This had never been done previously.
UK outsourcing deals chosen for analysis
Sainsbury's cumulative abnormal equity returns
Shell Trading cumulative abnormal bond returns
Abbey National Equities-Market Model
Abbey National Bonds-Market Model
Structured sale and leasebacks and corporate property asset outsourcing are often claimed to have benefits that seem to be inconsistent with financial theory. Eight such UK deals are analysed to investigate the impact on corporate value. The results show that impacts are contingent - on the capital structure of the firm, on the use of the capital raised and on market attitudes towards management and the sector. Two apparently similar deals can have quite different outcomes: benefits to shareholders and bondholders cannot be simply assumed.
Corporate real estate (CRE) refers to the land and buildings owned by companies not primarily in the real estate business. Given a large concentration of corporate wealth in real estate and that management is committed to increasing shareholders’ wealth, this paper identifies and discusses three major issues regarding the authors’ understanding of strategic CRE analysis and management from the perspectives of end-users, corporate finance and capital markets. The paper reviews recent studies and evidence related to these questions and considers future research that promises to be challenging and fruitful.
Purpose The purpose of this paper is to outline the development of public sector real estate asset management in the UK from the 1980s to the present day. Design/methodology/approach The paper is a narrative based upon a chronology of a selection of the reports, studies and research of the subject by academics, audit bodies, consultants, government departments, eminent business people and economists. The principal findings of the referenced reports/research are drawn out and highlighted. It should be noted that the extensive reference schedule is arranged in date order and not in the usual alphabetic sequence. Findings The analysis shows cycles of asset management focus across the public sector over the 30 years of the narrative. The attention of government changes, often reflecting straitened economic times, from influencing local authority asset management to highlighting the better use of the assets used by its departments. A strategy to involve private sector‐generated solutions to improve efficiency and generate cash is currently under development. Research limitations/implications This is a narrative paper. In‐depth research of the referenced reports would produce valuable insights to inform future strategies. Originality/value Strategists should be aware that some asset management issues identified in the 1980s remain unsolved and are still evident today.
Purpose This research paper aims to review the development of corporate real estate asset management (CREAM) in New Zealand since 1992. Design/methodology/approach The first research into CREAM in New Zealand was carried out by Wei Kium Teoh. Lincoln University staff and post graduate students have subsequently undertaken several CREAM research projects involving surveys of organizations in New Zealand. These were spread over a 14 year time period and led to the opportunity to carry out a time series analysis of the development of CREAM practice in New Zealand. Findings Substantial improvement in some aspects of CREAM practice was observed, for example, in the qualifications of those responsible for CREAM and the development of strategic plans for those assets. However, other aspects of CREAM have remained remarkably stable or plateaued, for example the percentage of organizations with a separate real estate unit, reporting levels to management and the allocation of real estate costs. Research limitations/implications Both academic and industry attention in New Zealand can now be focused on those areas of CREAM development that appear to be lagging or otherwise warranting further research due to inconsistent results across the different studies. Originality/value CREAM research in a New Zealand context is limited. This paper collates and interprets much of that research with the added benefit of hindsight and trend analysis. The similarities in the findings with research carried out in other countries means international developments in CREAM are likely to be also applicable in a New Zealand context.
The paper identifies the need for a portfolio approach to the management of real estate assets, and sets out its key components as a ‘macro’ level process. Portfolio management is positioned within an overall model of the corporate real estate function, from which a definition is developed. The main generic components of real estate portfolio management are described, and the most significant findings from a survey of current practices among a group of corporate organisations are presented. The paper concludes that in overall terms a more robust approach to the portfolio management of real estate assets is required to maximise the portfolio’s functional and financial value to the business.
Mergers and acquisitions and consolidation activities contribute to the supply of technical facilities in the real estate market. The disposal of these special-purpose assets poses unique challenges, including financial risk, redeployment of highly trained workforces and specialised equipment, and unknown timeframes. This paper will set out to take a deeper look into the internal corporate rationalisation process and the challenges and issues inherent in the disposal of special purpose assets.
Corporate asset managers are increasingly confronted with the escalating costs, regulatory pressures and disclosure requirements associated with the ownership of contaminated real estate. Corporations historically have been reluctant to sell, or even engage upon site investigation for, their contaminated or potentially contaminated real estate assets. Traditional efforts to address these concerns raise complex legal issues and fail to define or limit liability. Efforts to remediate these properties have often led to projects with ever increasing costs and, in the end, more lingering liability than many corporate directors had been willing to accept. New strategies and management tools are available to assist corporate real estate managers with identifying which environmentally affected real estate assets may be ripe for sale. Similarly, environmental insurance is being considered with increasing frequency as a tool to mitigate risk and facilitate the sale of contaminated and potentially contaminated property. This paper explores, with concepts and examples, how corporate real estate managers can effectively implement these tools to unlock value from underutilised real estate assets.
From time to time, clients ask counsel and brokers about the pros and cons of using an assignment versus a sublease to effect a transfer of possession and a transfer of obligations with respect to leased premises. With about equal frequency, questions come up regarding the differences between assignments and subleases, and ‘whether those differences really make a difference’ after all is said and done. While assignments and subleases are both means to achieve substantially similar ends, they do yield different legal and business results. The purpose of this paper is to explain and discuss some of the similarities and some of the distinctions between assignments and subleases, both from a legal perspective and from business and practical perspectives, and to discuss some of the reasons that the different parties involved in such transactions may prefer, or wish to select one of these transaction forms over the other.
Purpose – The purpose of this paper is to investigate the corporate real estate (CRE) practices of 25 major corporations in Australia. It will study such areas as, what constitutes CRE, the performance measures used in CRE practice, CRE management units, planning horizons in CRE, owned and leased CRE, outsourcing policies for CRE, use of benchmarking measures to assess the performance of CRE, use of “gain share” practices in CRE operations, use of flexible CRE practices and the role of cost or profit centres in corporations. Design/methodology/approach – A data base was established using 25 companies (corporations) taken from the top 200 listed in the Australian Financial Review. Contact was made with the companies and interviews were carried out to obtain the relevant data. As well as the annual reports for the companies were analysed over the last five years to extract the necessary financial and additional property data. Findings – The conclusions indicate that there is a great disparity between corporations. This may indicate that certain classes/types of companies do not need the CRE assets that others do. It may also indicate, as previously supported by other research, that some companies fail to capitalize on the potential of their CRE assets to increase overall return and in the long run increase shareholder value. It also revealed that most companies are disposing of property in an attempt to enhance shareholder value. This is reflected in new and innovative ways of financing CRE and moving CRE off the balance sheet. Originality/value – This study represents the first attempt to extract data direct from company balance sheets and then carry out interviews to assess the role of CRE in company policy.
Purpose The purpose of this paper is to shed light on the perceptions by occupiers of green workplace environments. It examines how occupiers (both management and employees) perceive and evaluate the role of green workplace environments, and subsequently assesses the effectiveness of a green workplace environment. Design/methodology/approach The paper relies on a data set derived from a survey of 128 respondents who have occupied Green Building Council Australia's Green Star‐rated offices and buildings for more than 12 months. Findings The findings suggest that green workplace offers greater psychological benefits (taking pride of the workplace environment) to occupiers than physical improvements (health and productivity gains). Further, management perceived greater benefits of green workplace compared to employees. Research limitations/implications This paper summarises the findings of the first phase of a longitudinal study. It is limited at this stage by a relatively small data sample, given that there are only a limited number of Green Star‐rated buildings that have been in operation for more than 12 months at this stage of data collection. However, the survey has a 36 per cent response rate and thus provides reasonable scope for generalisation of the findings. Practical implications The results are useful to building owners and employers who need to be more aware of probable outcomes in terms of employee workplace satisfaction, and areas that may require particular attention in transitioning to green workplaces. The results are also useful to managers by highlighting areas of perceived deficiency in green workplaces and ensuring a more targeted effort in meeting the needs and expectations of employees. Originality/value The paper provides empirical findings of the strengths and weaknesses of a relatively new concept, i.e. the green workplace. The findings from the Australian experience serves as a good benchmark for future similar studies.
New business opportunities and challenges are changing the structure of office, industrial and retail organisations and altering the pattern and demand for space. These agents of change on organisations’ decisions for new space formed the basis for a questionnaire survey of 167 new space occupiers. An index of degree of importance constructed from the results can provide a new platform for corporate real estate planning and a strategic approach to commercial property market decisions.
The Global dispersed corporate real estate operations and decision making processess of 26 international companies in six industry segments are compared. High standing CRE organisations, which are indicated by fewer levels between the CRE executive and CEO, frequent CRE meetings with senior management, a broad span of control for facility and real estate operations, and an executive committee for real estate matters, share common characteristics. High standing CRE organisations receive more strategic planning information, have more authority and power, and more formal policies and standards. Use of relationship management with business units also corresponds with better sharing of planning information. Some of the challenges faced today by firms carry large international real estate portfolios include: cultural issues, financing concerns, lack of local expertise/market knowledge, corruption in locales, and a lack of a standard/streamlined process.
Corporate real estate management (CREM) is the most important minor matter in nonproperty companies. Therefore CREM must commit to and deliver significant financial results in order to improve core business competitiveness. Ultimate valid criteria for success are contributions to earnings per share (EPS) and free cash flow. Pragmatic ‘on-site’ solutions are required by business units within their planning horizons, thus speed is key to success. This Aventis Real Estate case study presents an example of how a ‘non-core activity’ has become an ‘other-core activity’ within a globally operating pharmaceutical company. This paper demonstrates how measurable results can be repetitively delivered with a lean team and optimised financial deployment.
Annual reports and operational data are key performance indicators for any business. However, performance measurement is critical in today’s real property domain and should become part of strategic planning and management processes for an organisation to be truly successful. In this paper the authors examine a number of case studies for the application of the Balanced Scorecard framework in establishing a balanced distribution of measures across four perspectives: financial; customer; internal business processes; and learning and growth. This balanced measurement of government organisations can help satisfy customers and shareholders - in the public sector, often one and the same.
The corporate real estate provider community is freely using the term business process outsourcing, or ‘BPO’ to differentiate its value propositions. Yet most buyers and sellers have yet to articulate clearly the concept as it pertains to corporate real estate - the value proposition, economic structure, focus and impediments to adoption. This paper defines BPO as it relates to corporate real estate and suggests conditions that must be in place for its adoption.
Software companies boast the latest in interactive technology to solve all the CRE director’s problems, but this is rarely the whole answer, part of the answer or even the answer at all. This paper explores and categorises the generic attributes of software systems and the many factors it is necessary to consider in their purchase and implementation. How systems can deal with performance measurement, management of the many tasks that need to be undertaken, togather with the complexities of project management, financial management and keeping track of outsourced activities are all important. Mere replication of existing management procedures does not generally provide the best benefits. Guidance is put forward which might assist in assessing the wider aspects of how information and knowledge are used. By reference to case study it is shown how such an approach can lead to a better, more practical end solution as well as avoiding many of the pitfalls of implementation. It is at that final hurdle of implementation that a high number of systems fail.
No matter the size or scope of a biotech laboratory project, neither landlords nor tenants should rely on traditional ‘form’ documents to address the many complex leasing issues unique to this industry. When negotiating and documenting a biotech lab lease, five clauses warrant particular attention. - Construction of tenant improvements: Build-outs of lab space can be highly specialised and elaborate. Tenants will require detailed involvement in design and construction of improvements while landlords may limit, to the extent possible, tenant improvements to those that are financeable, resuable and ‘generic’. - Security deposits: Greater security in the form of a deposit and letter of credit may be required to balance the potentially higher risks and longer terms of many biotech laboratory leases. - Hazardous materials: Most biotech laboratories will work with hazardous materials. Specially tailored lease provisions can help limit liability and mitigate the potential costs of removal, remediation and litigation. - Building services and utilities: Biotech users may require high levels of heating, ventilation and air conditioning (HVAC), plumbing, electrical and janitorial services. Lease provisions for services and utilities should be tailored to the unique intended use of biotech premises. - Assignment of sublease: Given the rapidly changing nature of the science, tenants may require added flexibility to sublease space or to assign the entire interest in the lease. Although these five clauses address only some of the many issues that landlords and tenants should consider in biotech lab leases, they have implications that echo throughout the lease.
Buildings are a substantial contributor towards CO2 levels, and design methods to make buildings much more energy efficient are evolving. In the UK, the Building Research Establishment Environmental Assessment Method (BREEAM) has been in operation for over ten years. The scheme is intended to produce a label that distinguishes sustainable developments in the marketplace. This paper uses an in-depth case study to examine the role of BREEAM in the design and marketing of a city centre office development. The influence of BREEAM in the design process and among the designers is seen as significant, but its influence in the property market is not explicit. The paper concludes that internal environmental conditions are increasingly important to occupiers, but evidence of sustainable development being led by the market is not observed in this case study.
Organisations cannot effectively implement advanced workplace strategies and investment projects without clearly communicated vision, prioritised objectives and appropriate performance metrics. With any business strategy and investment project, the objectives and metrics selected will combine both quantitative and qualitative elements and aim to achieve both internal and external impact. This multidimensionality of objectives indicates the use of a balanced scorecard system of measurement. This paper argues that a coherent evaluation and feedback system should be an integral part of any workplace change programme, and that time and expenditure should be budgeted for learning from prototyping or piloting, review, adaptation and communication of feedback. Without such a learning loop, real estate professionals will fail to convince business leaders of how changes in corporate workplaces contribute to business success.
Top-cited authors
Theo J M Van der Voordt
  • Delft University of Technology
Barry P. Haynes
  • Sheffield Hallam University
Rianne Appel-Meulenbroek
  • Eindhoven University of Technology
Iris De Been
  • TwynstraGudde
Ingrid Janssen
  • Tilburg University