Is strategic real estate planning, or a lack thereof, affecting your business?
The importance of effective Strategic Real Estate Planning in driving a company’s ability to maximize profitability and minimize risk is often woefully underestimated and overlooked by business leaders; often until it is too late.
A company’s real estate assets, liabilities and real estate decision making will, on varying scales, either enhance or compromise the overall success of the business. If managed effectively, the aforementioned factors can add tangible value at all levels. It is therefore important that those responsible for corporate real estate strategy and operations are experienced in doing so, and that they take full advantage of the benefits of professional advice from a qualified commercial real estate consultant.
“Organizations that continue to use 19th Century workplace designs and 20th Century workplace practices to do 21st Century work will not survive.”
Strategic real estate planning examines the business issues affecting a company’s real estate requirements and performance. This determines how real estate assets or liabilities can be best positioned to support its financial and operational objectives. And now so more than ever, the performance of its workforce. The ability to respond quickly and effectively to changes in operations, organizational structure, markets and business strategy is more important than ever in today’s competitive and disruptive business environment.
Hence, the quality of decision-making intelligence a company gains from strategic real estate planning will directly impact its ability to maximize value and adaptability and minimize risk. Corporate real estate risks should be identified, understood, and translated into business risks, to determine the business consequences of a decision. This can be done by analyzing which risks are consistent with expected business returns, and which risks should be avoided because the cons outweigh the pros.
Maximizing value creation is one of the most challenging issues facing senior management today. Strategic real estate planning can enable companies to effectively map corporate real estate decisions to business strategy. When conducted properly, the result is witnessed typically in improved financial, operational and workforce performance. It can also be useful for establishing specific criteria for transaction structure, capital requirements, financing, P&L and tax planning, and decision making and approvals.
An effective strategic real estate plan begins with a detailed review of the business’s financial and operational objectives and the key business issues facing the organization. The goal of this review is to consider the real estate from a business strategy perspective, and determine how it can be positioned to most effectively support strategic business objectives.
Below is a summary of some common issues companies need to consider when formulating an effective corporate real estate strategy:
- Corporate Strategy
- Workplace Strategy
- Short and long-term goals and objectives
- Operational Drivers
- Physical and geographical locations
- Demographic and economic audits
- Proximity to Workforce
- Qualitative and quantitative analysis
- Lease review
- Operating expense audits
- Forecasting revenues
- Space programming
- Economic and municipal incentives
- Early lease renewals and negotiations
- Acquisitions and dispositions
- Sale and leasebacks
- Staffing and space utilization
Through aligning corporate real estate strategy with financial, operating and strategic goals, companies can derive greater value from their real estate assets and obligations. The right balance of a sophisticated, broad reaching, and intelligent approach that enhances corporate performance can mean the difference between “cutting good real estate deals” and driving business success.