What is the future of corporate real estate?
Innovation to Support CREs' Challenge
What We Did
We conducted two surveys—one in 2010 and a follow-up in 2012—among corporate real estate (CRE) executives at leading financial services firms to better understand how they manage corporate real estate at the portfolio level. Our first survey explored how CRE portfolios are structured, what growth and consolidation CRE executives anticipate across geographies, the measures used to track portfolio performance, and sustainable practices at the portfolio-wide level. The second survey expanded upon these findings to explore current trends and issues faced by portfolio managers today, including an exploration of measures and metrics most important for making informed real estate decisions, as well as which alternative workplace strategies are most likely to gain traction within the financial services sector. Clients participating in both studies worked for companies that represent millions of square feet of global real estate; were senior executives in their organizations—director level and above (including SVP, VP, managing director); and the majority were responsible for both real estate and workplace decisions.
The financial services industry has always been volatile and dynamic in order to respond quickly to changing market conditions, so there is a long history of change within financial organizations. Recently, however, the speed of change appears to be accelerating, and, as a result, our real estate clients are being asked to respond to demands that are increasingly complex and challenging. As a result, CRE executives are seeking more direct involvement in business decisions so they can proactively forecast and manage the real estate portfolio in ways that are beneficial to the enterprise. Speed of delivery, cost reduction, and operational efficiency are among the imperatives that influence CRE decision-making. Our research is geared toward better understanding the challenges faced by CRE executives today, with the goal of identifying the facts, analysis, and insights they need to make informed decisions more quickly and effectively.
Our first survey, conducted in 2010, showed that few financial services firms (only 5.6% of respondents) expected significant growth in the aftermath of the 2008 recession. Among places respondents did see as areas for expansion, the Asia- Pacific region showed strongest potential. Recent numbers show this expectation continues—the greatest potential for growth is seen in Asia-Pacific and Central and South America. Interestingly, 21% of 2012 respondents indicated their company expected no headcount growth in the near future, and 53% expected consolidations to occur in North America.
The industry as a whole continues to rely on cost-focused performance metrics to measure portfolio effectiveness. However, while CREs rarely use metrics to measure employee satisfaction or productivity, there appears to be growing interest in doing so. Our findings show that the most sought-after information for making effective real estate/workplace decisions—after space utilization—is a better understanding of business unit work flow/work processes, with employee satisfaction also ranked highly by the majority of respondents.
What This Means
The bottom line still drives decisions. The most common measure used to determine portfolio performance is cost per square foot followed by square feet per employee. The need to reduce real estate costs is also ranked as the top reason for considering alternative workplace strategies and is driving interest in exploring smaller offices/workstations, mobility programs, and work-at-home solutions.
CREs are seeking human-focused performance metrics. In 2012, 95% of respondents believed that the workplace has an impact on employee productivity, yet only 30% actually measured that impact (employee satisfaction surveys are the measurement of choice).
Attraction, retention, and generational changes are important. While cost reduction and economic volatility continue to be top-of-mind for respondents, more than half cite talent availability as a factor with a significant impact on the future of real estate and the workplace. Flexible work strategies in pursuit of top talent were also ranked highly among reasons for considering new ways of working.
For today’s CRE, information is at a premium. We continue to develop and utilize information-gathering tools to help clients understand how their workplaces are being used and how employees experience the effectiveness of workplace solutions. The need to balance cost reduction with the attraction and retention of talent is driving a desire to explore work flow, work process, and new ways of working for strategies that might help CRE executives move beyond exclusive reliance on cost measures.
Rocco Giannetti, Jan Gross, Ross Naismith, Dianne Dodge, Cathy Bregenzer, Krista Lindsay, Jeff Mitcheltree, Lisa Cholmondeley, Natalie Miller Ramos, Claire Richmond, Anne Bretana