The new FASB / IASB leasing standards will fundamentally change the way asset leases are handled. The time to comply is now.
How do you organize your CRE department? The structure of the CRE organization should directly correspond to key processes such as leasing, construction, design and facilities management. Organizational structure varies by the size of the real estate portfolio, the type of industry, the level of outsourcing and the geographic dispersion of the real estate portfolio.
Perhaps one of the most critical aspects of corporate real estate management is the subject of process management and the software that supports it. Process management is a major subject in the topic of quality management. It has been a topic that has dominated management subjects for decades. Most software applications have specific functionality that addresses process management; particularly around work flow.
My wife and I visited China from April 12 to the 24th. Our primary reason for the trip was to visit my son and his family in Shanghai. My son, Geoff and his wife, Bria, are the proud parents of their three month old daughter, Ava Patricia.
As we enter our third year of Bell’s Blog, I thought it would be helpful to step back from blog content and reflect on what topics should be explored in the months ahead. In this vein, I invite readers to propose topics that haven’t been covered. As a reminder, the purpose of Bell’s Blog is to cover topics that are related to the management of corporate real estate. In some sense, I’ve structured the blog as a set of tutorials for the aspiring CRE manager or executive. It’s written as a management guide for a manager or professional who is relatively new to the CRE field. Having been at all levels of the corporate real estate profession (including leasing manager, project manager, technology manager, department head, consultant and corporate executive), I base the blog content on nearly 30 years of experience. Also with 10 years as a Gartner analyst, focused on CRE technology and data center topics, I bring information technology knowledge to the blog.
In the latest issue of the LEADER, the official publication of CoreNet, two of my former colleagues, Mike Joroff and Frank Becker, co-authored an article entitled, “Exploit Change and Uncertainty to Drive Corporate Value.” Becker and Joroff collaborated with me on several projects, including Office 88 (Becker-1983) and the Agile Workplace (Joroff- 2003) The authors make the case that many of the assumptions about the office, technology, and work need to be updated and revised to reflect the new trends visible in the global workplace.
In February, IBM announced that it is reversing its 10 year old policy that allowed telecommuting. All marketing employees must now report to six IBM offices or be terminated. The offices include New York, San Francisco, Austin, Cambridge, Atlanta, and Raleigh. Other employee groups will be affected over the next six months. Employees have 30 days to make their decision. The policy will also be implemented throughout Europe.
In 1972, when I first took on a real estate management job at Xerox in Chicago, one of my most important tools was my Rolodex. For the younger reader of this blog, I should explain that the Rolodex was a simple filing of business cards or small index cards, arranged in alphabetical order, and containing names, phone numbers, and mailing addresses of service firms, colleagues, and other contacts. I would use the Rolodex at least 2-3 times a day to look up service people who I might need in an assignment or project, or check in with contacts who might help as a reference.
In an earlier blog post I addressed the subject of outsourcing corporate real estate services. One of the key services that is central to the real estate process is the need for design services, typically interior design services. Maintaining a design team internally is expensive and unnecessary. For some organizations having a design professional as a member of the CRE staff is advisable for the purposes of supervising the design contract firm and evaluating designs in various stages of development.
Both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) released their respective new leasing standards in the first quarter of 2016, but they are not the same.
In several of my blog postings over the last two years I made reference to the subject of outsourcing CRE functions. But my references were brief. So over the next several blog entries, I plan to delve deeply into the subject. My plan is to first discuss the general pros and cons of outsourcing while providing the rationale for outsourcing various CRE functions. I will then focus on three service areas: lease transaction services, design services, and property management services. I’ll also touch on other activities such as facility management and physical security.
Realcomm, the technology focused real estate web site, recently published an article entitled “The Data is Coming In: Corporate America is Using Less Than 50% of Its Real Estate.” This is no surprise; I remember from my own experience that our offices were nearly 30%-50% vacant at any one time.
One of my colleagues recently posed the question “Is there an example of a decision you made that you would do differently now based upon technologies available today?”
From time to time clients raise the question of the difference between corporate real estate and facilities management. In essence, they’re asking why we have two different professional designations since they both seem to have the same responsibilities. But the two professions have distinct differences and responsibilities. Here we explore these differences and attempt to bring clarity to the issue.
There’s always a dispute within the organization aboutthe issue of chargebacks, particularly facility occupancy costs. Department heads typically question the need for charging back occupancy costs, since they don ‘t feel they have any direct control over these overhead costs. But occupancy costs are directly linked to staffing, so it’s logical to burden a department with its share of occupancy costs relative to staffing levels. The argument for chargebacks centers on the need for reinforcing cost containment, as well as maintaining a level of fairness in the organization.
In March of this year, Sodexo released a study of the corporate real estate profession, focusing on its image and value as a viable career path. Having practiced in the profession for over twenty-five years, I experienced first hand the challenges and rewards of corporate real estate as a junior manager, a senior executive and as a broker and consultant . For many years, corporate real estate didn’t enjoy the cache or prestige of other corporate functions such as marketing, finance, and even Information Technology. But this is changing with the advent of new leasing standards and workplace strategies. So it was with this personal back ground I took a special interest in the Sodexo survey and report.
In June of this year, Corenet Global published a report entitled, “The Future of Corporate Real Estate.” The report covered several major trends which would influence the corporate real estate function. Such trends as sustainability, advanced information technology, globalization, the “gig economy”, urban development, workplace changes, etc. would all have a major impact of the future of corporate real estate.
In a recent article in the New York Times, the report described how corporate America is moving from suburban campuses back to urban markets, despite the higher cost of central business district office space.
Security and safety is now high in the minds of CRE managers, because of the eruption of violent terrorist attacks worldwide. It seems a day doesn’t go by when some violent outbreak takes the lives of multiple victims. In many companies the CRE executive is responsible for physical security and thus, must develop a plan for insuring the safety of people and assets in the workplace. Typically the IT department has responsibility for information security, but it’s wise for the CRE executive to coordinate with the CIO on security. So what are the key priorities that need to be addressed in a workplace security plan?
A key process for the CRE executive is overseeing the site selection process, particularly for major office, data center, or manufacturing sites. I’m going to focus on office site selection since this typically represents the most frequent type of leasing actions.