Real estate executives struggle to align function’s priorities with business strategy
NEW YORK; Oct. 8, 2012 – Opportunity remains to reduce waste and improve strategic management of the real estate function in large corporate and government organizations, according to a new Accenture (NYSE:ACN) study.
Of 181 executives surveyed at government agencies and companies worldwide with large real estate portfolios, 83 percent said that aligning real estate strategy with that of the broader business is their greatest challenge, despite the fact that 94 percent of corporate real estate managers report to C-suite executives. Nearly as many (80 percent) said that their real estate function was challenged by the pressure to reduce costs, and three quarters of the executives (76 percent) highlighted bloated portfolios resulting in grossly underutilized assets as a major concern.
Among other challenges acknowledged by the executives, 89 percent indicated that market volatility was having a moderate or high impact on their function and 60 percent noted that their real estate portfolio lacked the transparency and insight needed to support decision making.
To address these challenges, nearly half of the respondents (48 percent) said they would acquire, divest or re-purpose their real estate portfolio to maximize its use. However, a majority plan to make changes to improve their management practices. These include implementing process standards to increase productivity (56 percent), investing in technology to gain greater transparency and insight across the portfolio (also 56 percent) and implementing a more mobile way of working (53 percent).
Slow progress in aggregating real estate data
The study found that despite the challenges associated with aligning real estate strategy with the broader business, three quarters (75 percent) of surveyed executives said their organizations have not implemented a fully integrated workplace management platform that could integrate disparate data and generate reports to provide a global view of their organizations’ real estate portfolio. More than a third of the organizations (36 percent) are in the process of implementing such a platform to address this technological deficiency. However, only 8 percent have integrated such a platform with their company’s enterprise resource planning (ERP) programs and just 3 percent have implemented a customized real estate enterprise data warehouse.
“While organizations have done much in the last four years to rein in costs and improve their overall performance, they have an opportunity to create more value from their real estate function by generating an aggregated view of how their facilities are managed and used,” said Athena Reilly, the global lead for Accenture Real Estate Solutions. “Having information aggregated at the portfolio level with the ability to analyze individual property performance could provide management with the transparency and insight to improve real estate decisions that will optimize cost savings and identify revenue generating opportunities.”
The study’s findings on the criteria used to evaluate real estate management performance indicate that organizations are likely to invest more in enterprise wide processes and systems. Executives most frequently said that the level of the real estate function’s integration with the business was a criterion of performance (selected by 58 percent) and more than half (51 percent) of the organizations surveyed reported that they are primarily focused on efficiency and effectiveness measures. The executives also indicated that performance was evaluated on the basis of strategic alignment and the degree to which real estate influences employee engagement (47 percent each).
Centralized processes: A platform for progress
The centralization and simplification of processes also provides a platform for further improvement in the real estate function. Seventy-five percent of those surveyed indicated that their real estate operating model has a centralized component. This includes the use of shared services for the majority of their real estate management activities, outsourcing with a small, centralized senior team managing the function, or deploying aggressive sourcing strategies to rationalize their service providers and engaging a few to support traditional real estate operation services. In the next three years, only 13 percent of those surveyed indicated that the real estate function would remain decentralized, as the function continues a trend toward centralization and shared services models.
“Linking real estate with broader organizational goals and objectives is an idea that’s been discussed for years, but few have declared success,” said Athena Reilly. “The foundation exists for greater alignment of real estate and enterprise wide processes and systems with overall business strategy, and given the degree of centralization already achieved, many organizations seem now ready to take the next step and transition from managing a facility to optimizing a portfolio.
The survey covered organizations with a real estate portfolio of at least 10 million square feet and with revenues in excess of $5 billion. Currently, more than half (56 percent) of the organizations surveyed have more than 100 sites, with 60 percent of them spending in excess of $250 million on real estate portfolios that contain a mix of corporate offices, manufacturing, research & development, retail, call center and distribution facilities.
Accenture is a global management consulting, technology services and outsourcing company, with 257,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.
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