3 Keys to Optimized Business Performance

corporate real estate optimization

The priority of most companies is to scour every aspect of business, identifying ways to eliminate costs and operate at peak efficiency. That is why corporate real estate optimization is a necessity. At a typical company, real estate is the third largest expense, so controlling the costs of your portfolio can make a big difference in your company's bottom line.

So what does corporate real estate optimization mean? Successfully optimizing your portfolio can be easily broken down into a 3 step process:

Maximize Existing Resources

The first step in corporate real estate optimization is to look at how your company is using its existing spaces to maximize them. Maximizing your existing spaces is a multi-step process:

1. Audit every space's rents and CAM charges to ensure that you are not being charged more than what your lease specifies. If you are, work with your landlord to find a resolution.

2. Identify markets in which you have multiple spaces that are underutilized. If you have three spaces in an area, for instance, you may choose to consolidate them into two spaces. Even if you're still paying rent, you've still reduced your other carrying and management costs for that third space.

3. Re-bid any vendor contracts that you control to eliminate unnecessary costs.

4. Find areas where you can reduce operating expenses through higher efficiency, giving up unneeded parking spaces and other areas that are directly related to your occupancy costs.

Measuring how well your company is maximizing resources requires precise metrics and reporting functionality. Look into REoptimizer®, a software system designed to drive waste out and improve efficiency.

Benchmark Your Costs Against Market

Once you've gotten all of your existing markets performing at maximum financial efficiency, the next step in the corporate real estate optimization process is to benchmark the sites that you want to retain against other sites in the area, and against each other. Benchmarking against other sites lets you compare the attractiveness of your existing leases.The second part of the process identifies which of your sites are outside of your company's norms.

To benchmark your sites against their market typically requires the kind of inside information that you can get from a corporate real estate tenant representative. With that information, you can decide which sites to renew and which sites should be targeted for renegotiation, or disposal and replacement with competing space.

Internal benchmarking on metrics like employees per square foot and sales per square foot helps you to determine which of your sites are truly effective and which are simply not. This goes a step beyond the initial steps that you took in the first step of the corporate real estate optimization process. When you identify sites that are operating outside of your company's norm, you can then decide whether to close them, reduce their size or adjust the way that they are operated and managed.

Execute Strategy

The plans that you create are meaningless if you don't execute them. The first sites to handle are those that are vacant because they were consolidated, or that you will be vacating because of operational challenges. Deciding whether to pay the lease on the vacant space, sublease the space or negotiate a buyout with your landlord is usually a simple matter of running a net present value analysis and determining which solution results in the lowest overall cost to your company.

Spaces that you identify as worth keeping but as being too expensive usually require a two-track process. The process starts with identifying suitable replacement spaces and getting hard cost data for them. You can then use that data with your landlord in an attempt to adjust your option price if the lease is nearing renewal or to renegotiate your lease in exchange for a potential long-term renewal if the lease has a significant remaining term.