Corporate real estate strategy doesn't move in lease cycles anymore. While many of the most important decisions in running a corporate portfolio occur when renewals come up, operating buildings requires real-time information. This kind of data can help companies decide which locations to open, which to close and where to make capital expenditures.
In addition to lease rollovers, anniversary dates are also important milestones in corporate real estate strategy. The arrival of CAM reconciliations from landlords or the completion of a yearly budget period for owned space allows corporate real estate directors to analyze property performance to determine if there are any issues that need to be dealt with. However, waiting for an entire year to analyze a building and its performance could lead to lags in decision-making. Here are some case studies of buildings where real-time reporting saved money, and some cases where a lagging corporate real estate strategy resulted in suffocating losses:
Where's My Parking Lot
A consumer goods store located at a lifestyle center found its parking lot torn up by a new construction project. The most convenient place for consumers to park would be replaced with a new high-rise condo and hotel building. Because the company's real estate and operating departments were closely aligned, the corporate real estate strategy team immediately became aware of the decrease in sales and the corresponding increase in the building's rent-to-sales ratio. This gave the real estate department the ammunition that it needed to renegotiate its lease with the landlord, especially given that the new development's residential nature potentially constituted a material breach of the lease agreement's prohibition against having residential units in the property.
Out of Control Utilities
A private landlord leased out a single tenant office building to a state agency. Under the terms of the lease, the landlord retained responsibility for paying the building's utilities and other operating expenses. At the end of the year, the landlord reviewed his electric bill and found that he was spending over $3 per square foot to provide electricity to the building when comparable properties were spending $0.95 to $1.15 for power.
When the owner's commercial real estate broker found out that the utility bill was that high, he urged the owner to have an audit done. As part of the audit, the landlord found out that the employees of the building had disabled the automatic thermostats. Evidently, they had cranked the heat up to 80 degrees in the winter and turned the air conditioning down to 62 degrees in the summer. While this made the workers comfortable, it cost the owner thousands of dollars. With closer analysis of the building's operation, the owner would have caught the discrepancy after a month or two and saved tens of thousands of dollars.
The Right Space
Companies with real-time utilization data can make do with less space. Given the extremely mobile nature of modern workforces, it's entirely possible that one space could be almost completely vacant while another is packed beyond its capacity with visiting and hoteling workers. Companies that are able to get real time utilization data and integrate it with employee travel scheduling can ensure that they are sending employees to offices that have space for them. This can lead to better utilization of existing space while reducing the need for expensive temporary space for overflow.
