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The Corporate Real Estate Strategic Plan

By September 15, 2015Lease Management

In the last blog entry we reviewed how the strategic planning process evolved from forming the planning team, benchmarking performance indicators, and setting priority objectives. Outlined below is what the strategic plan looks like:

Over-all objectives:

·      Management has set forth the following strategic objectives for the corporate real estate function: 1.) Reduce over-all occupancy costs; 2.) strive for environmental sustainability in the company’s portfolio, 3.) and evolve a flexible work environment that fosters collaboration and employee mobility

·      From the benchmarking phase, the planning team determined that the corporation’s occupancy cost was at the high end of comparable companies in most leasing markets, at least 15% above competitive benchmarks. It further determined that space per person was high (300 sq ft per person) and set a goal to reduce this ratio by 50%. Finally the benchmarking study revealed that most office locations were neither energy efficient nor consistent with current environmental standards.

·      From a review and analysis of leased locations, the team determined that as high as 50% of the lease file was due for termination within 10 years, and 20% of the leased portfolio had leases expiring within 15 years. There was a major opportunity to reposition the leased facilities in more efficient, lower cost locations. From a FASB lease standard, it would appear that the lease repositioning would substantially reduce the total asset and liability levels once new leases were put in place.

·      Another key finding of the portfolio review determined that in at least 20 major metropolitan areas, the company had multiple locations that could be consolidated into two or three major locations, thus reducing space, cost, and improving operational efficiency by sharing support services and infrastructure. The strategic plan referred to this aspect of the plan as “the major city consolidation plan.”

Plan Summary:

·      The plan outlined the key leasing actions to be completed over the next five years, striving to reduce space, and occupancy cost. Over-all annual occupancy costs and associated capital spend was summarized by year over the five year time frame.

·      The plan outlined a set of new office standards that included alternative office techniques like office hoteling and desk sharing. The new leased locations would adopt open plan work stations and a multitude of small and medium size conference rooms for team collaboration.

·      The plan set forth the major city plan and included detailed leasing actions for office consolidations.

·      The plan also set forth environmental standards that would improve energy efficiency, air quality, and office location sustainability.

·      The plan included a financial summary listing occupancy costs by location, by year, over a five year time frame. Associated capital costs, and project expenses were also included in the plan.

·      The strategic plan (once approved) became the basis for engaging tenant representatives in executing the leasing actions across the portfolio, by year.


·      The strategic real estate plan was successful in reducing occupancy costs through smaller location footprints, tighter lease rates, and consolidated locations

·      New office standards achieved operational flexibility by adopting alternative workplace standards and worker mobility techniques. (laptops, tablets, and cell phones)

·      By adopting new environmental standards, new locations achieved improved sustainability as offices were relocated into new standardized locations.

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