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Five Challenges Facing Corporate Real Estate Executives in 2016

By January 5, 2016Lease Accounting

With the New Year it’s a good time to take stock of the corporate real estate domain and consider the challenges facing the managerial profession responsible for the corporation’s real estate assets and services in the year ahead. Here are five major challenges if dealt with effectively will determine in part the success of corporate real estate in 2016.

New FASB/IASB Lease Standard: We’ve been focusing on this dramatic new lease standard over the last several months in Bell’s Blog. Perhaps the greatest factor for success will be the degree of readiness when the standard is ultimately put into effect, now estimated to be in 2019. We believe companies need to start now to prepare for the commencement of this new standard which essentially requires all leases of more than one year to be placed on the balance sheet as both assets (value in use) and liabilities. Much work is required to achieve readiness including software upgrades, process changes, staff training, and portfolio restructuring. (Please read “The Lease Accounting Tsunami; Are You Prepared to Weather the Storm?”)

Sustainability:  The environmental imperative has been given added urgency with the United Nation’s commitment to challenging conservation targets. A corporation’s facilities assets represent the largest consumer of energy resources, particularly electrical consumption. “Going green” is no longer a corporate imperative but also represents an excellent source for cost savings. Adopting environmental standards such as the LEED standard (Leadership in Energy and Environmental Design) for construction will insure environmental efficiencies and assure a positive image for the corporate brand.

Staff Recruitment:  Now that the US economy has reached full employment, the challenge of staff recruitment and retention will become more intense in 2016 as employees seek more challenging and lucrative employment opportunities. This challenge is a double edged sword with work-loads in 2016 increasing with pressures to rebalance portfolios (new lease standard) while demand and competition for talented employee candidates intensifies. Corporate Real Estate executives must work closely with Human Resources to update replacement plans, as well as enhance workplace environments with progressive policies and amenities. Employment focus should shift to training, and personal development, as a way to enhance employee skills.

Information Technology Refresh:  Corporate Real Estate Executives must insure that their information technology resources are adequate to meet new challenges such as the new lease standard as well as efficiencies gained through broader use of mobile technologies and cloud computing techniques. It is probable that there will be requirements to upgrade data center capacities associated with growth in servers and storage devices. (All related to growth in private cloud computing.)  

Strategic Alignment: With the continuing improvement in the US economy, corporate real estate executives need to insure that facilities and real estate resources continue to meet the needs of the business units with a top to bottom review of portfolio strategy. Key questions to address: what and where is growth in space needed over the next 6 to 12 months? Are facilities configured to maximize agility and staff flexibility? Are we receiving adequate services at competitive prices from our major service providers? What can we do to reduce occupancy costs through consolidations, space reductions, and alternative workplace strategies such as telecommuting and desk sharing?

The New Year is a good time to review and refresh strategy and processes. 2016 will bring disruptive change to facilities and real estate management. Those corporate real estate executives who fail to address the challenges ahead (such as those listed above) will risk failure and possibly job security.

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