In the last several Blog posts, I’ve explored the various steps in becoming a CRE executive. Today I want to address the question of CRE organization. There is no one organizational model that is ideal. But there are various structures thatfit the needs of most business entities. Below I explore three popular models:
Functional: Here the organization is structured around the major disciplines needed to manage a CRE portfolio. These would include design, those actions needed to create the interior layouts for a particular office location. In many cases the design manager serves as a procurer of interior design and architectural services. Some companies maintain master agreements with design firms, while others recruit on an as needed basis. The next discipline would be leasing specialists. These individuals conduct site searches and then negotiate lease agreements with several building owners, and then finalizing a deal with the most competitive arrangement. The third discipline would be project management. This role oversees the build out of a project whether it’s an office, retail, or industrial site. The project manager also supervises the work of a contractor as well as orchestrates the move of the tenant organization. The final discipline is facility management. These individuals take over from project managers, and manage all on -going tasks related to the occupancy of the leasehold including maintenance, security, safety, and overseeing the services of the building owner. Most CRE organizations also require a lease administration group who manages the lease portfolio, relating to lease and escalation payments, lease abstracting and the day to day administration of the lease management system.
Outsourced: Here most or all of the key CRE disciplines outlined above are outsourced to one or more contractors typically on a geographic basis. Many of the major real estate service firms such as Jones Lang LaSalle, Cushman and Wakefield, or other full service firms can provide not only the transactional services such as leasing, but can offer the other services as an integrated capability. Outsourcing has grown in popularity as companies attempt to limit the size of internal non-core staffing. The role of the CRE organization is to focus on planning, budgeting, strategy, and to supervise the work of the outsourced services. Some CRE organizations are decentralized to the business units, and the CRE executive interacts with the unit CRE groups as well as corporate staff on matters of policy, capital approvals, and functional oversite.
Hybrid CRE Organization: This model combines the functional orientation with the outsourced model. The hybrid model is typically a small group of specialist managers who oversee the activities of the outsourced service firms. In some cases, the CRE group is aligned with the IT group, particular if there is an intense orientation toward IT infrastructure and services such as a “cloud computing” company that maintains a large portfolio of data centers. Another situation requiring specialized services is retail. Store location requires specialized capabilities that analyze market demographics and other variables important to a big box retailer.
Conclusion: There is no one organizational model that will suit every company. Organizational structure is as much about company culture, as functional needs. With advances in information technology, there is a clear trend to minimize staffing, and rely on service contractors in conjunction with powerful management systems to eliminate the need for multiple layers of CRE organization. The astute CRE executive will be a skillful outsourcer of CRE services and user of information technology. Keeping the CRE organization lean and technology enhanced is clearly a winning strategy in today’s global and competitive environment.