Corporate real estate benchmarking is an important process for companies to maximize the value, efficiency, and impact of their real estate assets. This article dives into the fundamentals of corporate real estate benchmarking, covering its importance, methodologies, and key performance metrics, as well as the challenges companies often face in gathering and analyzing data across diverse portfolios.
With the right approach, businesses can overcome these challenges and transform their real estate portfolio into a strategic asset.
What is Corporate Real Estate Benchmarking?
Corporate Real Estate benchmarking can be defined as comparing one’s business processes and performance metrics to the best practices and metrics from other companies. The processes and methodologies of benchmarking can be a valuable tool in the management of corporate real estate.
Why is Corporate Real Estate Benchmarking Important?
Corporate real estate benchmarking is important because it provides companies with a systematic way to measure and compare the performance, costs, and efficiency of their real estate assets against industry standards or competitors. Here’s why it’s particularly valuable:
- Cost Control and Optimization: Benchmarking reveals where real estate expenses may be higher than the industry average, identifying areas for cost reduction or improved efficiency.
- Improved Decision-Making: When making decisions about expansions, lease renewals, relocations, or consolidations, having benchmarks helps companies make more informed choices.
- Resource Allocation and Efficiency: Real estate benchmarking helps businesses assess how efficiently they use space and resources. It allows companies to see if they’re using their facilities effectively and make adjustments when needed.
- Risk Management: With benchmarks in place, companies can identify performance gaps that signal potential risks.
- Strategic Planning and Growth: For companies planning to grow or enter new markets, benchmarking offers insights into market standards.
- Sustainability Goals: As more companies focus on sustainability, benchmarking can be used to measure environmental performance, such as energy consumption or waste reduction, against other organizations.
Corporate real estate benchmarking methodology
Robert Camp wrote a book with an amazing 12-stage methodology on corporate real estate benchmarking. This methodology applies to a comprehensive benchmarking effort. A more abbreviated process can be used. Camp’s process was as follows:
- Select subject
- Define the process
- Identify potential partners
- Identify data sources
- Collect data and select partners
- Determine the gap
- Establish process differences
- Target future performance
- Communicate
- Adjust goal
- Implement
- Review and re-calibrate
Usually benchmarking is used to identify a specific problem in the company’s real estate portfolio such as space utilization, unit costs, leased rates, comparison of real estate values to prevailing market values, or cycle times such as average project cycles.
To take advantage of benchmarking, it’s essential that you have a robust lease management system that can provide the space and cost data to be used in the benchmarking process.
Benchmarking for corporate headquarters
Benchmarking for corporate headquarters involves comparing the costs, utilization, and operational efficiency of a company’s headquarters with industry standards or peer organizations. By examining elements like space utilization, operating expenses, and energy efficiency, companies can determine if their headquarters are performing optimally or if there is room for improvement.
This type of benchmarking helps organizations identify potential cost-saving opportunities, optimize space, and ensure the corporate headquarters meets both operational needs and sustainability targets. Understanding how similar companies manage their headquarters can provide insights into best practices for layout design, employee count, and occupancy costs.
Optimizing facilities and costs
Another use of corporate real estate benchmarking can be used to measure the metrics of internal facilities and costs. Here management is concerned with those facilities that represent unusual variances either in utilization or costs, as a way to target remedial action.
Optimizing facilities and associated costs through benchmarking allows companies to simplify real estate expenses while improving the efficiency of their properties. Benchmarking metrics such as maintenance costs per square foot, and facility utilization rates can reveal areas where expenses are higher than industry norms. This helps identify inefficiencies in operational processes or facility management practices.
Companies can then target specific strategies for cost reduction, such as negotiating lease terms or revising maintenance schedules. Good benchmarking in facilities management supports cost control, ensuring that each property within the portfolio operates efficiently without sacrificing quality.
Commercial real estate performance metrics to target
Corporate real estate benchmarking should be a fundamental tool in the CRE manager’s tool kit. I would urge CRE managers to include a series of benchmarks in the annual real estate plan.
Such benchmarks as average space per person, average facilities cost per person, and average cost per square foot as compared to market rates can provide management with a keen insight to the portfolio’s performance relative to best in class metrics.
Corporate real estate benchmarking can be a way to establish annual performance goals. Using benchmarks can set the stage for strategic actions to meet these goals such as facilities relocations, consolidations, and/or lease renewals/ renegotiations.
Why Corporate Real Estate Benchmarking Can Be Challenging
Corporate real estate benchmarking offers insights, but the process can be challenging. One common issue is data availability — finding comprehensive and consistent data across different locations can be difficult, especially for international companies.
Another challenge lies in data consistency and comparability. Even when data is available, companies may face discrepancies in how metrics are defined and calculated. Without standardized definitions, it’s difficult to make comparisons.
Regional and market variations also complicate the benchmarking process. The real estate market is highly localized, and what works as an ideal benchmark in one area may be unrealistic in another due to variations in demand, occupancy rates, and economic conditions. These differences require companies to approach benchmarking with flexibility and allow for adjustments while maintaining corporate standards.
How Lease Accounting Software Can Benefit the Benchmarking Process
Real estate lease accounting software is a valuable tool in the benchmarking process. By consolidating lease data into a single platform, the software allows companies to access accurate and up-to-date data across all real estate assets. This eliminates manual data entry and spreadsheet tracking, which can lead to inconsistencies and inaccuracies.
Advanced lease accounting software provides reporting and analytics tools that allow users to generate customized reports aligned with specific benchmarking metrics. The ability to narrow down metrics by region, asset type, or department also helps companies better understand performance gaps and areas for improvement.
Many lease accounting platforms offer forecasting and scenario analysis, allowing companies to model potential outcomes based on future lease decisions. This is useful for long-term benchmarking and it helps companies project the impact of potential changes in occupancy, rent escalations, and other variables.
By understanding and applying benchmarking data, businesses can find areas for cost savings, improve resource allocation, and make data-driven decisions that align with their goals and growth strategy.
Although benchmarking presents challenges, especially in terms of data consistency and regional variability, a strong lease accounting platform can streamline data management, enhance accuracy, and provide the analytics needed for meaningful comparisons.
As companies increasingly prioritize sustainability, efficiency, and financial performance, benchmarking will remain a powerful strategy for maintaining a competitive edge in real estate portfolio management. Contact our team today with any questions or schedule a demo.
