The upcoming FASB accounting changes are not only a challenge for corporate accounting teams, but also for the commercial real estate group. To get you up to speed, here’s an…
Beginning in 2006, there was a concerted effort by the two accounting standard bodies (FASB and IASB) to synchronize their respective standards on leasing to assure consistency and uniformity. The…
How to Abstract, Manage and Report on Lease Data When FASB issued its update to the lease accounting standard, the main goal was to increase the transparency and comparability of financial reporting. …
An agile leased real estate portfolio supports an agile workforce Business agility is a paramount goal for today’s business enterprises. Given the rapid pace of change, and the shortening of…
Information technology is revolutionizing CRE Technology is transforming everything today and this is true for commercial real estate technology as well.
Back in the 1980’s I was a manager in the corporate real estate department of Xerox Corporation. One of my assignments was to participate in a quality improvement program called…
The growth of co-working office spaces and flexible workplaces is explosive worldwide. In a recent article in CoreNet’s March 2018 issue of “Leader” magazine, the author reports that co-working has…
Over sixteen years ago while a Gartner analyst, I launched a series of research reports on the subject of virtual teaming. Because of mobile technology and the growth of telework,…
In my last couple of blog posts, I covered the basic elements of real estate market analysis and the real estate market cycle. In case you missed them: Real Estate…
In my last blog post, I covered the basic elements of real estate market analysis. In case you missed it: Real Estate Market Analysis: A Primer for CRE Executives In…
What CRE can learn from a real estate market analysis report Virtually all real estate service firms offer some type of real estate market analysis. These reports are typically offered…
Organizational Challenges & the New Lease Accounting Standards There are many organizational models that are used to manage corporate real estate. Companies adopt primarily two models: centralized and decentralized. In…
What is beacon technology? There’s been increasing interest in what is known as beacon technology. Usually associated with retail marketing, beacon technology first emerged in 2013. Today the technology is…
There’s been a growing buzz throughout the tech world about blockchain technology and its associated topic of Bitcoin, the blockchain enabled digital currency. The specific characteristics of blockchain make it…
The new FASB and IASB leasing standards go in effect in 2019. And one of the provisions requires a retrospective accounting of lease costs back to 2017. Recently PwC and…
We continue to get questions from our clients regarding the new leasing standards. Here are several of the more common questions with extended answers: Question #1 What are the new…
How do you organize your CRE department? The structure of the CRE organization should directly correspond to key processes such as leasing, construction, design and facilities management. Organizational structure varies by the size of the real estate portfolio, the type of industry, the level of outsourcing and the geographic dispersion of the real estate portfolio.
Perhaps one of the most critical aspects of corporate real estate management is the subject of process management and the software that supports it. Process management is a major subject in the topic of quality management. It has been a topic that has dominated management subjects for decades. Most software applications have specific functionality that addresses process management; particularly around work flow.
In the latest issue of the LEADER, the official publication of CoreNet, two of my former colleagues, Mike Joroff and Frank Becker, co-authored an article entitled, “Exploit Change and Uncertainty to Drive Corporate Value.” Becker and Joroff collaborated with me on several projects, including Office 88 (Becker-1983) and the Agile Workplace (Joroff- 2003) The authors make the case that many of the assumptions about the office, technology, and work need to be updated and revised to reflect the new trends visible in the global workplace.
In February, IBM announced that it is reversing its 10 year old policy that allowed telecommuting. All marketing employees must now report to six IBM offices or be terminated. The offices include New York, San Francisco, Austin, Cambridge, Atlanta, and Raleigh. Other employee groups will be affected over the next six months. Employees have 30 days to make their decision. The policy will also be implemented throughout Europe.
In 1972, when I first took on a real estate management job at Xerox in Chicago, one of my most important tools was my Rolodex. For the younger reader of this blog, I should explain that the Rolodex was a simple filing of business cards or small index cards, arranged in alphabetical order, and containing names, phone numbers, and mailing addresses of service firms, colleagues, and other contacts. I would use the Rolodex at least 2-3 times a day to look up service people who I might need in an assignment or project, or check in with contacts who might help as a reference.
In an earlier blog post I addressed the subject of outsourcing corporate real estate services. One of the key services that is central to the real estate process is the need for design services, typically interior design services. Maintaining a design team internally is expensive and unnecessary. For some organizations having a design professional as a member of the CRE staff is advisable for the purposes of supervising the design contract firm and evaluating designs in various stages of development.
In several of my blog postings over the last two years I made reference to the subject of outsourcing CRE functions. But my references were brief. So over the next several blog entries, I plan to delve deeply into the subject. My plan is to first discuss the general pros and cons of outsourcing while providing the rationale for outsourcing various CRE functions. I will then focus on three service areas: lease transaction services, design services, and property management services. I’ll also touch on other activities such as facility management and physical security.
Realcomm, the technology focused real estate web site, recently published an article entitled “The Data is Coming In: Corporate America is Using Less Than 50% of Its Real Estate.” This is no surprise; I remember from my own experience that our offices were nearly 30%-50% vacant at any one time.
One of my colleagues recently posed the question “Is there an example of a decision you made that you would do differently now based upon technologies available today?”
From time to time clients raise the question of the difference between corporate real estate and facilities management. In essence, they’re asking why we have two different professional designations since they both seem to have the same responsibilities. But the two professions have distinct differences and responsibilities. Here we explore these differences and attempt to bring clarity to the issue.
There’s always a dispute within the organization aboutthe issue of chargebacks, particularly facility occupancy costs. Department heads typically question the need for charging back occupancy costs, since they don ‘t feel they have any direct control over these overhead costs. But occupancy costs are directly linked to staffing, so it’s logical to burden a department with its share of occupancy costs relative to staffing levels. The argument for chargebacks centers on the need for reinforcing cost containment, as well as maintaining a level of fairness in the organization.
In March of this year, Sodexo released a study of the corporate real estate profession, focusing on its image and value as a viable career path. Having practiced in the profession for over twenty-five years, I experienced first hand the challenges and rewards of corporate real estate as a junior manager, a senior executive and as a broker and consultant . For many years, corporate real estate didn’t enjoy the cache or prestige of other corporate functions such as marketing, finance, and even Information Technology. But this is changing with the advent of new leasing standards and workplace strategies. So it was with this personal back ground I took a special interest in the Sodexo survey and report.
In June of this year, Corenet Global published a report entitled, “The Future of Corporate Real Estate.” The report covered several major trends which would influence the corporate real estate function. Such trends as sustainability, advanced information technology, globalization, the “gig economy”, urban development, workplace changes, etc. would all have a major impact of the future of corporate real estate.
Security and safety is now high in the minds of CRE managers, because of the eruption of violent terrorist attacks worldwide. It seems a day doesn’t go by when some violent outbreak takes the lives of multiple victims. In many companies the CRE executive is responsible for physical security and thus, must develop a plan for insuring the safety of people and assets in the workplace. Typically the IT department has responsibility for information security, but it’s wise for the CRE executive to coordinate with the CIO on security. So what are the key priorities that need to be addressed in a workplace security plan?
A key process for the CRE executive is overseeing the site selection process, particularly for major office, data center, or manufacturing sites. I’m going to focus on office site selection since this typically represents the most frequent type of leasing actions.
It’s been over a week since the British vote to exit the European Union, and the situation is worsening for property owners in the UK. The greatest impact is happening in the financial markets. Real estate Investment trusts (REITs) are experiencing increased redemption causing some of the biggest funds to halt outflows as a means to protect values for existing investors.
Earlier this week, the world was stunned by the British vote to leave the European Union within 2 years. The most likely impact on corporate real estate markets and operations will be immediate. While equity markets have recovered somewhat from the lows, it’s unlikely that the stock market will return to its historical highs of last week any time soon.
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.
In our continuing series about how to become a CRE executive, the conversation would be incomplete without a brief review of the IT basics relating to CRE management.
Entering a career in Corporate Real Estate can take many paths. During my career I met countless CRE executives with myriad backgrounds. Some moved from real estate services such as brokerage or consulting. Others came into the profession as architects or engineers. A popular avenue is facility management, since the disciplines of property and maintenance management are a natural stepping stone to real estate management.
In this blog entry I would like to introduce the topic of CRE leadership and management. I hope to explore the topic over the next several weeks with the hope that these personal observations will be useful to those readers who aspire to make corporate real estate management a long term career.
Performance management in corporate real estate has matured rapidly over the last ten years due primarily to the evolution of sophisticated real estate management systems. With the advent of integrated workplace management systems(IWMS), and now cloud based point systems (like Visual Lease), CRE organizations have a wide range of options in the type and utility of portfolio management systems.
Space (square footage) is the universal unit in corporate real estate management. It defines the basis for rental, allocation of costs to different occupant groups, is the primary factor in developing space requirements for different utilizations such as offices, work stations, conference rooms, storage spaces, etc. Most companies develop a set of space standards as a means to design office layouts, allocate space to various functions, and use to forecast space demand over time.
Back in November of last year I cited a study by CBRE that seemed to debunk several myths about the Millennial generation and the office environment. The essence of the study was that while Millenials had certain preferences and attitudes about the workplace, in general there was little difference between the generations about their desire for workplace flexibility, preferences for urban settings, more collaboration, and more autonomy. However, in a recent article about Millenials in the March 15 issue of Fortune magazine, the theme of the article is about how to attract and retain the Millennial generation.
In my last Blog posting I covered the subject of co-working; an office concept which entails using office space on a shared basis. Unlike executive suite operations such as Regus serviced offices; co-working is less formal, collaborative and aimed at the millennial generation. Co-working is growing rapidly in most major urban areas, particularly in central business districts. The outlook for growth is stunning, with nearly 2000 locations anticipated within five years. One of the most successful operators, Wework, now has a market cap of over $5 billion, with no slowing in growth expected.
But co-working is not without its drawbacks.
The primary driver of this growth is the rise of the contingent worker, which represents about one third of the US workforce according to government estimates. With the advent of mobile technology and cloud computing, millennials, those between the ages of 20-35, seek non-traditional work environments as well as a sense of community. Co-working meets these needs by offering informal and edgy workplaces, and a spectrum of services that might include WiFi, marketing training, social events, and even conferences aimed at the young, independent entrepreneurs.
For some large companies, the charter of CRE has expanded to include physical security, sustainability, and now even the charter may include company wellness programs. In an open online survey conducted by CoreNet Global, a strong majority of respondents – 80 percent — said that corporate wellness initiatives represent a “significant trend,” while only 20 percent said that they were a “passing fad.”
Earlier last week I attended a dinner in San Francisco of a group of corporate real estate executives. During the evening I had a chance to speak with several of the attendees, and queried what were the major issues being discussed by the group at their 2 day meeting. A number of topics came up including the subject of Corporate Wellness, Sustainability, and Strategy.
A major question I am asked on occasion is what is the best way to organize the corporatereal estate function. There are several fundamental principles that should be considered to answer this question.
The long awaited new lease standard has arrived! The International Accounting Standards Board (IASB) released its version of the new lease standard last week with implementation scheduled for early 2019. The US accounting standards board (FASB) is expected to release its version shortly with implementation to follow soon after IASB’s.
During my tenure as head of real estate I always began the new year with a few resolutions that would become goals for the year ahead. These were typically above and beyond department objectives for the year and represented personal goals for some kind of improvement. Here are a few that I recall..
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.
In the last several blog posts, I’ve explored various aspects about the future and how these trends may affect the workplace. One key variable in the future workplace is demographic differences, or how generational differences will impact workplace design. I suspect we all assume various truisms about the major generations.
In my last Blog entry I wrote that IOT would be a megatrend that would revolutionize building operations by imbedding machine addressable technology in every aspect of the built environment. IOT is not new. In fact the technology has been around since the late 1990s. Gartner estimates that there will be nearly 26 billion devices on the Internet of Things by 2020.
Price Waterhouse Coopers recently published a report, “The Future of Work, a Journey to 2022,” in which the consulting firm developed three scenarios of how the future of work may evolve over the next 7 years. Mike reviews them here.
October, 2015 is the month and year when Marty McFly traveled from July 1985 to the future in the famous Delorean time machine. Thus, it’s a good time to review past predictions of the changing workplace, and to rate their accuracy. Predictions of the future almost always miss the mark. Here are a few of my favorite classic misses:*
In a earlier white paper, The Lease Accounting Tsunami; Are You Prepared to Weather the Storm?, I wrote that users should evaluate the effects of the new FASB/IASB on a company’sdebt structure, debt to equity, and other factors that would be affected by the new standard, assuming lease liabilities would be considered as debt. In point of fact, the FASB explicitly decided that Type B lease liabilities should not be considered as “debt.” However, the IASB which treats all leases as Type A leases or capital leases, does consider these liabilities as “debt-like liabilities.” (Their exact words) As one of my accounting friends advised “The accounting for Type A leases requires IASB companies to record interest expense, and segregates payments on the lease liability into operations and financing outflows per the cashflow statement, which is consistent with debt.”
Thus, US companies will experience less impact from the new standard, particularly as it relates to debt covenants, debt to equity metrics, and capital structures. But US companies with significant international lease portfolios subject to the IASB standard, will see their debt levels increase.
Having split my career between facilities management and IT management, I gained an appreciation of how these two professional disciplines have many similarities, but distinct differences which createpolitical difficulties in many organizations.
Virtually the entire infrastructure of the enterprise combines traditional facilities assets: buildings, land, furnishings, and lease contracts and IT assets: servers, storage, networks, mainframes, and applications. In the last half century these distinct asset classes have become ever more intertwined, interdependent, and fused to create work platforms.
In this morning’s New York Times, it was reported that Goldman Sachs recently consolidated from three floors to two in its major Manhattan office tower. The Times reports that “the changes in real estate have helped Goldman reduce its cost by 17 percent since 2010.” This is yet another example of the value in corporate real estate strategic planning and why I wanted to spend a bit more time on the subject.
At the time I was the Corporate Real Estate Director of a major multinational corporation with a headquarters in New York City. It was the mid 1990s, and the real estate market in midtown Manhattan was a bit soft. Senior management wanted to move out of New York to an owned (and relatively vacant) office building in suburban Connecticut.
What are some guiding principles for selecting and investing in software functionality in support of your facilities and real estate operations?
Perhaps one of the most daunting and complex responsibilities of the corporate real estate executive is the management of lease escalation costs. These costs which represent expense pass- thrus from the landlord to the tenant can represent nearly half or more of the cost of tenant occupancy.
Many companies today use tenant representatives to handle various leasing actions such as leasehold relocations, renewals, expansions, and extensions. Tenant representatives are commercial brokers who typically operate exclusively as tenant advocates, while collecting commissions from building owners. This may seem like a conflict of interest, but the industry has self-regulating practices to avoid most abusive behavior.
There’s compelling logic to combine a lease audit service with a lease management system such as Visual Lease..
As a Gartner analyst some years ago, I focused on the real estate/ facilities management software space. I had spent nearly thirty years in corporate real estate, and was perhaps the only analyst at Gartner who had a broad and varied background in corporate real estate. I wrote one of my first research notes, in April of 2003 on the corporate real estate and facilities management space when I identified the key components of what I later named IWMS.. a lot has changed since then.