JLL Finds Spotlight on Corporate Real Estate

CHICAGO- Jones Lang LaSalle has just released its second biennial report on global corporate real estate trends and found evidence that senior business leaders have begun pushing their corporate real estate executives to help increase productivity, revenue and employee performance. By contrast, during the worst of the recession, these leaders were far more likely to see real estate as a source of short-term cost reduction.

“We're seeing somewhat of a reversal,” says Christian Beaudoin, vice president of corporate solutions, research and strategy for JLL. The firm spoke to 630 corporate real estate executives in 39 countries, and 68 percent of respondents have seen increased demand from senior business leaders to enhance their portfolio's long-term productivity, although continuing economic uncertainty means demands for short-term cost-cutting remain.

However, the increased attention “can be a way for corporate real estate executives to get close to the CEO,” Beaudoin adds. Nearly 60% of survey respondents say they report directly into the C-suite, a trend that has strengthened since the end of the global recession.   

The survey respondents do feel, however, that the increased attention to their operations highlights five main risks they face in 2013:

1. Singular focus on real estate cost cutting undermines potential rewards from revenue-enhancing investments.
2. Procurement drives price- rather than value-driven outsourcing partnerships.
3. Workplace productivity is frequently miscalculated in cost-per-square-foot terms,      when contribution to business performance better characterizes returns.
4. Collaboration with HR, IT and finance is a must for enhancing workplaces, yet silos      continue to constrain joint efforts.
5. Compromising real estate quality to enter high-growth global markets is dangerous.

The final item on the list has become increasingly crucial as more companies look to expand into high-growth nations such as China and Brazil. “Most companies are doing that well,” at least the initial steps, Beaudoin says. But many falter when it comes to starting up offices in more peripheral areas beyond global cities like Shanghai. Partly, “it's a function of not being everywhere at once,” since a typical corporate real estate office in a global firm will cut a deal in San Jose one day, Shanghai the next, and never get a chance to develop in-depth knowledge of either place. Typically, what's needed is “more in-country leadership staff. In part it takes time, but it also takes cultural understanding.”       

But the biggest challenge for CRE executives may be figuring out how to best communicate with the C-suites. For example, data on short-term cost-cutting measures tends to be easily digestible and simple to create. However, the new environment means CRE executives also have to present data which explains how the use of real estate can increase innovation, worker productivity, satisfaction and overall efficiency, says Beaudoin. “Those are metrics that are harder to create.” Only 28% of survey respondents said they had all of the data tools they need, he adds. The executives who can create the proper metrics “will be ahead of the game.”