Many large corporations with significant property holdings are doing a poor job of managing, utilizing or even just keeping track of their real estate holdings, and could be spending way too much on things like office buildings, retail space or manufacturing space. That's the finding of a survey conducted by the global management consulting, technology services and outsourcing firm Accenture, which surveyed real estate executives at 181 companies.
Athena Reilly, global lead for Accenture Real Estate Solutions, says that if large companies acted to optimize their real estate portfolios, "they could save anywhere from 5% to 40% of what they are spending on real estate." In many cases, that could be quite a lot of money.
Accenture surveyed companies that had at least $5 billion in revenue and 10 million square feet of property. "Sixty percent of the companies we looked at are spending over $250 million a year on their real estate," Reilly says, "with the money going for things like rent, staff, utilities, taxes and maintenance." Such companies, she says, might realize savings of $12.5 million to $100 million if they did a better job of managing their property portfolios.
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"No matter what business a company is in, they generally are in the real estate business too, because property holdings are such a significant contributor to their costs," Reilly says. The survey shows corporate executives are generally aware of this, "but many of them don't know where to start," she says. "They often have complex global real estate assets, assets with different needs and with different ownership arrangements. That can be daunting."
Among the findings of the Accenture survey:
* Although 94% of corporate real estate managers say they report directly to C-suite executives, 83% say aligning real estate strategy with the strategy of the broader business is the greatest challenge they face.
* 60% of respondents admit that their company's real estate portfolio "lacked the transparency and insight needed to support decision-making." Significantly, only 8% of companies surveyed have integrated property holdings into their ERP systems, and only 3% have a customized real estate data warehouse.
* 48% say they plan to acquire, divest or re-purpose their existing real estate portfolio to maximize its use, while half say they plan to make changes to improve their management practices.
* 76% report that "bloated" real estate holdings are reflected in underutilized property assets.
* 75% of the executives surveyed say their company has not implemented a fully integrated workplace management platform that could integrate property data and generate reports that would provide a global view of the company's real estate portfolio.
"What we're seeing is that managements are starting to try to centralize property oversight so they can gain more transparency across their portfolio," Reilly says. "The actual management of properties might remain decentralized, but they are trying to centralize the data. They're also getting more interested in analytics."
Reilly predicts that this centralization will make corporate real estate more of a risk management issue, "so treasury and risk departments may have a bigger role in real estate going forward."
Among the changes that Accenture found companies are planning are: implementing process standards to increase productivity (56%), investing in technology to gain greater transparency and insight across the company's property portfolio (56%), and implementing a more mobile way of working (53%).
"Linking real estate with broader organizational goals and objectives is an idea that's been discussed for years, but few have declared success," says Reilly. But that may be starting to change. She says that only 13% of the companies surveyed expect their real estate management function to remain decentralized in three years' time, as companies move toward more centralization and optimizing their often sprawling property holdings.
Thom Bogle, executive managing director of strategic portfolio solutions at real estate company Studley, says Accenture's study "nails it.
"I can't tell you how many Fortune 100 companies I've been to that can't tell me within 25% what they're spending on occupancy," Bogle says. "And they have no idea whether their costs are getting better or worse."
Fixing this requires a board-level commitment, he says. "The C-Suite has to say, 'We're spending tens of millions or hundreds of millions of dollars on housing our people and we're going to track these costs and reduce them.' It can take months of consultants fanning through a company to find them all, but it's worth it."
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