There was a time when managing an organization’s real estate portfolio was relegated to the back office, out of sight and far from mind. A fixed cost, managed by the operations team – with very little attention given by the executive level. In recent years, there has been a massive paradigm shift, as the complexities of “how we work” continues to evolve. Anemic economic growth has forced management to look for opportunities to reduce spend on real estate – as it is generally considered the second highest expense, behind human capital.
On one hand, you have a workforce that travels to meet the needs of their business and/or customers, working remotely and therefore not needing a physical space. On the other, you see the exponential advancement of technology – enabling your workforce to meet their organizational objectives without leaving the home office.
Therein lies the challenge – managing an expensive real estate portfolio based upon very little certainty and a dynamic landscape.
Because of this shift, real estate has become a major influencer of overall corporate strategy. With all of the above implications, you may find yourself asking why this didn’t happen sooner.
Drivers in Corporate Real Estate
Corporate Real Estate has many drivers of its own. For example:
- Globalization: As the regulatory environment changes across the globe, so does investment appetite. In essence, favorable locations today may present an unacceptable amount of risk tomorrow. These risks may be political, organizational, and/or strategic.
Finance: Market conditions can create significant opportunity. Changes in lending structure, crowd funding, and green bonds are all changing the way we borrow money, and organizations need to seize upon these opportunities when appropriate.1
- Sustainability: No longer the “new kid on the block,” adoption of a sustainable strategy has been benefiting the early adopters for years. Smart buildings are proven to have a happier, healthier workforce – leading to an increase in productivity. Significant savings can be realized by way of increased efficiency, and sustainable buildings realize increased marketability to tenants, and investors alike.
- Technology: Many would argue that Smart Buildings fall entirely within sustainability, but that is simply not the case. Reliance on technology is increasing – to name a few hot topics – connected buildings, the Internet of Things, cloud, and analytics. Per an IBM/Siemens study worldwide buildings consume 42% of all electricity up to 50% of which is wasted. Energy costs alone represent 30% of a building’s total operating costs.2 Organizations need to have a technological roadmap in place to maximize efficiency of their resources. Inefficient systems create waste; and that affects the bottom line.
In 2012, Pcubed began working with a large global financial services client to help manage space across their entire real estate portfolio. The challenges were vast, and they needed to be resolved quickly. With more than 100,000 people across 21 time zones in over 60 countries, this client had an annual real estate spend nearing $2 Billion. Many of the 3,000+ locations had a different process to manage their space, and each country was governed by a unique set of laws and regulatory constraints.
Business Change Enabled by Technology
Pcubed began by working with a vendor to integrate a Computer-Aided Facility Management (CAFM) solution. This included configuration to ensure the product aligned with the client’s requirements – which were based on their long-term strategic plan. Pcubed partnered with the business to define a global standard for defining different types of space (i.e. offices, hot desks, and permanent workstations). Once a standard was defined, Pcubed managed several other vendors to create and upload floorplans for each location. Next came the real challenge – populating sensitive data into the system.
Data Protection and other Regulatory Considerations
The process within any institution to store protected data into a third party vendor system is complex, but to use a SaaS (Software as a Service) solution increased the complexity of this project exponentially. Pcubed approached this methodically and aligned themselves with the different compliance and regulatory groups and processes across the organization. Each of these groups was treated as a core stakeholder, with their input captured during the design phase and to be kept informed on the overall progress. There could be ten groups to work with in one country, and two in the next. There could be fifteen countries aligning themselves to one parent country. There was simply no “one size fits all” solution, and Pcubed had to adapt the solution to ensure guidelines were met. Only once the very last regulatory body gave the approval for the program to move forward, was the data migrated into the tool.
The Pcubed Solution
With the regulatory hurdles overcome, Pcubed could focus now on the solution - enabling existing applications to be integrated into the tool in order to provide the client with optimized data outputs and an enhanced reporting capability.
While, there are many tools available for managing space, analysis on those with the largest market share shows that consideration to space management tools should only be given after a careful review of your organizational requirements - as they vary from one organization to the next.3 One of Pcubed Space Management Team’s best practices - leverage the capabilities of the tool within the organization - and work to redefine the organizational processes where necessary. Upon go-live, nearly 4,500 unique users had access to the system. But without global standards, the integrity of that data couldn’t be trusted. Those newly redefined processes then had to be industrialized.
Harmonization of Processes
Pcubed worked with the institution to harmonize these global processes and drive adoption of the tool. They brokered a deal with each country through workshops with experts in the Americas, Asia PAC, and Europe, leveraging deep regional knowledge across the global Pcubed team. This was accomplished by collecting and verifying the data against the newly harmonized global standards with the regional teams. As with any program within Pcubed, the team had the benefit of a “follow the Sun” approach, which allowed work to continue around the clock by leveraging three shifts, cutting overall time to completion by nearly 70%.
To further ensure the quality of the data, a team of eight dedicated near-shore resources were brought in to support the business with the newly defined data definitions and processes. A global community of practice was implemented to keep the communication across regions clear, consistent, and ensure that each team was managing space consistently.
The result was a tremendous success. When the system was rolled out, the client had access to accurate, dependable data at a moment’s notice - which enabled strategic decisions at the boardroom level.
Real-time reporting, scenario planning, high data quality, standardized global processes, and precise allocations allowed the client to begin realizing the cost savings that they had been striving for all along.
Transition to BAU, and Program Maturity
With this increased level of maturity realized, the organization has verified cost savings over $100 Million per annum. There are many qualitative benefits as well – like the ability to run different scenarios based upon external factors impacting your business. This enhanced visibility and control of the portfolio can ensure that the “right” decision is made every time.
Now Pcubed is focused on transitioning the program to the organization, and ensuring that the processes that have been defined are understood and followed by the business. Through these efforts, Pcubed has identified additional value-add initiatives; leveraging the global tool and data-enabling rationalization of the systems and processes, aimed at achieving additional benefits and cost savings.
As a result, Pcubed’s client is now at the cutting edge within their industry. The maturity of their space management program is years ahead of their closest competitor within the financial services industry. They are now viewed as strategic leaders amongst their peers, and will realize the benefits associated with this for years to come.
1 Deloitte 2015 Commercial Real Estate Industry Outlook “Enhance Technology. enable innovation.”
2 Siemens and IBM Transforming Real Estate Performance
3 Gartner Space Management: Align Business Challenges and IT Vendors