Responsibility for and performance of corporate real estate functions A comparison of European and North American companies 16th Annual European Real Estate Society Conference, in Stockholm, Sweden, June 24-27, 2009 Steffen Hartmann/Andreas Pfnür 26.06.2009 | Hartmann/Pfnür | TU Darmstadt | ERES 2009 | 1
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16th Annual European Real Estate Society Conference, in Stockholm, Sweden, June 24-27, 2009
Responsibility for and performance of corporate real estate functions A comparison of European and North American companies. 16th Annual European Real Estate Society Conference, in Stockholm, Sweden, June 24-27, 2009 Steffen Hartmann/Andreas Pfnür. Background situation and motivation. - PowerPoint PPT Presentation
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Responsibility for and performance of corporate real estate functionsA comparison of European and North American companies
16th Annual European Real Estate Society Conference, in Stockholm, Sweden, June 24-27, 2009
An increasing number of non-property companies has recognized that their real estate holdings possess enormous value, but also requires immense expenditures.
In this context, one important issue facing non-property-companies is how to effectively manage real estate assets.
Besides many coordination instruments (e.g. intra-organizational market mechanisms, standardization, etc.) used to organize CREM, two further essential organizational questions arise in this regard:
(1) Who should be responsible for particular real estate functions within the company?(2) How should the respective services be performed?
Although many companies seek similar goals with regard to their real estate assets and CRE managers are faced with similar challenges, different models concerning the responsibility for real estate functions and their performance seem to exist in practice.
To date, little research has been carried out to determine these different types of responsibility for real estate functions and their performance as well as the causes for their occurrence.
Some companies bundle decision-making authority for nearly all real estate issues into a unified CREM department. In others, where CREM is more decentralized, business units (i.e., the “tenants” of that space) themselves are responsible for specific real estate decisions and performance of real estate tasks.
Steffen Hartmann
A number of articles have been published where it was analyzed whether real estate tasks were performed by the CREM department or by external service providers. But there is no research that includes the performance by the business units
Aims of the study
Analyzing the allocation of responsibility for particular real estate functions within the companies.
Identifying different characteristics of the current performance of real estate tasks. Analyzing the future performance of real estate tasks. Determining factors which influence the occurrence of different models in practice.
A questionnaire survey was chosen as the method of data collection in North America (conducted by a partner in the U.S.)
In Europe, data was collected by Computer Assisted Telephone Interviews (CATI) by a professional marketing firm
Target companies were major enterprises from the Banking, Energy, Telecommunication, and Transport & Logistics industries
The senior executive in charge (Head of CREM, Director of CREM, SVP CREM) responded to the questionnaire and was interviewed respectively
Interviews ranged from 13 minutes to 56 minutes with an average duration of 24 minutes
187 European and 225 U.S. companies were invited to participate in the study 74 European and 38 U.S. CREM executives took part in the survey, which equates to
This paper is an extract of a larger research project, which compares and highlights notable differences in CREM in European and North American companies from the banking, energy, telecommunication, and transportation & logistics industries.
What are the typical models that exist in practice concerning the responsibility for CREM functions?
Aim: identification of different types by using cluster analysis
Degree of responsibility-concentration of the more sophisticated functions (PM, Leasing, Space Planning, Acquisition & Disposition) is higher than for operational functions.
Operational functions were under responsibility of business units using the property in about 40% - 50% of the interviewed companies.
79%
84%
68%
82%63%
66%
50%
66%
0%
20%
40%
60%
80%
100%Portfoliomanagement
Leasing and Lease Administration
Space Planning and Site Selection
Acquisition and Disposition
Technical Facilities Management
Infrastructural Facilities Management
Commercial Facilities Management
Development
Europe (n = 74) North America (n = 38)
Five different types of CREM responsibility could be identified
CRE managers perception concerning the realized achievements seemed to be almost identical across all types of responsibility with low advantages for the types 1 and 5
0%
20%
40%
60%
80%
100%
Portfolio Management
Leasing & Lease Administration
Space Planning & Site Selection
Acquisition & Disposition
TFM
IFM
CFM
Development
Extent of CREM ResponsibilityCluster 1
n = 29
1
0%
20%
40%
60%
80%
100%
Portfolio Management
Leasing & Lease Administration
Space Planning & Site Selection
Acquisition & Disposition
TFM
IFM
CFM
Development
Extent of CREM ResponsibilityCluster 2
n = 17
2
0%
20%
40%
60%
80%
100%
Portfolio Management
Leasing & Lease Administration
Space Planning & Site Selection
Acquisition & Disposition
TFM
IFM
CFM
Development
Extent of CREM ResponsibilityCluster 3
n = 20
3
0%
20%
40%
60%
80%
100%
Portfolio Management
Leasing & Lease Administration
Space Planning & Site Selection
Acquisition & Disposition
TFM
IFM
CFM
Development
Extent of CREM ResponsibilityCluster 4
n = 21
4
0%
20%
40%
60%
80%
100%
Portfolio Management
Leasing & Lease Administration
Space Planning & Site Selection
Acquisition & Disposition
TFM
IFM
CFM
Development
Extent of CREM ResponsibilityCluster 5
n = 25
5
Conclusion
It was shown that the degree of bundling CREM functions is generally higher in North American companies compared to their European counterparts.
Five typical models which describe the extent of CREM responsibility for certain real estate functions and their performance have been identified:
a) At U.S. CREM groups the two models with a relatively high level of responsibility were most common (types1 and 3).
b) In European companies all five models could be found with an almost similar frequency.
External performance was mainly common for operational functions (CFM, IFM, TFM)a) Outsourcing intensity was higher in European companies compared to North
American CREM groups.b) The higher the degree of responsibility for CREM functions the higher the outsourcing
intensity All five types of CREM responsibility led to cost reduction, increased user satisfaction and
increased portfolio flexibility in almost the same extent over last ten years.
Strong and significant associations between the responsibility for corporate real estate functions as well as their performance and other variables like industry segment, number of employees, ownership rate, and portfolio composition could not be identified.
The absence of those associations along with the fact that all five identified types resulted in cost reduction, increase in user satisfaction and portfolio flexibility leads to the assumption, that there is not a best practice model for the responsibility for and performance of CREM functions.
Further research: Analysis of a broader CREM model with more organizational factors based on
considerations of gestalt-theory / configuration-theory In contrast to the contingency approach which postulates that there must be a fit between the
situational factors of a company and each organizational variable to be effective and efficient, the gestalt-theory acts on the assumption, that a close fit must exist between all organizational variables.
“[…] the gestalt or configuration of an organization is likely to be a more potent determinant of its effectiveness than any of the individual components of this configuration.” (Khandwalla 1973)
Aim for future research: Identification of gestalts / configurations