Real estate and portfolio strategy

More and more companies are recognizing the potential that lies in their corporate real estate. Corporate Real Estate (CRE) regularly forms one of the highest cost pools in companies. Optimized Corporate Real Estate Management (CREM) can reduce costs, create liquidity for the core business and increase work productivity. Nevertheless, this potential is very often misjudged by management.

The cornerstone for developing a real estate and portfolio strategy lies in the analysis of the location and space requirements of the core business. This sets the basic direction, because a real estate strategy can only follow the corporate strategy.

Against the background of the corporate strategy, portfolio analyzes of the real estate portfolio must be carried out with regard to their compatibility with the strategic requirements of the company. The focus of these analyzes can be, among other things, the identification of operational and non-operational real estate, the identification of the main cost drivers and the uncovering of unused potential in the real estate portfolio. In addition, a personnel analysis serves to derive the space and functional requirements of the organization. The real estate and portfolio strategy is to be derived accordingly on the basis of these analyses.

It is important here not to regard the derived strategy as a rigid construct, but to use it as an instrument that is to be further developed on a rolling basis. Cyclical portfolio adjustments are necessary, particularly due to changing framework conditions, such as the recent one caused by the Covid-19 crisis. It is important to check to what extent the inventory is marketable and how it can be transformed. There will be no “business as usual” in terms of land use. The space requirements must be adjusted in the light of the change in the working world, digitization and the sharing economy. Areas that become free can, for example, be made available to other areas of the company. Real estate that is not required for operations could be sold, thus reducing unprofitable capital commitments. Within the framework of scenario analyzes and business case calculations based on them, the most economical alternatives can be determined in each case.

Based on the company or business area strategy, the real estate and portfolio strategy has a direct effect on the individual property level. At this level, it is important to implement the strategic and tactical guidelines operationally. There is often enormous potential at property level, which can be uncovered by means of real estate cost and investment requirement analyzes (e.g. OpEx/CapEx). It is to be found out through which measures these can be used, (rental) income can be increased and/or real estate-related costs can be reduced. Questions that companies have to ask themselves in this regard include: Is maintenance carried out proactively and with foresight? Have cost savings already been achieved? Has revenue and earnings increase potential been identified? Are areas used in a usage-oriented and efficient manner?

In order to check the effectiveness of the developed strategy, the introduction of control instruments is recommended. Key Performance Indicators (KPIs), for example, provide a quick overview of your own real estate portfolio. By benchmarking the KPIs, outliers can be identified and countermeasures can be taken at an early stage. Since real estate data is often still entered manually in many companies and comprehensive IT implementations are usually very expensive, agile business intelligence solutions are a cost-effective alternative to controlling the inventory with current figures and data. This enables a shift from entrepreneurs as data collectors and processors to real estate controllers.

To round off the real estate and portfolio strategy, we recommend not forgetting the topic of sustainability. As a buzzword on everyone's lips, the topic has been neglected for a long time. But especially since the real estate sector is attributed a weighting of 40% of energy consumption and over a third of CO2 emissions, sustainability is actually more relevant than ever. As part of the federal government's efforts to achieve a climate-neutral building stock by 2050, companies are already challenged today. Higher taxes on fossil fuels give additional incentives to achieve energy savings. In addition, the topic of "wellbeing" is gaining in importance in the area of ​​sustainable real estate. For more information, see the Workplace Strategy section.