Cut Real Estate Costs by Optimizing Properties, Portfolios

Tips on Outsourcing Corporate Real Estate

In Global Fight for Workers, Don't Forget Mom

Energy Saving Plays Key Role in Sustainability Plans

Temperature Biggest Complaint about Offices

Cut Real Estate Costs by Optimizing Properties, Portfolios

Costello offered four critical areas where real estate costs are ripe for the cutting:

Facilities optimization: This includes janitorial and anything else to do with the management of the facilities--the brick and mortar of the business, said Costello. He emphasized that this is a low-investment/high-return project. If the corporation has never before optimized a facility, big money can be saved. This involves going over each facility with a fine tooth comb. "It is all about replacing double-ply toilet paper with single-ply," he said. "Those nickels and dimes across the facility add up to real dollars. If the facility has never been optimized, we have seen savings as high as $4 per foot on average. For a facility that is already well run, the savings can amount to $.75 to $1.50 per square foot."

Portfolio optimization: Because the real estate area is so visible to the CFO today, Ernst & Young is seeing considerable portfolio optimization: "This includes shifting operations to lower-cost areas, consolidating real estate and selling real estate to raise capital. As borrowing becomes more difficult in the future, look for real estate to increasingly become an alternative source of capital for corporations."

Energy optimization: A critical reason that the green movement has caught on so convincingly in the commercial real estate business is that it saves money on operations. Costello recommended implementing an energy optimization program on both the supply and demand side of energy use. Obviously, the demand side looks for ways to cut energy use with better lighting and switches, to name just two. On the supply side, look to buying energy from competitive sources and to generating some of the power needs on site--a growing trend in the business.

Optimizing services: A new generation of shared-services initiatives is impacting some of the largest corporations in the country, according to Ernst & Young. Whether the shared-services initiative is internal or external, it will help optimize space use in the portfolio and help cut costs. "That has other cost benefits that go well beyond real estate," said Costello.

For more information
Ernst & Young:
www.ey.com

Tips on Outsourcing Corporate Real Estate

If the main impetus for outsourcing the real estate is to cut costs, then Paddison said the company must have good governance processes in place and a variety of up-to-date data must be available."We find that a lot of times when corporations want to outsource, they want to set a baseline so that they can measure cost savings. Then we come to find that they do not actually know what their real estate costs are," she said. "It is difficult to measure the success of a relationship, particularly on cost savings, if data is not available."

With many different service providers available, what should a corporation look for in a service provider? According to Paddison, the key ingredients are good chemistry and a good cultural matchup between corporation and service provider. The next critical element is to evaluate the people who will actually work on the project. "You can have great global processes and great functional expertise but if you don't have the right people executing, all this goes by the wayside," she remarked. "When you can combine the right processes and the right people, the result is just amazing."

Although numerous corporations have taken the plunge into outsourcing, there are still many who have not, according to Paddison, but interest is growing. "Last year, 40 percent of the RFPs that we received were for multi-regional outsourcing projects. We say multi-regional, we mean RFPs that cover the Americas, Europe, the Middle East and Africa or Asia and the Pacific."

In Global Fight for Workers, Don't Forget Mom You could be forgiven for forgetting about an employee's mother on Mother's Day but smart companies like Cisco Systems are keeping mom and a lot of other things front and center in the struggle to keep facilities fully staffed with the best workers. While competition for American workers may have been temporarily ameliorated by the economic slowdown here, in other areas of the world the race continues. At a CoreNet Global Summit in Mumbai (formerly Bombay) recently, Michael A. Zamora, senior manager AsiaPacific and Japan regions for Cisco Systems, shared some of the company's thinking. Although this area of the world has a huge population, competition for the best talent is fierce because so many people "job hop." When Cisco planned a new campus facility its team wanted to know how it could build a sense of community for its employees, along with a campus. Zamora told the audience that Cisco brought its North American experience to bear on the task but also hired local consultants to adapt to local market realities. Amenities at the new campus include: clubhouse and cafeteria; yoga studio; outside working environments connected wirelessly; waterfall; large, naturally lit atrium staircase; band room for staff who are amateur musicians; outside amphitheater for performances; bus transportation; library; medical room; Cisco store; ATM; concierge service; child care; open sports area with a small cricket pitch; gym with lockers and shower; and breakout area and pantry. One corporate amenity that was also incorporated was Cisco's TelePresence - a high definition video conferencing system that connects to its global facilities. The system is primarily for business. However, Cisco does let staff use it to communicate with family around the world during off hours. On Mother's Day, for example, employees can schedule time for visiting face-to-face with their moms...not a bad way to keep connected with your employees.

Energy Saving Plays Key Role in Sustainability Plans A new global survey of 1,254 senior business executives, including more than 300 CEOs, shows that energy efficiency plays a central role in corporate sustainability efforts -- a finding that has implications for how companies manage their real estate. Fifty-two percent of all respondents named energy efficiency as one of their leading sustainability priorities, a goal that is addressed primarily or solely through real estate strategies. The survey, conducted by the Economist Intelligence Unit (EIU), was co-sponsored by global real estate services firm Jones Lang LaSalle and seven other leading companies from different industries. For more information Jones Lang LaSalle: www.joneslanglasalle.com

Temperature Biggest Complaint about Offices

The survey reported:

• One in three workers surveyed said they have either accepted or left a job due to "the condition of the building and/or the amenities offered."
• Nearly half said their office buildings and office environments are either "bland" (36 percent), "dumpy" (seven percent) or "stodgy" (four percent).
• The most-frequent complaint: extreme office temperatures due to poor heating, air-conditioning and ventilation systems (47 percent).
• About a quarter of the respondents said the cleanliness of their buildings is either "marginal" or "appalling."
• One in three workers said they're concerned about getting sick or injured from unhealthy or unsafe building conditions.
• Fully 80 percent of workers said the overall condition of their office buildings affects how they perceive their employers.
• The vast majority (69 percent) confirmed that the condition of their office buildings affects their own individual productivity and motivation.

By Ron Derven, co-editor of Development magazine