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    Inviting Real Estate to

    the Strategy Table

    Results of the Accenture Global Real Estate Survey

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    Real estate is a massive investment,representing hundreds of millions ofdollars of assets for organizations andmajor corporations. These large and still-growing portfolios are obvious targetsfor the efficiency initiatives some otherbusiness functions have largely completedby now. Ignoring such a large portion ofthe income statement and balance sheetmay leave tremendous opportunity forstrategic cost reductions for most major

    corporations uncovered.

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    Real estate portfolios may representas much as 10 percent of the operatingexpenses and 40 percent of the balancesheets for large corporations. As such,real estate represents one of the lastbig concentrations of cost many ofthese companies still need to tackle.Inefficiencies are often evident in realestates large staffs, decentralized

    decision making, and the lack of robustperformance management programs (seethe sidebar Global real estate challenges).

    A recent global Accenture Real Estatesurvey suggests that many organizationsstill have significant holdings of ownedproperties despite the benefits ofleasing facilities, such as increasedflexibility. Limited visibility intoportfolios may be driving the reasoncompanies own rather than lease.

    Some companies do not have easyaccess to even the most rudimentaryinformation about their portfolios forexample, what they own, how much thesefacilities cost, which of these facilitiesare performing well, which functions areassigned to the space, and to what extentthose functions are using the assets.

    Why, then, have companies been so slowto drive costs out of real estate? Manywould argue with such an assumption,claiming that they are addressing the

    real estate spend with tactics such asimproving workplace design. Yet, intruth, the hard work remains ahead formany large organizations. To effectivelymanage their real estate, these companiescan benefit from first crossing multiplegaps: an organizational alignment gap,a technology gap, and a capability gap.

    Real estate organizations are often deeplyburied in the hierarchy of the business.Senior real estate officers are typicallyunwilling to rock the boat. Those whoare willing are seldom able to drivesignificant change because they do nothave the authority or budget to do so.

    Whatever their position in the hierarchy,senior real estate officers are often notprovided with the capabilities they needto prioritize the opportunities to improvetheir portfolios. Despite the signficanttechnological advances of the last 10years, these officers lack the technologytools to understand their portfolios andrespond to global, regional or corporatetrends. They are too often challenged tomanage decentralized portfolios withnon-standard processes and disparatetools and applications. Therefore, itmay be difficult for them to compare

    their portfolio expenses in regions with,for example, high versus low costs, orto identify geographical areas wherethe company is growing or declining.

    There is a compelling opportunity forcompanies to look hard at these expensiveassets that are core to the business,reflects its brand and can have significantinfluence over customers, investors andemployees. Finally, it may be real estatesturn to both define and align on the valuethe function provides to the business.

    One catalyst for this work could be theCEO or the senior real estate officerdemanding strategic alignment andproof of cost efficiencies. Anothercould be a real estate officer willing topush the strategic line. In either case,real estate functions face a multiyeartransformation that will require strongsponsorship from the C-suite. Further,they will often need partners in theorganization which requires speakingthe language of the business.

    Global real estatechallengesGlobally, survey respondentsidentified the largest challengespertaining to their portfolios as:

    83 percentAligning real estate strategywith broader business strategies(Finance, HR, or IT transformationprograms); this issue has been topof mind for a decade

    80 percentPressure to reduce costs

    76 percentOvergrown portfolios creatinggrossly underutilized assets

    60 percentLack of transparency and insightacross the portfolio to supportdecision making

    Base = Total Sample, excludes DontKnow ResponsesSource: Accenture Real Estate Survey,2012

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    Accentures 2012 Real Estate Surveyencompassed 181 companies withat least $5 billion in revenue, and aminimum of 10 million square feet intheir organizations real estate portfolio,across industries and geographies(North America, Europe, Latin Americaand Asia). These results validated thethree key observations about realestate trends that we outline here.

    The real estate function isnot aligned with the broaderbusinessSenior real estate officers are oftendisconnected from other business leadersin global companies. They can be left outof strategic discussions, typically isolatedmany layers deep in the organization.In the Accenture study only 25% of therespondents had a C-level title and thatwas only in the case where real estatewas managed directly either by the CFOor CIO. This is consistent with Accenturesbroader experience in the marketplace where the head of real estate

    is usually a director or vice president.This situation may reflect a commonattitude regarding the relative lack ofimportance of corporate real estate andof the senior real estate officers role.

    Unlike other functions, there is not astandard home for real estate in thetypical corporate hierarchy. Manycompanies lack a strong vision of howreal estate creates value; this can breedambivalence about where to place thefunction. Senior real estate leaders areoften not hired with a C-suite capabilityin mind; they have frequently grown up inthe function and serve as subject matterexperts rather than as strategic managers.

    Our survey results show that, in Europeand North America, 40 percent of seniorreal estate officers report to the CEO,nearly 20 percent each to the CFOand COO and the remainder to the CIOand Senior Vice President of HumanResources. In Latin America, 37 percentreport to the CFO and 28 percent to theCOO; in Asia, 30 percent report to the CIOand 28 percent to the CFO (see Figure 1).

    Exploring the gaps in real estate

    Figure 1: Real Estate reporting structure

    Who does the head of real estate report to in your organization? (Please select one answer only)* By region

    Chief Executive Officer (CEO)

    Chief Financial Officer (CFO)

    Chief Operating Officer (COO)

    Chief Information Officer (CIO)

    SVP of Human Resources

    Other

    Global

    2%5%

    17%

    19%

    28%

    30%

    Europe

    2%2%9%

    22%

    24%

    40%

    NorthAmerica

    2%5%

    14%

    19%

    21%

    40%

    LatinAmerica

    2%12%

    28%

    37%

    21%

    Asia

    2%10%

    30%

    8%

    28%

    22%

    Base = Total Sample, excludes Dont Know ResponsesSource: Accenture Real Estate Survey, 2012

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    These different placements implyvarying opinions regarding the realestate value proposition. For example,rolling up to HR suggests that realestate is a tool of culture. Rolling up tothe CFO suggests that real estate is anoperational cost, while rolling up to theCOO suggests that the function providesa pool of resources for operations.

    The net effect of any of these placementson real estate frequently is the same.For example, leaders without realestate expertise are often makingdecisions about real estate. Seniorreal estate officers can be boxed intoroles as followers, reactively delivering

    against requests. Because these realestate leaders are not plugged into thefoundational business strategy, they canhave no framework or context by whichto prioritize requests or even to determinewhat to offer the business. Even thoughthey are under pressure to cut costs,they often have little direction on howto do that to maximize the assets.

    The nature of the function can furthercomplicate the issue. Making changesto large real estate portfolios is

    similar to turning an oil tanker around;

    nothing happens quickly. The moreinflexible the portfolio and costly thechanges (from both a financial andorganizational point of view), the lesslikely that real estate leaders maybe willing to spearhead change.

    Asset ownership is a case in point (seeFigure 2). In the past, large organizationspurchased real estate because of thesolid return on investment. In thecurrent climate, that business case haslargely evaporated. According to ourstudy, companies on average own 62percent of their corporate facilities.

    The proposed new Financial AccountingStandards Board rules will eliminatethe distinction between capital andoperating leases and will require leasesto be accounted for as assets andlease payments as liabilities versusexpenses.1Even so, companies can gaingreater flexibility in their operations byleasing as opposed to owning propertywhere they maintain facilities unlessproperty management is their coremission (or high-performing facilitiesthat require significant investmentare critical to their success).

    Real estate is a massive asset;therefore, improved real estate portfoliomanagement could provide companieswith a significant return. Involvingreal estate leaders in the creation ofa vision to strategically control thisundermanaged and often underutilizedasset could provide the necessary framingfor improved decision making. Ultimately,companies could be well served byrecognizing the real estate valueproposition, as both a value protectorand a value creator, as well as the roleof the senior real estate officer as a keymember of the management team.

    Real estate organizations,

    unlike their peers, lack aprogressive business modelReal estate is often times a generationbehind in adopting business modelsthat align with current global marketrealities (see the sidebar Progressivebusiness models). We see real estatefunctions moving slowly in one directionor the other, based on the level ofcurrent centralization in the function.

    Figure 2: Asset ownership

    What type of facilities comprise the portfolio and generally what percentage of themare owned or leased?

    0% 51% to 75%1% to 25%

    % Own Overall (%)Average: 62%

    Corporate

    76% to 100%26% to 50%

    32%24%33%8%8%

    Base = Total Sample, excludes Dont Know ResponsesSource: Accenture Real Estate Survey, 2012

    1. Financial Accounting Standards Board, http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=900000011123

    http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage%26cid%3D900000011123http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage%26cid%3D900000011123http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage%26cid%3D900000011123http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage%26cid%3D900000011123
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    Progressive business models

    Figure 3: Examples of progressive business models

    Center of excellence

    Organizations differentiate

    between strategic, high-value

    activities & transactional activities

    & then centralize the strategic

    activities.

    Business process

    outsourcing

    Organizations outsource

    transactional as well as select

    strategic activities to a 3rd party toreduce costs, optimize services

    levels, & allow focus on core

    business.

    Shared services

    Organizations shifts

    transactional activities into the

    shared service center where they

    can be combined with similar non

    real estate efforts.

    Global integrator

    Organizations look to a 3rd party to

    oversee the transactional activities

    performed by other vendors, relying

    on the 3rd party to manage the

    reduction of costs & the

    optimization of SLAs.

    As organizations continue to try toreduce administrative costs, they havebegun to examine real estate as one ofthe last large contributors of cost thathas yet to be addressed. Many of theseorganizations recognize that, while

    real estate can be a value protector,it can also be a value creator.

    Armed with this perspective, theydifferentiate between what theyconsider strategic high-value activitiesand transactional activities and thencentralize the strategic activitiesinto a center of excellence. Thetransactional activities often stay atthe local level. In some organizations,however, the transactional activitiesare shifted into a shared servicecenter where they are combined withsimilar (not real estate) efforts.

    Recently organizations have begunto experiment with other moreprogressive operating models. Twothat are particularly interesting, bothof which leverage third parties toreduce real estate costs, are the global

    integrator model and the businessprocess outsourcing (BPO) model.

    With the global integrator model,organizations turn to a third-partyglobal integrator to oversee thetransactional activities performed byother vendors. The global integratortakes on the responsibility to reducecosts and optimize service levelagreements (SLAs), often by leveragingtechnology and governance to increasetransparency between vendors thatoperate in different geographies.

    With the BPO model, organizations oftenare outsourcing real estate in conjunctionwith other administrative functions. Theorganization may continue to operate acenter of excellence to manage the moststrategic real estate activities, but overall

    the entire real estate function becomesa service provided by a third party.

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    56%

    56%

    53%

    53%

    48%

    22%

    12%

    Implementing process standards toincrease productivity

    Investing in real estate technology toimprove transparency and insight acrossthe portfolio

    Implementing a more mobile way ofworking

    Implementing green initiatives to reducecarbon footprint

    Reorienting portfolio to highest and bestuse (acquire, divest, or re-purposeactivities)

    Outsourcing key real estate managementactivities and consolidating vendors

    Centralizing real estate managementactivities

    Real estate functions that are alreadycentralized are showing more interestin moving to a shared services model.As they do so, they shift transactionalactivities to others along with theaim of reducing costs and optimizingSLAs by combining these efforts withsimilar efforts outside real estate.

    Real estate functions closer to thedecentralized end of the spectrum aregravitating toward a global integratormodel. As a result, they rely on a vendorpartner to centralize operations, increaseportfolio transparency, reduce real estatestaffs, consolidate other service providersand reduce costs while optimizing SLAs.

    Our survey shows that many largecompanies have been slow to leveragevendors, regardless of the pressure toreduce costs even though real estateis often not a core element of thesecompanies business. Overall, the majorityoutsource less than 50 percent of theirreal estate functions to third parties, andfew outsource more than 75 percent.

    The Accenture research indicates thathealthcare (51 percent), resources (42percent) and federal agencies (45 percent)maintain the highest average of real

    estate employees, versus contractors,primarily based at headquarters. Mostother industries keep the majorityof their real estate employees in thefield, with retail and banking reportingthe biggest gaps between field andheadquarters workforces; with retailhaving 59 percent in the field andbanking 64 percent at headquarters.

    Geographically, real estate functionemployees are primarily located in thefield in North America (63 percent) andin headquarters in Latin America (64percent). Europe and Asia use a morebalanced approach, with a 6.5 percentdifferential between employees locatedin the field and at headquarters.

    While many organizations havebeen slow to change, more than 50percent of respondents confirmedtheir intent to transform their realestate organization relative to processstandards, technology initiatives,workforce mobility and green initiatives(see Figure 4). As an example, innovativemobility options under considerationinclude bring your own devices towork and using facilities such as retailbanks as satellite hoteling locationsfor geographically dispersed workers.

    Figure 4: Real Estate function initiatives planned in the next two years?

    Which of the following initiatives is your real estate function planning in the next two years?(% Select the three most important initiatives)Global

    Base = Total Sample, excludes Dont Know ResponsesSource: Accenture Real Estate Survey, 2012

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    Measuring operationalefficiency is in the infancystageFor many business functions, thedecision-making horizon has shortenedto a fraction of its former length,due to sociopolitical and economicinstability, globalization, mergers and

    acquisitions, increasing competitionfor talent and customers as wellas technologically enabled, just-in-time project-based cultures.

    The days of creating a 10-year plan,printing it and placing it on the shelfare in the rearview mirror for many. Inorder to be effective against the freneticpace of change, real estate leaders canbenefit from being agile, often measuringand refining their strategy not merelyreactively but proactively, anticipatingthe internal and external conditionsthat can create the need for change.Eighty-nine percent of respondentsidentified market volatility as having amoderate or high impact on their realestate function, with a particularly highimpact in consumer goods and services.

    Increasingly, real estate organizations arebeing tasked with improving performanceof the portfolio and forecasting demandand associated operational costs. Thehomegrown technological systems thatreal estate functions have traditionallyused may not be up to the task. Theytypically do not create transparencyinto the portfolio, cannot effectivelyscale to meet continuous improvementgoals or keep pace with rate of growthor contraction, and do not supportstandardization or continuity.

    Lack of integration can compoundthe problem. Different real estatebusiness units handle services such as

    facilities, leasing, workplace design,facility management and maintenanceand project management; and theirapplications are not integrated. Thismeans there can be separate homegrownsystems (or, in many cases, manualprocesses) for leasing, workplaceplanning, tracking occupancy andutilization, operations and maintenance.

    Figure 5: Real Estate technology landscape

    What is the current state of the real estate technology landscape in your organization?(Please select one answer only)Global

    Global

    Customized real estate enterprise data warehouse implemented

    Integrated workplace management system implemented with ERP integration, either

    as part of ERP or integrated into ERP

    Integrated workplace management system implemented

    Integrated workplace management program underway, but not implemented

    Some automation, but largely point solutions with little integration

    Little automation, primarily offline Excel worksheets, created and consolidated manually

    8% 30% 36% 15% 8% 3%

    Note: Due to rounding, total may not equal 100 percent.

    Base = Total Sample, excludes Dont Know ResponsesSource: Accenture Real Estate Survey, 2012

    Regardless of the technologicalsophistication in other business functions,a full 75 percent of real estate functionsparticipating in the study have notimplemented integrated systems (seeFigure 5). In other words, at thosecompanies, data is not centralized;there is no master data management.Further, there are no management

    tools that can mine data in real time toprovide a full view of the portfolio orcorrelate key management indicators.

    The risks associated with this approach,given the size of the assets involved,can be nothing less than monumental.Real estate leaders are makingdecisions on transactions valued in thehundreds of millions of dollars oftenwithout knowing what assets theyhave, where assets are underutilizedor the condition of the assets.

    Even Fortune 100 companies frequentlyrely on manual data processes to collectdata and reconcile conflicts. Instead ofa quick scan of a visual dashboard ofportfolio performance or trends, manyreal estate leaders are spending their timecalling regional resources. These resourcesmay define assets differently, which canopen the door to under- or overestimating

    costs. Direct comparisons are oftendifficult, and it can be easy to losewhole buildings. You cannot measurewell what you do not know you have.

    Real estate organizations wanting toachieve strategic management objectives and senior real estate officers lookingto gain a place at the strategy table can benefit from using data visualizationand analytics tools as a staple of in-house real estate management (seethe sidebar Data visualization and

    analytics tools for real estate).

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    Figure 6: Real estate visualization tool

    0Staff housed Seats allocated Seats uti lized

    Workplace utilization

    %o

    fpopulation

    %U

    sage

    10

    20

    30

    40

    50

    60

    70

    Energy use by department

    Time period

    0

    10

    20

    30

    40

    50

    60

    70

    OctSeptAugJulJunMayAprMarFebJan Nov

    Effective management requires wellorganized data. A large, complexportfolio of real estate is no exception.Managers can benefit from analyticstools that consume massive amountsof disparate data so they can uncoverinsights regarding the current usage ofreal estate assets and accurately predictbusiness needs.

    High-performing real estate organizationsare implementing tools such as that shownin Figure 6. These provide visualization ofhow data in one segment of the businesscorrelates to other demands on theportfolio. Dashboards provide repeatableviews of key indicators and also allowintuitive drilldown to see underlying issuesneeding attention.

    Data visualization and analytics tools forreal estate

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    In Accentures experience, manycompanies tend to focus onincreasing the efficiency andreducing the cost of the portfolio.But such a singular focus can lose

    value over time: Organizationscan save only so much beforeeliminating the portfolio in itsentirety. High-functioning programsapply a balanced perspectivethat aligns initiatives across thefour areas of real estate value,considering real estate both a valueprotector and a value creator. (SeeFigure 7.)

    EfficiencyThis is not just about findingspace at the right price. A broaderperspective includes determiningthe right amount of space requiredby the organization and definingthe right type of space needed tosupport an evolving workforce,where the space is well utilized andvalued. Companies now have an

    opportunity to reduce space andreallocate workspaces from theindividual to a team, a function likeR&D, or even a space where salesteams can interact with customers.

    EffectivenessReal estate often the primaryarena where work happens cansignificantly impact behaviors. Theworkplace may have a substantialinfluence on individual and teamperformance and it can help orhinder collaboration, innovationand time to market.

    Many existing real estateorganizational structures arenot optimal for positioning real

    estate as a tool of performance.They split accountability for realestate among heads of businessunits, they make location-specificdecisions without taking a global

    perspective, or they use manyoutsourcing providers with a poorlydefined governance structure.

    EngagementReal estate is often the largestmanifestation of an organizationsculture and, as such, cansignificantly impact workerexpectations and engagement.

    Workplaces can influence whatemployees think and say about theiremployer, and they can enhance acompanys brand and help attractand retain talented employees.The extent to which workplacesare tailored to local cultures andwork styles can considerably affectindividual and team satisfaction.

    EnvironmentBuildings can be one of thelargest contributors to pollutionas well as a large contributorto an organizations carbonfootprint. Real estate can berationalized when redundancyor underutilization exists, byestablishing flexible arrangementsthat avoid gaps betweenrentable and usable space, orby implementing an alternativeworkplace strategy. Also key areprograms to help improve energymanagement and, where applicable,energy procurement. All of theseefforts could assist in improvingsustainability performance.

    The Four Areas of Real Estate Value

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    Figure 7: Four Areas of Real Estate Value

    Recognizing and rewarding

    the right behaviors

    High performance individualsand teams

    Lean solutions andoperating models

    Managing portfolio information

    to drive efficiency &effectiveness

    Batching work orders anddriving user satisfaction

    Database reporting increasing visibility intopain points and value drivers

    Right people doing the right

    thing at the right cost

    Lean solutions and operatingmodels emphasizing life-cyclecosts over first costs

    A range of fixed and variablecost options allowingincreased portfolio flexibility

    LEED/Green solutions

    Managing health andsafety

    Rightsizing the RE footprint

    We focus on effectiveness, efficiency, engagement, and environment...

    Business

    stra

    tegy

    Environm

    entalstrategy Techno

    logy

    str

    ate

    gy

    Humancap

    itals

    trategy

    2. Efficiency

    Leveraging realestate

    1. Effectiveness

    Connectingpeople andideas

    4. EnvironmentLowering the

    carbon footprint

    3. EngagementChanging the

    culture

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    A Call to Action

    To move from a transactional to astrategic vision of real estate, companiescan take the following three steps, whichalign with the key observations about real

    estate trends we have discussed here.

    Step 1: Align to the corebusiness strategyTo do so, companies would define thevalue of the real estate organization andthe role that it will play. Those decisionscan enable them to rationalize real estateportfolios around key organizationalfunctions as well as to align where realestate reports in the organization. Theymay also be able to identify, prioritize

    and realize opportunities to optimize theportfolio relative to the organizationalgoals and objectives.

    Step 2: Increasetransparency in the portfolioAs we noted earlier, companies cannot

    measure well what they do not know theyhave. For many companies, the time islong past when manual data processeswere sufficient to manage their real estateportfolios. They urgently need to developthe processes to gather and maintainportfolio data, invest in technology tostore and analyze portfolio data, anddevelop performance metrics to gauge theperformance of the portfolio. Standing onthis foundation, companies can implementanalytics capabilities in an effort toimprove their real estate forecasting.

    Step 3: Implement aprogressive business modelCompanies can benefit from continuing

    their evolution to a progressive businessmodel. The rationale for the choice ofmodel can be socialized internally andwith the executive team. That work cansupport the creation of a performance-based culture focused on ef ficiency.(See the sidebar The Four Areas of RealEstate Value.) With that foundationin place, companies can move on tooptimize how portfolios are managed,serviced and financed as well as how tocentralize control of the portfolio andservice management.

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    About the authorsAthena Reilly is a managing director inAccenture Management Consulting andis the global lead of the Accenture RealEstate Solutions practice and is responsiblefor the end-to-end real estate lifecyclemanagement capability development. Shespecializes in real estate strategy, operatingmodel and organization design, facility

    management best practices, real estateprocesses, and performance measurement.Athena has assisted a number of Fortune500 organizations and public serviceentities to transform their real estatefunction and portfolios into highest andbest use capabilities and assets. Athenahas been in management consulting forover 14 years. Athena has a BS in Writingand a MBA with an emphasis in Finance,attending Utah State University.

    Jim Barlow is a senior manager inAccenture Management Consulting andleads the Process & Technology team in theAccenture Real Estate Solutions practice.He has 20 years of experience in real estatemanagement tools that spans both thecommercial and public sector, and as apractitioner as well as consultant. He hasdeveloped custom technology solutionsand has been a thought leader throughthe evolution of modern business softwaretools. Jim brings a unique blend of domainexperience with an understanding of the

    core business need, and the technicalcapabilities to define, lead and manageenterprise-tier systems implementations formany of todays largest and complex realestate portfolios.

    Abby Levine is a senior manager inAccenture Management Consulting and ispart of the Accenture Real Estate Solutionspractice and assists clients in leveragingtheir investments in real estate portfoliosto support their broader business strategy.She specializes in real estate strategy,

    workplace strategy, portfolio optimization,and performance management. Abbyfocuses much of her efforts helpinghealthcare and life science companies to

    optimize their real estate portfolios to drivecost savings and to reallocate assets totheir highest and best uses. Abby has beenin management consulting for over 18 years.Abby has a BA in Economics and a MBAwith an emphasis in Finance, attending theUniversity of Southern California.

    About AccentureAccenture is a global managementconsulting, technology services andoutsourcing company, with approximately259,000 people serving clients in morethan 120 countries. Combining unparalleledexperience, comprehensive capabilitiesacross all industries and business functions,and extensive research on the worldsmost successful companies, Accenturecollaborates with clients to help thembecome high-performance businesses andgovernments. The company generated net

    revenues of US$27.9 billion for the fiscalyear ended Aug. 31, 2012. Its home page iswww.accenture.com.

    About AccentureManagement Consulting,Finance & EnterprisePerformanceAccenture is a leading provider ofmanagement consulting services worldwide.Drawing on the extensive experience of its

    16,000 management consultants globally,Accenture Management Consulting workswith companies and governments toachieve high performance by combiningbroad and deep industry knowledgewith functional capabilities to provideservices in Strategy, Analytics, CustomerRelationship Management, Finance &Enterprise Performance, Operations, RiskManagement, Sustainability, and Talent& Organization. Accenture Finance &Enterprise Performance consulting serviceshelp Finance organizations maximize thevalue they create for their enterprises. Formore information, please visit us atwww.accenture.com/fep.

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