CREM 2010: How important is the user? - Importance of user-orientation in Corporate Real Estate...

CREM 2010: How important is the user?

- Importance of user-orientation in Corporate Real Estate Management -

Andreas Pfnür

Sonja Weiland

ERES Conference 2010in Milan, Italy, June 23-26, 2010

25.06.2010 | TU Darmstadt | Research Centre for Real Estate Business Administration | Andreas Pfnür und Sonja Weiland1

Agenda

Motivation and aims of the survey

Method

Survey results

Conclusion


Agenda


Method

Survey results

Conclusion


Corporate real estate between owner-function and user-function: a more rival than complementary relationship

After the economic and financial crisis a change in German CREM could be observed

• the corporate real estate portfolio had no stabilising effect for the financial situation of the company

• now the real estate assets and the real estate management processes are critically analysed for efficiency

• We assume: CREM is more focused on objectives introduced by the users

Background situation and motivation


Germany United states, others

For example:• first extensive studies (status quo, strategic management and institutionalization in CREM) [Schäfers (1996), Pfnür (1998)] • focus on financial perspective [Henzelmann/Schweiger (2002), Henzelmann (2003), Hill (2003), Schulte/Schäfers/ Wiffler (2004), Pfnür (2004), Eicher (2007), Schweiger (2007)]• U.S. firms are more inclined to utilise a collaborative effort with end-users [Hartmann/Linnemann/Pfnür/Siperstein (2007)]

For example:• financial aspects of CRE [Manning/Roulac (1999)]• other trends and issues than the financial aspects of CREM which expected to face in the future [Carn/Black/Rabianski (1999)]• a new form of cooperation is started and will lead to more flexibility, cost certainty, and a higher quality of service [Asson (2002)]• strategic planning was rated by real estate managers as one of the top skill requirements for the future [Gibson/Luck (2003)]

dominant perspective: operational assets / increasing shareholder value

CREM self-image: „problem-solver“

Aims of the survey

The main aim of the survey was to verify:

Became the user less important in German CREM in the recent years and is this trend turning now?

Is there a relation between outsourcing of real estate-related functions and user-orientation in German CREM?

For reaching this main aim the following questions were examined:

1.Which relevance is ascribed by the CREM to the user-function of real estate compared to the owner-function?

2.What is the status quo of user-satisfaction actually and how is it measured and controlled by the CREM-Unit?

3.Is there a correlation between user-orientation and sourcing decisions?

[just an extract of the questions]


Agenda


Method

Survey results

Conclusion


Research design – concept and basic conditions

Sample:• target companies: major enterprises with more than 10.0001 employees (relevance criteria)• interviews had an average duration of 23 minutes• 184 German companies were invited to participate in the study• 97 usable datasets, which equate to a response rate of 53 %

Method:• a questionnaire survey was chosen as the method of data collection in German companies• data was collected by Computer Assisted Telephone Interviews (CATI) by a professional

team of market researchers• the senior executive in charge (Head of CREM, Director of CREM, SVP CREM) responded

to the questionnaire

Analysis (status quo):• univariate and bivariate descriptive data analysis (e.g. frequency and correlation)• visualisation by TOP-2-Boxes and BOTTOM-2-Boxes

25.06.2010 | TU Darmstadt | Research Centre for Real Estate Business Administration | Andreas Pfnür und Sonja Weiland

1 Data version: TOP 500 companies (2008), TOP 50 banks (2007) and TOP 30 insurance company (2007) from Axel Springer AG / WELT GRUPPE Ullstein GmbH/ Berliner Morgenpost

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Agenda


Method

Survey results

Conclusion


Importance of real estate as resource is underestimated

Asked for current main objectives of the CREM:

Against this background increasing user- and service-orientation would be relativized


Leverage effect of real estate management to increase labour productivity is underestimated


Asked for the average enhancement in labour productivity by an improved provision of real estates and services difference to status quo:

A high abstention from voting indicates uncertainness.

An other question shows: 82.5 % of the surveyed persons of charge estimate that users productivity would increase with higher workplace satisfaction.

There is a lack of knowledge about the effects of real estate to labour productivity

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Real estate finance themes comparatively seem to be a minor challenge


Statements of the respondents when asked for …

… the current challenges of their company: …the current CREM objectives:

Just 52.6 % respondents estimate that

CREM could contribute to the company success

by implementing compliance.

creating shareholder value and fulfilling the requirements

of capital markets

User-function currently predominates owner-function


Asked for the agreement with this statements:

Importance of the user-function is growing:In 1998 the relationship between owner-function and user-function was 50:50

User-orientation and user-satisfaction could be upgraded – part 1


Our CREM could influence the company's success especially by...

Self-assessment: • 85.6 % estimate that they are working user-orientated

User-orientation and user-satisfaction could be upgraded – part 2


Further self-assessment: • 54 % assume that their office space users are satisfied with the fulfilment of their space-

requirements• 56 % are using instruments to analyse the user satisfaction• Reasons:

• minor appraisement of benefit by person of charge or the top management• unavailable human resources

Outsourcing motives should be rethought


• most outsourcing-potential is

seen in the technical and infrastructural

facility management (33 %; 29 %)• the least potential is seen in the

specific key functions like assessing

the needed land and space or portfolio

management

unchanged in the last years1

• if outsourcing is intended

service providers are used especially

for technical FM• commercial FM often remains

in-house (41,7 %)

(e.g. subsidiary company)

1 see also Pfnür/Hartmann/Pärssinen 2008

Agenda


Method

Survey results

Conclusion


Conclusion

• an overemphasis of the owner-function by the real estate management leads to a misallocation of resources: the main aim of an optimal support of the core business would be missed

• the results in common demonstrate:

user-function become more important in German CREM but the implementation (measurable by the degree of satisfaction) is not completed jet• User-orientation is a main aim but not realised practically• User often perceive the CREM as part of financial management• Simultaneously there is a lack of job completion on location: the current real estate stock

do not fit completely the requirements of the users. Therefore the satisfaction of the users and labour productivity can not further be increased by real estate.


proposal for solution

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Conclusion


1 2alternative implementing own

resources on location

Outsourcing

problem disagreement with the main aim: focus on core business

Outsourcing is currently rather used for cost-reduction. Professionalising and more quality for the users are no reasons.BUT: cost-reduction often leads to an increasing dissatisfaction of the users and they will be displeased with the service provider The CREM-objective to fulfil the requirements of the users in the best way would be failed

proposal for solution

outsourcing 1) leverage effect of user-satisfaction for the company success has to be recognised

2) top management and CREM have to pursue matched strategies

3) service providers must be chosen due to quality and professionalization reasons and less due to cost-reduction

4) service providers have to show that their service is worth its price due to contributed success for the users

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Dipl.-Wirtsch.-Ing. Sonja Weiland

Institut für Betriebswirtschaftslehre

FG Immobilienwirtschaft und Baubetriebswirtschaftslehre

Technische Universität Darmstadt

Hochschulstraße 1, 64289 Darmstadt

Tel. +49 6151 16-4705

Fax +49 6151 16-4417

E-mail: [email protected]

http://www.immobilien-forschung.de

Thanks for your attention!

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Backup


Balance of sectors


Real estate portfolio


Lion`s share of the portfolio in Germany


Major influence by top management


• Competence for decision making by top and middle management is predominant• In spite of the stated objective of achieving users requirements the users have

comparatively a minor influence on CREM

CREM 2010: How important is the user? - Importance of user-orientation in Corporate Real Estate...

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