Corporate Real Estate Asset Management

Strategy and Implementation

Barry Haynes, Nick Nunnington, Timothy Eccles

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317427124
• Edition: 2
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

The second edition of Corporate Real Estate Asset Management is fully up to date with the latest thought and practice on successful and efficient use of corporate office space. Written from an occupier's perspective, the book presents a ten-point CREAM model that offers advice on issues such as sustainability, workplace productivity, real estate performance measurement, change management and customer focus. In addition, new case studies provide real-life examples of how corporations in the UK, USA, Hong Kong and Abu Dhabi actively manage their corporate real estate.

The book is aimed at advanced undergraduate and graduate students on corporate real estate, facilities management and real estate courses and international MBA programmes.

Chapter 1
The CREAM context

Introduction

Corporate Real Estate Asset Management (CREAM) is a relatively new discipline and has evolved from a number of professional areas that have converged and changed emphasis and jurisdiction over time. It is important, as an introduction to CREAM, to understand how the contemporary interpretations and models of CREAM, including our own, have come about. This chapter aims to set out the development of these interpretations and understand the definitions of other discipline areas that contribute to them.

In this chapter we explore the history of CREAM, its origins and the twists and turns that have led to its current significance, discipline, focus and scope. We also set out definitive definitions of CREAM and the associated disciplines that support it; and examine the knowledge and education that underpin it, which are inherently embedded within its contemporary remit.

Finally, we examine our own definition and the ‘10P’ model of CREAM, which is a framework that underpins the whole structure of this book, including the chapter headings.

An integrated approach: collapsing of boundaries

To understand the processes and practices of CREAM, it is important to have clear definitions. Unfortunately, as the disciplines which form the constituent parts of CREAM have grown, the boundaries between them have become blurred. This section attempts to clarify these definitions and track the changing nature of CREAM, the context within which it operates, its growing significance and its evolution.

To understand CREAM we first have to look at the definition of some of its components.

Asset management

In 2008, the Royal Institution of Chartered Surveyors (RICS) produced guidelines for asset management for the public sector. Included in these guidelines are two useful definitions relating to asset management. The first definition relates to what constitutes the asset base. The asset base is defined as:

The entirety of the land and building assets owned or occupied by an organisation.

(Jones and White, 2008, p. ix)

The second definition relates to asset management and is defined within the same RICS guide as:

The activity that ensures that the land and buildings asset base of an organisation is optimally structured in the best corporate interest of the organisation concerned. It seeks to align the asset base with the organisation's corporate goals and objectives. It requires business skills as well as property skills although only an overall knowledge of property matters is required. However, property input within the overall process is imperative.

(Jones and White, 2008, p. ix)

This definition of asset management clearly identifies the need to link the land and buildings of an organisation to its core business objectives. It also makes clear that professionals working in this area need to have both business skills and an overall knowledge of property matters. Our definition, set out later in this chapter, extends this to include the integration and coordination of other assets of an organisation, most significantly human capital.

Property management

Property management is a term that tends to be used in the UK and Europe, whereas real estate management is used in many other parts of the world.

Property management is largely concerned with the day-to-day operational aspects of the organisation's properties.

It is sometimes referred to as ‘operational’ and it is the activity of undertaking the professional/technical work necessary to ensure that property is in the condition desired, in the form and layout and location desired and supplied with the services required, together with related activities such as the disposal of surplus property, the construction or acquisition of new property, the valuation of property, dealing with landlord and tenant and rating matters, all at an optimum and affordable cost.

(Jones and White, 2008, p. ix)

Facilities management

Facilities management (FM) is the term used in the UK and Europe, whereas facility management is used in countries such as the USA and Australia.

The British Institute of Facilities Management (BIFM) has formally adopted the definition of FM provided by the European Committee for Standardisation (CEN) and ratified by BSI British Standards:

Facilities management is the integration of processes within an organisation to maintain and develop the agreed services, which support and improve the effectiveness of its primary activities.

(BIFM, 2009).

This definition as it stands appears a little vague since the terms ‘processes’ and ‘agreed services’ are not expanded upon. However, the BIFM add the following:

Facilities management encompasses multi-disciplinary activities within the built environment and the management of their impact upon people and the workplace.

(BIFM, 2009)

This additional definition of FM starts to establish that facilities managers are involved in a range of different professional disciplines. It also makes the linkage between the workplace and the impact it can have on its occupants.

The International Facility Management Association (IFMA) define FM as:

Facility management is a profession that encompasses multiple disciplines to ensure functionality of the built environment by integrating people, place, process and technology.

(IFMA, 2016)

This definition, like the BIFM, acknowledges the multidisciplinary nature of FM. It makes specific the role of the built environment and even includes technology. However, it lacks the connection to the core business strategy.

The Facility Management Association of Australia (FMA) defines facilities as:

Facilities can be generally defined as buildings, properties and major infrastructure, also referred to within the Facility Management industry as the ‘built environment’.

(FMA, 2009)

The FMA propose that:

The primary function of Facility Management (FM) is to manage and maintain the efficient operation of this ‘built environment’.

(FMA, 2009)

While this definition acknowledges that the built environment needs to be maintained efficiently, it does not link the provision of FM to the needs of the organisation's core business.

All the definitions used for FM have their strengths and weaknesses. The essential ingredients of FM are:

• it encompasses multidisciplinary activities;
• it improves the effectiveness of the core business; and
• it acknowledges the impact the workplace has on people's productivity.

Our definition has always been more strategic, based around FM having both an integrating and supporting function to help align the business strategy with its working environment.

Facilities Management (FM) aims to achieve organisational effectiveness by ensuring that the working environment, and the support services are in alignment, and integrated with, the business processes and the strategic direction of the organisation.

(Haynes, 2000)

Corporate real estate management

The definition of corporate real estate management (CREM) evolved in the context of a service provided to an organisation whose core business is not real estate (Bon, 1992). The aim of CREM is to contribute to organisational performance by ensuring the real estate portfolio is in alignment with the business strategy. The original ideas relating to CREM tended to relate to the private sector. However, advancement and developments in the public sector mean that CREM is now used in both the private and public sectors (Bon, 1992).

A definition of CREM was proposed by Bon (1992, p.13):

CREM concerns the management of buildings and parcels of land at the disposal of private and public organisations which are not primarily in the real estate business. An organisation which occupies space is in the real estate business and needs to manage it properly.

The use and ownership of real estate is common to all businesses and yet it has not traditionally been treated in the same way as other company assets. Increasingly, companies are now looking at the relationships between real estate and their core business in three key dimensions (Bon, 1994).

• Financial asset. This relates to the economic value of the real estate and can be represented as a fixed asset on the company accounts balance sheet. This dimension of assets resonates with ...