What are the benefits of centralizing Real Estate operations?

Real estate portfolio statistics

As a global organization, your footprint spans the globe, and significant sums of money are spent every day on rents, charges, facility management costs, etc.

Some decisions are made centrally, some are left to the local teams. The question is, what is the right balance between centralization and local autonomy?

For best results, decisions should be shared between local teams and HQ and HQ should be involved in every new project from the very beginning. A crucial part in keeping costs under control is the proper definition of needs, with a footprint that will allow for future growth, without representing excess space.

Then as the project progresses, communication needs to be fluid and transparent between teams, this is why a 3rd-party advisor is a great asset: connected to both local and central teams, he is the link, a facilitator who will make sure that critical information flows back and forth. Some of the benefits of centralizing the management of real estate projects are:

  • Saving resources: internal and external resources are only mobilized on projects that have received a preliminary greenlight from HQ

  • Avoiding last minute “surprises”: by involving all proper stakeholders from the very beginning, you eliminate the risk of discovering, late in the process, that a key factor was missed, jeopardizing the entire project

  • Keeping the project within reasonable boundaries: too often, local teams running a project on their own will tend to go for the best and the greatest. It’s good for HQ to keep an eye on specifications to prevent overspending

  • Ensuring compliance with Corporate guidelines in all aspects of the project: timing and cost obviously, but also location and design choices that impact the image projected by the company, for example

Centralization not only applies to projects, but also to portfolio management: examples of costly mistakes made by local teams unaware of an upcoming lease critical date are countless. A proper database will help you proactively manage lease expiry dates, upcoming options to terminate, renew, expand, purchase, etc. BY managing these dates ahead of time, you can level the playing field with landlords who are professionals at this, and save months or years in future rent payments.

What is the best software solution?

There are many great solutions out there. The first choice is to decide whether you want to develop your own in-house solution, or go with an existing software.

The first solution may seem appealing if you have the resources, as you can build a taylor-made solution. However, you need to consider wherther you really want to go through the learning curve instead of focusing on your core tasks, and long-term, consider whether you will always have the necessary resources to upgrade your solution over time?

In my experience, having seen clients waste considerable amount of time and resources trying to build their own solution, rather than going with ready-to-go, easy-to-implement, tested and proven solutions, I can only advise you to go with an existing, off-the-shelf software. Most of them allow for a bit of customization, and they will be upgraded over the years without you having to worry about it. The best platforms have started to include AI to perform some basic tasks like abstracting a lease, which is a huge time saver.

What if I don’t have a budget to centralize real estate projects?

It’s a question of visible costs versus hidden costs: how much does it cost your company to accept lease renewal rates dictated by landlords because the option dates and expiry dates are not managed proactively? How much does it cost your company to pay above-market rents because you don’t have a regular benchmarking process? How much does it costs to pay for excess space? Or to miss an early termination option date for premises you no longer need?

It’s easy to understand that these hidden costs can run in the hundreds of thousands of dollars or euros every year, maybe even every month. No matter how profitable your operations can be, there is no reason to waste money on real estate.

You can use minimal internal resources at your global HQ and leverage the resources of external consultants, agents and experts to do most of the work for you, and have them paid on savings and/or performance. At the end of the day, you can have dozens of professionals on your side and save time and money.

What are the key factors of success for a real estate project?

The key factors of success for a real estate project (for example, new lease acquisition, lease renewal, relocation, consolidation of several sites, sale, etc.) are:

  • A proper Expression of Needs, detailing the reason for the project (ultimate goal), how it aligns with the company’s strategy, size, technical specifications, HR requirements/impact, target location if already defined, timing and budget. If your company runs several projects every year, you should have a standard Expression of Needs form to be used across the organization.

  • Identification of stakeholders: central and local, operations, finance/tax, HR, supply chain, FM, insurance, procurement, and of course, real estate team.

  • Seamless communication and reporting protocol: your real estate core procedures should tell you who needs to be involved and informed, at what stage and using which support (email, internal platform, collaborative tools such as SLACK, ClickUp, Trello, etc.)

  • Well-defined KPIs and deadlines: a proper warning system to inform you immediately of any potential difficulty, budget issue or possible delays.

  • An escalation process so that issues can be addressed rapidly and in a satisfactory manner

Above all, success requires transparency, honesty and trust between all stakeholders, internal and external..

What books do you read?

That’s a totally different topic but I felt like sharing a few ideas here. I’m a strong believer in continuous personal development. Age and experience don’t matter, there’a always something more to learn, espectially when it comes to learning about yourself, pushing your limits and living outside of your comfort zone.

I enjoy reading books or watching videos from Jim ROHN, Anthony ROBBINS, David BACH, Steve HARVEY, Oprah WINFREY, Earl NIGHTINGALE, Bob PROCTOR, Wayne DYER, and Napoleon HILL.

A few books I enjoy:

Let’s work together!