Corporate Real Estate Management: Strategy and Implementation

Citation

Cooke, H. and Keeping, M. (2011), "Corporate Real Estate Management: Strategy and Implementation", Journal of Property Investment & Finance, Vol. 29 No. 3, pp. 331-332. https://doi.org/10.1108/jpif.2011.29.3.331.1

The subject of corporate real estate gets considerably less coverage than the “other half” of the equation, that of the investor/developer. Yet without the occupier the value of a property is only based on an assumption of future occupancy and a functional space is just storing air.

Therefore it is pleasing to be able to review a book on corporate real estate, and specifically one on the asset management of the corporate real estate portfolio. What drives a business to occupy space and how they use it are essential questions that a business needs to understand. Yet even though property costs can be 15 per cent to 17 per cent of total business expenditure it struggles, either being neglected altogether or because board members own homes everyone has an opinion.

Investors and developers have real estate strategies, but the occupier will generally not have one; instead, outside a small number of larger organisations the strategy is non‐existent or rudimentary. In total contrast to other parts of the business, yet with the forthcoming changes to the accounting regulations by the IASB, the position of property will be much more explicit with the assets and liabilities reflecting the exposure to property on the balance sheet, rather than hidden away as a note in the accounts. Every company is going to have to consider their position on each property, and that will ultimately bring corporate real estate asset management to the fore; the timing of this book is therefore ideal.

That being said, the book is aimed at undergraduate and postgraduate conversion course students and the subject matter is thus extremely wide. Although a book of this length is limited by what it can cover, the authors do get to grips with a good number of key subjects and cover some of them in depth, with very detailed references to other works for readers to follow up on. By its very nature, the book approaches the subject from the theoretical side, although practical examples throughout and decent case studies at the end do assist in applying theory to practice.

Accounting issues are very important in the CRE world. The accounting impact will not necessarily be the primary driver but it can remove the attractiveness of certain options. The authors cover the subject of “freehold versus leasehold” ownership and how to look at the impact of the options. At the same time they consider the new regulations on leases and the impact on balance sheets. The Exposure Draft is still in circulation and is attracting considerable debate, such that it is looking likely that at best the effective date will be 2013/2014. The key will be whether pressure will lead to significant changes to the proposal, but within a few short pages the authors give a clear understanding of what is currently on the cards.

CRE is such a broad spectrum covering offices, shops, production plants, factories, etc. that in looking at the workplace and benchmarking, it is obviously difficult to develop every idea. Surprisingly, though, the authors do not reference the BCO occupier density study, which is pertinent for the UK office market and is a recent study (May 2009). The development of benchmarking and flexibility leads to the questions around what is efficient and effective space use and it is important to remember that the different routes firms have taken to get to where they are today has an impact on what they have now, how they use it, what they think of it and what they might do with it in the future. The “one size fits all” concept needs to be shown as being irrelevant. The theory of taking space and the use of matrices to determine what is best is well laid out and thought through. The reality that needs to be overlaid is that it applies to the very small minority, and that beyond that at some stage the whim of the CEO or chairman comes in to the selection process, and takes control.

Sustainability and property is a subject that appears to be expanding exponentially and to cover it in a chapter is a tall order. The overview link between CSR and sustainability is very helpful, as the two are often thought of as the same within a company. The lack of an international set of standards is highlighted and that must be something that needs to be achieved in the near future. Although the sustainability agenda is fast moving, it is somewhat surprising that some aspects of the book appear dated already (such as the reference to the European Performance of Buildings Directive, when Version 2 of the Directive is about to be implemented). The concept of the green lease is introduced but it would have been helpful if this had been done from the occupier's perspective (and if the Better Buildings Partnership's Green Lease Toolkit had been referenced). Discussion of the conflict between landlords and occupiers under the UK's CRC Energy Efficiency Scheme would have presented an ideal opportunity to expose pitfalls for all concerned under the “them and us” attitude that still persists between most landlords and occupiers. Also, if they had managed to focus more on the “holy grail” linkage between how “green” a building is and productivity within it, this would have delighted many CREAM professionals. These points notwithstanding, however, the authors should be congratulated for their treatment of the complex issues posed under the sustainability banner.

Overall, this is a very readable book that provides a good balance between width and depth of coverage. It is well written and the layout is logical, using checklists at the end of each chapter. One of the most important things that this book achieves is that it provides students with assessment tools with which they can understand real estate scenarios and predict their impact. Every real estate student, and a good many practitioners, should be encouraged to read this and utilise the tools provided.