What occupiers want
Total Property - Issue 3 2017
Executives charged with making corporate real estate decisions are focused on strategies to attract and retain staff and help enhance their productivity.
At the same time, they must continually find ways to reduce occupancy costs. The overriding challenge is to balance these two goals, which are often in opposition to one another.
This is the picture that emerged from a new global survey conducted by Cushman & Wakefield. The survey examined not only location and workplace strategies, but also how the priorities of those making corporate real estate decisions align with the priorities of their CEOs.
The findings show an on-going tension between the aspirations of corporate real estate executives and their practical decision-making. Too often, attempts to advance corporate strategic goals through real estate decisions must take a back seat to cutting costs.
SAVINGS v GROWTH
How successful are corporate real estate executives in translating their wider organisation strategy into day-to-day decision making?
Based on responses to questions on their perception of business challenges, they are having a difficult time transitioning from traditional cost centre models to more strategic resource models that support organisational objectives.
Previous global studies show that talent management and innovation are priorities for most CEOs, so it’s natural to suppose that corporate real estate strategies would be aligned with these goals. Instead, occupancy costs top the list of corporate real estate priorities.
Talent management issues are second to cost when the question is about strategic challenges, but when it comes to priorities for day-to-day decision-making, talent falls to fourth place. As for the goal of fostering innovation in the workforce, the impact of corporate real estate is negligible, in terms of what is driving decisions. Thus, the concerns of their CEOs may be an aspirational goal for most corporate real estate executives, but in reality they remain focused on cutting costs.
One reason might be that the people making corporate real estate decisions are too strong aligned to the chief financial officer.
It might not be a coincidence that 58 percent of survey respondents report to the CFO, and 58 percent of firms have cost savings targets. Approximately 48 percent of survey respondents globally said their property strategy is not aligned, or is only partly aligned, with their overall corporate strategy. But the survey results may also point to a solution: we found a strong correlation between firms with centralised property functions and budget ownership, and those that report strong alignment with business strategy.
As organisations grow, the alignment of real estate to wider business strategy becomes increasingly difficult without a centralised corporate real estate function. However, the survey showed that centralized corporate real estate teams often have difficulty in translating critical corporate challenges into practical decision-making. While nearly 58 percent of respondents have annual cost saving targets, very few take talent or innovation – let alone sustainability – into account when making budget decisions. Centralised control can be a powerful tool, but without the ability to advance nonfinancial strategic objectives, that tool is not being put to its best use.
Where a corporation locates within a metropolitan area region has direct impact on all of the senior executive challenges: access to talent, ability to innovate, strong customer relationships, operational excellence, and sustainability.
Location selection reveals the ways that strategic drivers are translated into practical decision-making.
Whilst cost remains the key location criteria for 28 percent of survey respondents, a number of other factors are rising up the agenda, with an increasing number of occupiers locating where they can attract talent, gain flexibility and enhance operational efficiency.
The dwindling supply of suitable labour to carry out business operations remains a fundamental challenge for companies, and is addressed by international and local site selection strategies. Survey responses show a growing preference for occupiers to locate in urban areas that offer strong transportation infrastructure and the opportunity to engage talent.
Nine out of 10 global survey respondents said the physical workplace is a fundamentally important or critical factor in securing superior workers and enhancing their wellbeing.
While there was significant variation by industry sector, the vast majority of occupiers see a connection between workplace and strategic corporate goals.
Yet, many said their workplace practices fall short of providing a “great place to work” or an ideal environment for attracting innovative workers. Only 63 percent of respondents said their companies dedicate less than 25 percent of space to collaboration, although this varied by industry: 47 percent of financial services firms devote at least one-quarter of space to collaboration, but only 8 percent of industrial sector firms do.
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