CRE and the expanding
sphere of influence
Emerging social trends that will impact corporate
real estate in Asia Pacific
Jones Lang LaSalle pioneered the corporate
real estate offering in Asia Pacific. Today our
platform provides unmatched services across a
single project, country, or global portfolio. Our
commitment to shaping our business around
helping clients improve their productivity and
delivering on our promises keeps us at the
forefront of the industry. Our global platform of
transactions, lease administration, and project
and facility management services is backed by
our expertise in strategic consulting, workplace,
and portfolio strategy to provide an end-to-end
service offering.
CRE and the Expanding Sphere of Influence
Companies across the globe are increasing their demand for maximum productivity and smart
growth – a shift from the focus on cost control that came with 36 months of turbulence in the
corporate operating environment.
Global influences are changing the landscape for corporate real estate (CRE). CRE leaders are
being required to diversify their teams and become true business partners. CRE organizations are
being restructured to operate more effectively in a complex environment. Vendor partnerships are
increasingly being adopted as a way of empowering CRE to drive greater corporate value. The
workplace is seen as an opportunity to attract and retain talent, to drive both improved productivity
and sustainability.
In Asia Pacific, the return to business growth in most markets, combined with the continued need
for cost control, is presenting CRE executives with twin challenges. As companies grow and
expand their portfolios in the region, they will be challenged by the relative lack of transparency and
varying degrees of maturity around real estate in many of Asia’s growth engines.
Post the global financial crisis (GFC), many growing cities in Asia will run the risk of supply
constraints because development activity slowed down in 2007–2008. This means companies
will need to manage their real estate portfolios very tightly in order to balance growth and cost
effectively.
Against this backdrop, we explore how these dynamics are impacting CRE in Asia Pacific. We draw
from the results of Jones Lang LaSalle’s Global Corporate Real Estate Survey 2011 for insight
about the future path, challenges and opportunities that are facing CRE. We then take a deeper
dive into six social trends that will shape the future of our industry in the region.
Emerging social trends that will impact corporate real estate in Asia Pacific
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3
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5
6
7
Opportunity Emerges from Crisis: Global CRE Survey 2011
Workplace: Attracting and Inspiring the Next Generation of Talent
Lease Accounting Changes: Brace for Impact!
Sustainability: Companies Go Green to Enhance Productivity
Partnerships: Making CRE Partnerships Work in Asia Pacific
Talent: CRE and the Swiss Army Knife
CRE Structures: Better by Design
Jones Lang LaSalle 1
Opportunity Emerges from Crisis
Global Corporate Real Estate Survey 2011
Jones Lang LaSalle’s inaugural Global Corporate Real Estate Survey, undertaken in partnership with Thomson Reuters, drew responses
from more than 500 CRE executives from 36 countries worldwide. The survey findings unveiled four overarching global trends impacting the
future state of CRE, which are summarized below, and are further explained in the full report.
1
3
Higher demands on productivity:
Progressing toward partnerships:
CRE teams are required to be more relevant and resourceful, enabling CRE leaders to further enhance productivity and efficiency
CRE teams are moving toward more sophisticated partnership models
Having been placed in the eye of the storm during the GFC, CRE
teams now experience more scrutiny from internal stakeholders,
increased demand for real-time reporting, and tougher performance
targets. This should help CRE teams be better prepared to address
returning growth as well as the continued uncertainty in some
sectors and markets.
Driving improved productivity through the implementation of
more strategic real estate initiatives will define best-in-class CRE
organizations. A shift from short-term survival tactics toward
medium-term strategic initiatives aimed at driving productivity
enhancements is both possible and required.
2
Balancing the dual forces of growth and right-sizing:
CRE organizations are exposed to complex targets such as dealing with the contrary pressures of growth and right-sizing
Tasked by corporate leadership to deliver sizeable cost savings,
CRE teams embarked on a series of short-term tactical real estate
plays focused exclusively on driving direct cost savings from
real estate portfolios. This forced a “step change” in the form,
function, and structure of the CRE organization’s engagement with
leadership.
Moving forward, a key challenge for CRE teams will be to deliver
a platform that enables the business to pursue select growth
opportunities, often in markets that lack transparency, while
simultaneously right-sizing CRE portfolios within mature markets.
Jones Lang LaSalle
To meet the challenges of the next three years, CRE teams will
need help from the outside. Evolution along the outsourcing curve
will be necessary to provide capacity for CRE leaders to elevate the
function within the organization.
For those already engaged with the market, a re-evaluation of
existing partnerships with key service providers may be undertaken
to ensure that value and benefits are being extracted to the
satisfaction of the higher levels of the organization.
4
Reshaping CRE structures and skills:
A new talent requirement is emerging, resulting from a tougher operational environment, forcing CRE leaders to rethink team structures and skills
CRE teams were exposed during the period of economic
uncertainty as senior company executives - the “C-suite” – gained
a better appreciation of real estate fundamentals and the costs
associated with real estate portfolios. While this presents new,
tougher challenges for CRE teams, it also creates an opportunity for
greater engagement.
CRE leaders should consider re-evaluating their existing teams
and skills. They must be prepared to redesign team structures in
order to reduce focus on tactical (more easily outsourced) activities.
Greater attention on driving sustained relationships with business
leaders will facilitate better long-term alignment between business
and CRE strategies. Whether through investment in up-skilling
existing staff or acquiring fresh talent – including talent from both
within the industry and possibly outside the traditional boundaries
– CRE leaders must broaden the skill sets residing in their
organizations today.
For a copy of the full report, Opportunity Emerges from Crisis:
Global Corporate Real Estate Survey 2011, please visit
www.joneslanglasalle.com/global-cre-survey-2011
For more information, please contact:
Five keys to CRE success
Stuart Hicks
CEO Corporate Solutions
Americas
[email protected]
2. Place a strong focus on real estate strategies that are
highly efficient and drive enhanced productivity, and align
them with top business goals.
John Forrest
CEO Corporate Solutions
Asia Pacific
[email protected]
1. Generate a long-term plan for the evolution of the CRE
team that supports and facilitates wider business growth.
3. Leverage service providers and find partners that will
help increase capacity and capability to tackle the twin
pressures of right-sizing, while pursuing selective growth.
4. Refocus and restructure the CRE team both in response to
growing scrutiny from senior business leaders and to drive
a more strategic agenda.
Vincent Lottefier
CEO Corporate Solutions
Europe, Middle East and Africa
[email protected]
5. Focus on talent to ensure that the CRE function is suited
to engage and manage the raised expectations of an
informed C-suite.
Jones Lang LaSalle Opportunity Emerges from Crisis
Over the next three years, the challenges of managing CRE will
intensify. The strong and sustained interest from senior business
leaders in real estate costs and strategy represents an unparalleled
opportunity to elevate the CRE function and its contribution
even further. Along with this, CRE professionals will have an
unprecedented opportunity to accelerate their careers.
2
Perspectives on workplace
Attracting and Inspiring the Next Generation of Talent
Applying Maslow’s hierarchy to drive productivity in the workplace
As businesses continue to globalize their operating footprints, a
new generation of employee is entering the workforce with different
work styles and expectations. Technology is advancing so rapidly,
it is difficult to keep up – let alone anticipate what’s next. With
the tremendous influx of technology solutions coupled with the
pressures to dramatically reduce costs, support employee work-life
balance, and increase sustainability, it is tempting to ponder the
extinction of traditional office space altogether.
At the same time, a war for talent is brewing. Despite high
unemployment rates in many developed countries and workforce
surpluses in developing countries, the talent risk is big – and
growing – for a number of reasons. These reasons include the
ageing populations in mature countries, uneven skill levels in
emerging markets, and an increasing demand for workers who
have the rare combination of both technical and knowledge skills.
In Asia Pacific, many companies face specific risks due to the rapid
rate of growth in the region and the increased competition for talent
accompanying the expansion of Asian companies outside their
home markets.
As CRE teams embrace next-generation real estate models, it is
imperative to deeply understand the new workplace milieu and its
impact on how employees work in order to provide what they need
to thrive – from supporting basic needs to enabling productivity,
creativity, and innovation.
The pyramid approach
A pyramid of human motivational needs, developed by psychologist
Abraham Maslow, has long been used by organizations to
understand what motivates individuals (Figure 1). Maslow’s pyramid
has been used by global corporations to evaluate the needs,
values, drivers and priorities of people from different countries in
communicating business goals and strategies across cultures. How
can Maslow’s pyramid be applied to CRE to better meet the diverse
and evolving needs of today’s – and tomorrow’s – workforce?
The pyramid and the workplace
Applied to the workplace, Maslow’s four-level pyramid can be
adapted from bottom to top to describe needs such as the following:
• Physiological: Physical comfort, including adequate heat, air
conditioning, lighting, air quality, drinking water, and restrooms
• Safety: Safe, healthy working conditions, including protected
travel to and from work and security of data and other critical
corporate properties
• Attraction/Belonging: An engaging corporate culture,
collaboration among diverse individuals, and being a part of a
desirable team
• Self-actualization/Esteem: Feeling of pride as a result of
making contributions that are innovative, creative, and solve
important problems
Figure 1: Maslow’s Pyramid Approach
Self-actualization/Esteem
Attraction/Belonging
Physiological
Jones Lang LaSalle
Company culture
Collaboration
Teaming
Security of person
Security of resources
Health
Safety
Source: Abraham Maslow, A Theory of Human Motivation, 1943
Innovation
Creativity
Problem solving
Air
HVAC
Water
Lights
Shelter
Figure A: Stages of Workplace Mobility Programs in Asia Pacific in 2010
25%
Overall
21%
Australia
12%
47%
25%
China and India
7%
6%
53%
Japan
Rest of APAC (mainly Hong
Kong and Singapore)
41%
13%
20%
20%
13%
25%
Limited or partial program has
been implemented
Plan has been proposed but not
yet scoped out or developed
No plans underway at this time
13%
20%
10%
62%
Comprehensive program is in
place and underway
15%
6%
7%
20%
6%
13%
Workplace mobility program is in
the planning phase
Source: Jones Lang LaSalle, Global Corporate Real Estate Survey 2011
Traditionally, CRE has focused on the bottom two levels of this
workplace hierarchy within brick-and-mortar corporate-controlled
facilities. In order to make the workforce thrive, CRE should
address the upper levels of the hierarchy, including the following:
1. Provide the right environment and tools to create the most
productive workplace possible.
2. Be an anthropologist and dig deep to truly understand the voice
of the worker and the variations across different groups.
3. Realize the significant influence of location on workplace – and
vice versa.
4. Invest thoughtfully in your workers, moving the criteria from
what best suits the job function to what best enhances their
productivity.
5. Engage with your senior leadership; the success of workplace
programs depends on the ability of the C-suite to drive these
concepts through the organization.
For more on how CRE can contribute to a thriving workforce,
download a copy of the original report, Attracting and Inspiring
the Knowledge Worker: Applying Maslow’s hierarchy to drive
productivity in the workplace, at
www.joneslanglasalle.com/CRE-Impact
For more information, please contact:
Martin Hinge
General Manager, Project & Development Services
Asia Pacific
[email protected]
Cameron Scott
Chief Operating Officer, Integrated Facilities Management
Asia Pacific
[email protected]
Conclusion
In a knowledge economy, productivity is driven by the workforce,
which should be both talented and enabled. CRE is in a position
to address both imperatives as workplace strategies reinforce the
stickiness of talent to the firm by contributing to an attractive brand
image, and enable the workforce to become more productive by
providing an optimized environment.
Jones Lang LaSalle Attracting and Inspiring the Next Generation of Talent
Workplace strategy back on the agenda
Today, CRE executives can no longer be complacent about the need to provide a workplace that contributes to the firm’s ability
to attract, retain, and enable a productive workforce. This shift is reflected in the responses to Jones Lang LaSalle’s Global CRE
Survey 2011. The GFC resulted in the cancellation or postponement of a large proportion of workplace strategy projects, due to
economic uncertainty and capital expenditure constraints. Today, workplace mobility is the number one initiative back on the agenda
according to respondents.
3
Perspectives on lease accounting changes
Brace for Impact!
How global lease accounting changes will lead to behavioral and skill set changes for CRE
executives
There has been much discussion around how global lease
accounting changes are likely to impact company balance sheets
and profit and loss statements (P&Ls) around the world. What has
been given less attention is the behavioral and skill set changes
that will be required of CRE executives.
Are CRE executives in Asia Pacific prepared?
In Asia Pacific, Jones Lang LaSalle polled CRE executives at a
webinar held in November 2010 to gauge their preparedness for the
coming lease accounting changes and found that more than 70%
were unaware or unprepared for the changes.
In the beginning, many CRE executives viewed the changes as
something that would have the greatest impact on the finance and
accounting communities. In recent months, many CRE executives
have begun to realize that the impact on their industry will be just as
profound.
Impact to the CRE profession
Although the final standards have yet to be issued, CRE executives
should still begin preparing now for the behavioral changes that
will be required of them. Jones Lang LaSalle has identified two
overarching behavioral trends that will challenge CRE – a shift
towards centralization and an increased need for strategic portfolio
management (Figure 2).
The responses to the Asia Pacific poll suggest that there are three
areas that CRE executives should focus on in order to prepare for
the impact of the changes:
CRE executives unprepared globally
Jones Lang LaSalle’s Global CRE Survey 2011 demonstrates
that globally, 60% of CRE executives are not yet familiar
with the details of the proposed changes to lease accounting
standards. The industry will need to increase awareness and
education given the anticipated behavioral and skill set changes
that will be required for CRE executives to deal with the impacts
to their real estate portfolios.
Figure 2: Behavioral Challenges of Global Lease Accounting Changes
for CRE
Centralization
Strategic portfolio management
• Centralized process for all
lease approvals
• Increased need for robust
strategic planning
• Increased involvement and
scrutiny by C-suite on CRE
decisions – affects bottom line
• Pressure for business to
anticipate future needs with
reasonable certainty
• Centralized control of real
estate costs on the P&L
• Understanding of the true cost
of flexibility
• Shift in how lease vs. buy
decisions are made
Source: Jones Lang LaSalle
Acquire basic accounting knowledge – Over 75% of respondents
indicated that understanding the financial impacts and articulating
them to senior management is going to be their biggest challenge.
Consider centralization – more than half of the respondents
think that centralizing the P&L will be the biggest challenge of the
centralization trend.
Manage the portfolio strategically – the biggest challenges of the
strategic portfolio management trend, according to respondents,
will be the ability to anticipate future business needs (41%) and
understanding the true cost of flexibility (28%).
Figure B: Familiarity of CRE Executives Globally With
Proposed Changes to Lease Accounting Standards
I am very familiar with
the proposed rule change
15%
40%
45%
I am aware of the proposed
change but not familiar with
the details
I am not aware of the
proposed rule change
Source: Jones Lang LaSalle, Global Corporate Real Estate Survey 2011
Jones Lang LaSalle
Figure C: Seniority of CRE Leaders’ Reporting Line Post-GFC
10%
1%
C-suite
Managerial level
26%
63%
Executive level
Operational level
Source: Jones Lang LaSalle, Global Corporate Real Estate Survey 2011
Conclusion
In light of the proposed changes, CRE executives will need to add
additional layers of consideration to strategic planning such as
impacts to financial ratios; loan covenants and stock price; true cost
of flexibilities; and viability of buying versus leasing.
It will not be certain how much more complex the planning process
will become until the final standards are released. Regardless, this
is as good an opportunity as ever for CRE executives to rethink
their current planning processes and ensure that they are robust
and truly strategic because now the prize is bigger if it is done right.
For more information on the challenges facing CRE and what
you can do now in order to prepare, download a copy of the full
report, Lease Accounting Changes: Brace for Impact!, at
www.joneslanglasalle.com/CRE-Impact
For more information, please contact:
Sylvia Koh
Head of Corporate Consulting
Asia Pacific
[email protected]
David Brown
Head of Lease Administration
Asia Pacific
[email protected]
Jones Lang LaSalle Brace for Impact!
CRE increasing alignment with finance
Jones Lang LaSalle’s Global CRE Survey 2011 confirms that
the growing cost consciousness since the GFC has brought
CRE teams increasingly into reporting alignment with CFOs and
finance departments. This will likely intensify when the proposed
changes to global lease accounting standards are implemented
as property will have an instant balance sheet impact.
4
Perspectives on sustainability
Companies Go Green to Enhance Productivity
Results of the 2010 CoreNet Global and Jones Lang LaSalle global survey on CRE and
sustainability
Corporate sustainability programs today are increasingly focused
on employee productivity and health as more companies say they
will pay extra for green leased space.
Companies that occupy office space around the world consider
sustainability as a key factor in their space occupancy plans, and
half of CRE executives say they will pay extra for space in green
buildings, according to the fourth annual Sustainability Survey
conducted by CoreNet Global and Jones Lang LaSalle (Figures 3
and 4).
The survey of CRE executives responsible for real estate portfolios
across the globe reveals an industry in the process of reconciling
the focus on reducing environmental impacts of buildings with the
need to control costs and support corporate financial performance.
Figure 3: Sustainability is Considered a Fundamental Factor in
Location Decisions
8%
Not a factor
23%
A factor taken into account
51%
18%
“Tie-breaker” factor
Major factor
Source: Jones Lang LaSalle and CoreNet Global Sustainability Survey 2010
Figure 4: Occupiers are More Willing to Pay Premium Rent for
Sustainable Space
Not willing to pay a
premium
19%
26%
2%
1–5%
5–10%
12%
37%
Over 10%
Premium offset by
savings
Source: Jones Lang LaSalle and CoreNet Global Sustainability Survey 2010
10 Jones Lang LaSalle
Key findings of the CoreNet Global and Jones Lang
LaSalle 2010 survey
• Sustainability is a critical business issue today for 64% of
respondents and 92% consider sustainability criteria in their
location decisions.
• The number of respondents willing to pay more for green leased
space jumped from 37% in 2009 to 50% in 2010.
• Most survey respondents (57%) confirmed anecdotal consensus
of one to three years as an acceptable payback period for
energy-efficiency measures in owned space; 30% said that
payback periods of three to five years may be acceptable.
• 31% ranked employee productivity and health as their top
sustainability concern, and an additional 11% rated employee
satisfaction as the most important factor.
• Green building certifications are considered by 88% and energy
labels by 87% in administering their portfolio.
• 48% would pay a premium of up to 10% for sustainable space,
while 2% are willing to pay over 10%.
• Respondents still focus on energy-efficiency programs
(65%) and waste recycling (61%); 49% are implementing a
sustainability-related workplace strategy project and 48% are
collecting sustainability data.
• CRE executives are highly involved in providing sustainability
performance data and funding sustainability-oriented investment
with the purpose of reducing cost and increasing employee
satisfaction.
Figure D: Delivery Model of Energy and Sustainability
Services Globally (%)
9%
32%
Undertaken in-house
Outsourced
Partly both
47%
12%
Don’t know/not applicable
Source: Jones Lang LaSalle, Global Corporate Real Estate Survey 2011
Conclusion
Corporations increasingly view sustainability strategies as a
permanent aspect of their business, and real estate executives are
keys to implementing those strategies. The high percentage of CRE
executives worldwide who consider sustainability in making location
decisions shows how deeply this issue is ingrained in the business
community.
These results reinforce the trends that Jones Lang LaSalle has
experienced in serving CRE clients worldwide. The focus on
containing operational cost remains a driver of many sustainability
programs, but CRE executives also recognize the value of
enhancing workplace effectiveness with strategies that promote
employee health, well-being and productivity.
For a deeper insight into the results, download the full report,
Results of the 2010 CoreNet Global and Jones Lang LaSalle
global survey on CRE and sustainability, at
www.joneslanglasalle.com/CRE-Impact
For more information, please contact:
Peter Hilderson
Head of Energy and Sustainability Services and
Head of Engineering and Operations Solutions
Asia Pacific
[email protected]
Joel Quintal
Director of Sustainability
Australia
[email protected]
Jones Lang LaSalle 11
Companies Go Green to Enhance Productivity
Companies favor the hybrid approach to sustainability
Once a project is in place, energy and sustainability services
are most often undertaken via a combination of in-house and
outsourced resources, with 47% of respondents to Jones Lang
LaSalle’s Global CRE Survey 2011 indicating that they use a
hybrid delivery model.
5
Perspectives on partnerships
Making CRE Partnerships Work in Asia Pacific
Leveraging vendor-partnering relationships to tackle the twin forces of cost control and
business growth
Companies operating across Asia Pacific are presenting their
CRE managers with twin challenges: drive down the total real
estate occupancy expense while making the CRE portfolio
highly responsive to the rapidly changing business environment.
However, these seemingly opposing goals cannot be met through
the traditional approach of managing the portfolio with a focus on
tactical execution.
are derived from the geographic scale of the region and the mix of
mature, emerging, and frontier markets.
To help address some of these challenges, CRE managers are
leveraging various types of vendor-partnering models. We see six
different models being used in the industry today. These range from
the traditional out-tasked model through to specialized vehicles
involving common equity ownership (Figure 5). These models
are not unique to CRE; generically, they are also evident in other
service-based industries.
To successfully drive down cost and increase portfolio
responsiveness, CRE leaders need to focus on strategic
relationship management with business units, portfolio strategy,
capital planning, and management. These are the capabilities that
the C-suite and business unit leaders value the most. In order to
build these capabilities in-house, CRE leaders across Asia Pacific
are increasingly leveraging vendor-partnering relationships to outtask and outsource service delivery to specialist real estate service
providers.
Partnering is a journey-line for many organizations; and depending
on their maturity, complexity, culture, and geographic footprint,
organizations typically migrate left to right across the spectrum.
While there are many characteristics upon which the above models
can be compared and analyzed, there are five key aspects to note
that influence the depth of the partnership:
• Degree of alignment between client organization and vendor
What works in Asia Pacific?
• Degree of leverage gained by client organization
Much has been written about the complexities and dynamism of
the Asia Pacific region, and these characteristics create challenges
in making partnerships work successfully. Many of the challenges
• Level of strategic engagement
• Trust levels
• Value creation
Figure 5: Six Models for Vendor Partnering
Out-task
Relationship
Preferred
Less of
Alliance
Alignment
Leverage
Sophistication
Trust
Value
Strategic Alliance
Equity
More of
Source: Jones Lang LaSalle
Major CRE trends in Asia Pacific
• CRE leaders are grappling with the opposing forces of cost
reduction and business growth.
• CRE leaders are shifting from a geographic and functional focus
to a business-unit focus to better serve their internal customers.
• The shift to smaller and more dynamic in-house real estate
teams is directly correlated to the greater reliance on vendorpartnering relationships.
12 Jones Lang LaSalle
• CRE leaders of Asian and Australian companies are gaining
increasing influence over their companies’ international
portfolios, driven by real estate spend and
growth in Asia.
• Corporate supply chain/
procurement is gaining
greater influence over
real estate.
Figure E: Adoption of a Hybrid Delivery Model in Asia Pacific, Today and Three Years From Now
%
90
80
70
60
50
40
30
20
10
0
Australia
Today
Japan
Three years from now
China and India
Rest of APAC
(mainly Hong Kong and Singapore)
Source: Jones Lang LaSalle, Global Corporate Real Estate Survey 2011
As with all models, each has inherent strengths and weaknesses.
The out-tasked and relationship models are commonly favored in
first-generation partnerships as they bring industry best-in-class
to execute across the varied real estate tasks. As relationships
mature, CRE managers typically look for more leverage and move
to deeper partnering models, such as alliance or strategic alliance,
which require less tactical oversight and supervision.
Conclusion
CRE leaders in Asia Pacific are successfully tackling the
twin challenges of driving down cost and increasing portfolio
responsiveness. This is being achieved in the world’s most complex
and dynamic region. While there are many challenges to overcome,
the region is maturing at such a pace that sufficient best practice
exists to address the most current challenges. Both CRE teams and
service provider partners are evolving rapidly, fuelled by the growth
momentum in Asia.
For more information on the partnering challenges unique to
Asia Pacific, download a copy of the full report, Making CRE
Partnerships Work in Asia Pacific, at
www.joneslanglasalle.com/CRE-Impact
For more information, please contact:
John Forrest
CEO Corporate Solutions
Asia Pacific
[email protected]
Marina Krishnan
Managing Director, Corporate Accounts
Asia Pacific
[email protected]
Jones Lang LaSalle 13
Making CRE Partnerships Work in Asia Pacific
Asia Pacific progressing along the partnering journey
The Jones Lang LaSalle Global CRE Survey 2011 indicates that hybrid delivery models will increasingly be adopted by companies
in China, India, and Japan over the next three years. In Australia, companies are more likely to ramp up their reliance on a
fully outsourced model, while in the rest of Asia Pacific (mainly Singapore and Hong Kong), firms will rely more on in-house
management.
6
Perspectives on talent
CRE and the Swiss Army Knife
The radical up-skilling of the CRE executive
The role of the CRE executive is fast changing. CRE has now fully
hit the C-suite’s radar – a legacy from the GFC. As a consequence,
the C-suite has higher and more diverse expectations that involve
the transformation of the CRE executive into a multi-skilled
professional. These expectations, combined with an increasingly
challenging operating environment, mean that CRE leaders will
need to work in new ways.
According to a survey by CFO Research Services, The CFO
Perspective on Corporate Real Estate, in 2008 85% of CFOs
viewed CRE as important to achieving corporate strategies, but
only 40% of them viewed CRE as aligned to business planning.
Today, the Jones Lang LaSalle Global CRE Survey 2011 shows that
67% of CRE leaders manage objectives that are part of the wider
business strategy, and this percentage is expected to reach 74% in
three years.
An increasingly challenging environment
Because of the direct influence CRE leaders have on real estate
costs, a range of overarching forces cannot be ignored by the new,
emerging generation of CRE leaders:
• A multi-speed recovery, creating uncertainty as growth
progresses at a different pace across geographies
• An ever-connected economy, characterized by complex and
permanent flows of capital, goods, information, and people
• Sophisticated strategies deployed by agile firms, that target
market expansion as well as organic growth
• Expansion in unchartered markets and opaque countries,
with many corporations pegging their growth prospects to
developing nations
• Accelerating pace of deal-making, with merger and acquisition
(M&A) activity set to accelerate in 2011
• Sustainability and workplace strategy back on the agenda,
as companies are more willing to pay for sustainable space that
includes an increased focus on employee productivity, health
and overall satisfaction with their place of work
• Regulations with a global impact, such as new international
accounting standards for leases, significantly impacting
companies’ bottom lines
• Race for talent, again, with fierce competition to recruit
and retain high caliber talent, whose options are many and
expectations high
The evolution of the CRE function
Legacies of the GFC have increased the pressure being placed upon CRE teams. The capacity to develop more flexible and
valuable CRE strategies is dependent upon effective and regular engagement with business leadership. The Jones Lang LaSalle
Global CRE Survey 2011 suggests that this dialogue is emerging and provides a platform for a step-change in the role, remit, and
structure of the CRE function going forward.
Figure F: The Likelihood of Transformation Scenarios in the CRE Function Post-GFC
Scenario
Has not
Has not happened
and will
but will in the next
3 years
not happen
Has partly
happened
Has
happened to
a large extent
CRE function gains greater visibility and ability to influence business
decisions
7%
8%
42%
43%
CRE function is placed under greater scrutiny by the wider business
10%
9%
45%
36%
CRE function has far greater visibility and engagement with senior
business leaders
4%
4%
40%
51%
CRE function has greater and earlier insight into potential changes to the
wider business
6%
12%
48%
34%
CRE function is given more difficult targets / key performance indicators
6%
12%
38%
43%
CRE function is called upon to report more frequently on portfolio status /
issues
11%
14%
36%
39%
CRE function is charged with reworking the CRE strategy
10%
15%
34%
40%
CRE function is tasked with enhancing portfolio data and understanding
8%
11%
34%
47%
CRE function is required to be able to articulate the true costs of the real
estate portfolio to the wider business on demand
5%
17%
34%
44%
Source: Jones Lang LaSalle, Global Corporate Real Estate Survey 2011
14 Jones Lang LaSalle
The Strategist
The Achiever
The Strategist knows where their environment is headed and uses this
insight to align the real estate strategy with the firm’s strategy as a whole.
Complexity does not deter them.
The Achiever gets things done and gets them done right the first time
– second chances are rare in the ultra-competitive corporate world. Their
creativity enables them to find new ways to achieve productivity targets.
• A trend spotter
• An innovation maestro
• A sustainability champion
• A value creator
• A strategist
• A change accelerator
• A master of complexity
• A productivity enabler
The Manager
The Communicator
The emerging multi-skilled CRE professional, equipped with survival tools
like a Swiss army knife, has a strong Manager profile.
More visibility comes with more scrutiny and direct interaction with senior
leadership. The Communicator understands that to be a trusted advisor
and to efficiently support decision making, communication skills are key.
• An agile manager
• A risk manager
• A financial expert
• A team leader
• A relationship builder
• A functional integrator
• A decision influencer
• A brand contributor
Source: Jones Lang LaSalle
All of these overarching forces are true across all continents.
However, a tide is expected to draw further investment toward Asia
where M&A and other foreign direct investment (FDI) are forecast
to reach high levels. Attractive as it can be, this dynamic region is
not the easiest given its scale, its cultural complexity, and its mix of
mature and emerging markets. Some issues are particularly acute
in the Asia Pacific region such as transparency or employability
ratios.
Increasingly high expectations, requiring additional skills
CRE leaders succeeded in capturing senior management’s
attention as they rose to the challenge during the GFC to help their
organizations meet aggressive cost-management objectives, which
in some cases, was a requirement for survival. Although functional
expertise and accurate real estate intelligence are still needed to
understand the ins and outs of the industry and to make informed
decisions, mastering technical real estate skills is no longer enough.
Indeed, CRE leaders are moving toward fulfilling a relationship role,
defining a new value proposition.
CRE leaders must display a dauntingly vast combination of
capabilities if they are to fully contribute to the business in today’s
environment and in accordance with the firm’s evolution (Figure 6).
They have to endorse the diverse roles of strategists, achievers,
managers, and communicators, and master the skill sets attached
to each role.
Conclusion
The new environment is one that brings greater scrutiny, pressure,
and challenges direct from the C-suite. Being able to respond
and engage with these leaders in a language they can relate
to will serve to elevate the reputation of the CRE function, build
confidence, and showcase the added value that CRE teams
undoubtedly bring to their organizations.
To find out more about the many roles the CRE leader will
need to master, download a copy of the full report, The
radical up-skilling of the CRE, or the “Swiss army knife” CRE
executive, at www.joneslanglasalle.com/CRE-Impact
For more information, please contact:
Anne Thoraval
Corporate Solutions
Asia Pacific
[email protected]
Jones Lang LaSalle 15
CRE and the Swiss Army Knife
Figure 6: The Many Roles of the CRE Executive
7
Perspectives on structures
Better by Design
Reshaping the CRE function for greater impact
Today’s CRE executive is being challenged to support an
increasingly complex array of corporate initiatives. These can
include global expansion or contraction, sustainability, winning the
war for talent, speed-to-market, cost reduction or avoidance, and
enhancing operational efficiency.
Faced with such a range of complex and important demands,
engineering an optimal team structure is crucial to achieving
best-in-class performance. In addition to elevating performance,
a leaner, more effective team structure can improve business
alignment and reduce cost – demonstrating the full value of the
CRE function to the wider business. Most importantly, the onus
is being put on CRE teams by their core businesses to adapt the
team’s skills to meet the changing requirements and demands.
The prospect of adding value through the refocusing of the CRE
structure is alluring, but how is it best achieved?
Towards a strategic future
There is already a clear evolution underway driven by dynamic
macroeconomic conditions, continued globalization and a growing
realization among corporate leaders of the value that can be
delivered by an effective and focused CRE function. This evolution
will ultimately be characterized in a range of ways. However,
one thing is clear: best-in-class CRE teams will be leaner, more
strategic and more focused on internal stakeholders, working
alongside the wider business as influencers and leaders of change.
This evolution is likely to require a fundamental reassessment of
team structure, roles and skills (Figure 7).
Choosing the right model
A range of factors must be taken into account in designing the
right CRE model as each organization operates in very different
ways. But in each case, there are common factors that need
to be addressed. Alignment with the core business is the most
fundamental of these, as without it, the structure cannot be truly
effective. In addition to this core concern, the size of the team and
the skills required of it depend on a series of key factors as outlined
below:
• The objectives and targets set by the board/leadership
• The complexity of the portfolio in terms of property and
ownership types
• The existing mandate and remit of the real estate team, which
is particularly crucial as a clear remit and control will strengthen
the process
• The composition of the core business; i.e., the number of
business units
• The manner and frequency that the real estate function intends
to interact with the business
• The number of stakeholders and their input into real estate
decisions
• The mandate and remit of any outsource partner, also critical as
it directly impacts resourcing and the focus of the internal team
• The level of management of the partner contract
Figure 7: Toward a Strategic Future
Typical Time
Potential Value
Typical Time
Potential Value
Strategy and Relationship Management
50%
5%
70%
Strategy
and
Relationship
Management
50%
Planning
25%
25%
Planning
70%
Source: Jones Lang LaSalle
16 Jones Lang LaSalle
25%
25%
25%
Operations
5%
Operations
25%
Figure G: Future Scenarios for CRE Structures
Scenario
Mean value across the survey
CRE function to become highly centralized and driven by a core global team
3.4
CRE function to be overseen by the CFO/COO as an operational part of the business
2.9
CRE team to be split into different functional roles and structured/managed globally
2.7
CRE function to be reduced in size
2.6
1 = Will definitely not happen
5 = Will definitely happen
Mean values exclude those respondents who believe scenarios already occurring
Source: Jones Lang LaSalle, Global Corporate Real Estate Survey 2011
CRE models: the options
Only once these factors have been assessed and clarified can
CRE leaders determine which organizational model is the most
appropriate. Four of the most frequent models observed today are:
1. Functional – a traditional CRE model that promotes autonomy
based on real estate function, with each function or “silo”
reporting to the global lead.
2. Geographic – allows the global lead to have overall control of
the real estate functions, with regional executives liaising with
the local business units and service provider representatives on
the ground.
. Process – involves structuring the real estate team and
functions around delivery and transformation processes,
matching each activity to the life cycle of real estate. Executives
accountable for each process then report up to the CRE lead.
. Market/Customer – assigns relationship managers to key
business units who then report back to the CRE lead. Each
business unit manages a range of strategic and tactical services
on behalf of the business unit.
Conclusion
Reshaping the team structure can be a challenging process.
Although the benefits can be great, the length of time such a
change can take should not be underestimated. Nor should the
potential challenges be overlooked, particularly in terms of skill sets
and realigning people within new structures.
When it comes to choosing the right CRE organizational structure,
there is no single, standard template that can be applied regardless
of company size and structure. There is, however, an evolution
in best practice. Those CRE organizations that adapt and reflect
this evolution will be best positioned to reap the rewards of a more
effective and strategic function more closely aligned to their core
business.
To learn more about the four organizational models for CRE,
download a copy of the original report, Better by Design:
Reshaping the CRE function for greater impact, at
www.joneslanglasalle.com/CRE-Impact
For more information, please contact:
Sylvia Koh
Head of Corporate Consulting
Asia Pacific
[email protected]
Marina Krishnan
Managing Director, Corporate Accounts
Asia Pacific
[email protected]
Jones Lang LaSalle 17
Better by Design
A shift toward centralization
With a return to optimism and growth, there is concern over the CRE function’s future readiness in terms of structure and skills. The
Jones Lang LaSalle Global CRE Survey 2011 posited a number of future scenarios in terms of potential CRE structures and asked
respondents to assess the likelihood of these scenarios emerging over the next three years. The structural scenario that was most
likely to occur according to respondents is a shift toward more highly centralized real estate functions, which are driven by core
regional or global teams, thus shifting in-house talent requirements. Encouragingly, given the size of the task facing CRE teams in a
post-GFC era, there is no anticipation of a strong reduction in the headcount size of CRE teams over the next three years.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm
specializing in real estate. The firm offers integrated services delivered by expert
teams worldwide to clients seeking increased value by owning, occupying or
investing in real estate. With 2010 global revenue of more than USD 2.9 billion,
Jones Lang LaSalle serves clients in 60 countries from more than 1,000 locations
worldwide, including 185 corporate offices. The firm is an industry leader in property
and corporate facility management services, with a portfolio of approximately 1.8
billion square feet worldwide. LaSalle Investment Management, the company’s
investment management business, is one of the world’s largest and most diverse in
real estate with more than USD 41 billion of assets under management.
Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over
19,400 employees operating in 78 offices in 13 countries across the region.
For further information, please visit our website, www.joneslanglasalle.com
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