Effective real estate portfolio management is important for organizations looking to maximize their space and reduce their budget.
Good real estate portfolio management is critical for both the short-term and long-term success of a company. This is especially true as we shift to hybrid work.
In this article, we explore how and why hybrid work is changing real estate portfolios for so many companies and real estate investors. We also look at how better real estate management can lead to happier and more productive workers.
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A real estate portfolio can refer to a collection of real estate assets, the software or file(s) that track all these assets, or both.
Corporate real estate encompasses all the property that a company uses to work and accomplish its goals. This is not to be confused with commercial properties and the commercial real estate market, which is property owned to generate profit.
Companies that own their own office buildings, factories, and other property types are continually looking to improve their portfolios. This is whether through diversification, different asset classes, or adjusting and reducing their assets. When they can improve vacancy rates, occupancy, and space utilization, they can often optimize their real estate portfolio.
In other words, when a company optimizes how well they use their space, they often end up needing less.
Real estate is often a company’s biggest expense after payroll. For example, consider that the average yearly cost to rent corporate space in New York is $14,800 per employee.
Given the costs of owning and managing facilities, optimizing real estate portfolios can dramatically improve a company’s bottom line. Smaller real estate portfolios can often mean better cash flow. This makes a prime goal for most real estate portfolio managers.
Broadly speaking, a real estate portfolio manager is in charge of tracking, analyzing and optimizing a company’s real estate portfolio. This includes both owned assets and rental properties.
At the top level, real estate portfolio managers have two main roles. They analyze how workplace strategy is affecting a company’s real estate, and they help companies understand how their real estate is impacting their workplace.
The nitty-gritty of real estate portfolio management includes risk assessment, asset strategy, supervising transactions, and identifying investment opportunities. You will want to diversify your portfolio. Managers will typically also provide reports and guidance on investment property.
Finally, note that real estate portfolio management is not property management or facilities management, both of which have to do more with how property is used and/or maximized on a day-to-day basis.
The workplace is rapidly changing, and so too is the average corporate real estate property portfolio.
Since the start of the pandemic, we’ve seen a rapid increase in both hybrid work and remote work.
Meanwhile, employees that are in the office need to socially distance. Companies now have to keep up with on-site health regulations that can change on a dime.
To react to these changes, companies are using the workplace differently, with ripple effects into real estate management. We’re seeing multiple hybrid work models emerging, including some that are specifically designed to dramatically reduce real estate portfolios.
Space planning has never been more important. Real estate portfolio managers may now have to collaborate with facility managers (FMs) to ensure they are accessing all the data they need to make key decisions. This collaboration can help them better embrace the new normal in a cost-effective and productive way.
Basically, hybrid work is now making it so that managers have to work together using robust space management software that provides detailed and actionable reporting and analytics.
Only then will hybrid working actually lead to a more streamlined real estate portfolio.
Specifically, hybrid work is changing real estate portfolios in the following four ways.
Like we’ve mentioned, workers who do access the office need to be able to do so safely. Without improving social distancing, some companies would have to consider actually expanding their real estate portfolio—the exact opposite of what they usually want.
To accommodate social distancing, FMs need to better plan the workplace with a focus on safety measures and social distancing. Tools like Distancing Planner and Safeguard, coupled with a well-planned hybrid work schedule, can make this process as seamless as possible.
Companies may also implement new desk booking procedures to improve health and safety. Such as eliminating hot desking and only allowing hoteling or permanent desks.
Similarly, meeting rooms may become bookable-only spaces.
To adjust to the new hybrid workforce, many companies will have smaller offices, but more of them. We can therefore expect to see some types of real estate portfolios become more decentralized going forward.
While this may be a boon to workers, spread out locations are much harder to manage and will require robust space planning software to stay productive.
As head offices become less and less prominent, companies may shift away from real estate investments all together.
Instead, an increasingly large number of companies are embracing co-working spaces and Space as a Service (SPaaS). While SPaaS has many iterations, in this scenario, companies are typically using collaborative spaces that provide modern workspaces coupled with amenities and community.
When chosen carefully, these co-working spaces can often foster the right workplace experience, at a much lower price point. At another level, co-working spaces may also be used as real estate investment trusts (like REITs), where companies and individual investors can benefit from rental income and passive income.
As the real estate portfolio changes, so too will the ways in which employees access the office.
Employees will no longer be using the office at the same time as all their coworkers. And that’s only if they use the office at all.
The reality is that the office—along with all the software and files needed to work—needs to be accessible anywhere.
When we say the office is ‘mobile,’ we mean that employees need an integrated workplace management system (IWMS) that is accessible from anywhere.
In other words, they need a digital workspace they can tap into from their mobile phones, from their home offices, from any desk in the office, and from anywhere else they have an internet connection.
This will involve FMs collaborating with IT to ensure employees can access these digital tools safely and securely.
Ideally this IWMS will also integrate with communication tools like Microsoft Teams and Slack. This allows for both real time and asynchronous communication and therefore foster better collaboration.
Finally, when the IWMS integrates with wayfinding tools like meeting room signage, it can also make it easier for mobile workers to navigate the physical office whenever they have to.
When companies embrace these new ways of using the office, they can generally use their space better, and reduce their real estate footprint—along with their carbon footprint. But they can only do so when real estate portfolio managers cooperate with FMs and team leaders.
For many organizations, the pandemic has exposed how wasteful their existing corporate real estate portfolio actually is. The reality is that legacy real estate decisions made decades ago rarely serve anyone well today. That’s why part of the new normal can also include resetting the corporate real estate portfolio.
For example, perhaps customer support functions can be moved to lower-cost areas, while the locations for product development and other back of the house departments can still be decided based on access to labor.
Ultimately, companies today can and should think about how to create a location and real estate policy that is specifically designed to lower costs and increase productivity. In many ways, the pandemic has offered an opportunity for a fresh start. Real estate portfolio managers that embrace change can help future-proof their organizations.
Finally, new trends in hybrid working coupled with modern real estate portfolio management can be used to make a better employee experience.
We know from recent surveys that the majority of workers enjoyed their time working from home, but that they also missed the office.
That’s why there’s a growing demand from employees for hybrid work, so that they get the best of both worlds.
According to OfficeSpace OfficeSpace CEO David Cocchiara, “the office is not always the default location where people need to go—it is becoming more of a destination. Employees don’t go there just because they have to be there. They go because there’s something they’re trying to accomplish. Whether that’s collaboration with another team or within their team, planning, reviews, brainstorming and similar activities.”
Going forward, we can expect people to use corporate real estate spaces to get what they can’t get from home: community, conversations, that ping pong table in the break room.
Using the office as a perk can also help attract and keep employees, critically important now in the Great Resignation.
For all these reasons, when analyzing real estate investments and investment strategy, managers should consider employee needs first.
When it is managed with due diligence, a hybrid real estate portfolio can help a company cut costs while improving employee satisfaction.
That said, if it is not managed well, then a hybrid real estate portfolio can get unwieldy fast, becoming more trouble than it’s worth.
Real estate portfolio managers therefore need to work closely with FMs to ensure they are maximizing their space to the benefit of everyone.
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Photos: xavierarnau, Laura Tancredi, energepic.com, Yan Krukov, Ivan Samkov