Strategic Real Estate Consultancy Flashcards
What is the role of real estate?
Real estate plays a vital role in helping most businesses and organisation to achieve their strategy and objectives. It drives collaboration, improves efficiency, and a physical tool for marketing the brand. It is often the second largest operating expenses for organisations.
What is a real estate strategy?
A strategy reviewing how a real estate portfolio can be optimised and used to help a company reach its objectives and goals.
How do businesses measure performance?
Businesses will typically have KPIs to track relevant business metrics to show progress of business goals. Setting goals may include increasing profit margin, increasing efficiency, or capturing bigger market share.
KPIs could look at operating margin, net profit margin, return on capital, or benchmarking against industry standards, processes or comparable evidence.
Can you provide an example of how different geographical locations impact real estate strategies?
Different geographical locations have varying levels of transparency when it comes to the availability of information, such as when trying to ascertain buildings sustainability credentials. Whilst green lease clauses are widely adopted in the UK, they are far less common in markets like China - this creates challenges for benchmarking across a portfolio or delivering a portfolio strategy such as all new leases / renewals must have green lease clauses.
Additionally, whilst in many markets sqft or sqm are used to assess the area of a building, in Japan, one Tsubo is equivalent to 35.58 sqft, whilst one Ping is equivalent to 35.58 sqft in Taiwan. This creates additional challenges to ensure I report consistently and accurately when presenting data to clients and benchmarking across markets.
What have you learnt about strategic real estate consultancy from your experience in this area?
I have learnt that real estate is vital to many organisations but is often underperforming in its contribution to business value an therefore strategic advice is increasingly important to maximise success of the business.
How can real estate strategies improve business performance or generate financial savings?
Business performance can be improved by analysing their real estate portfolio, occupational costs, and development land. Strategies may include:
- Reduce their real estate portfolio to realise savings and improve efficiencies.
- Relocate to markets which command lower rents to reduce costs.
- Use virtual technology - automation / digitisation to reduce costs.
- Focus on sustainability / renewable energy to lower utility costs.
- Outsource some services e.g., IT to reduce costs.
- Develop greenfield or brownfield land to optimise their existing resources.
- Lease vacant premises (to a private individual, company, serviced operator etc.) to generate a rental income.
What is a flexible office operating model?
My client wanted to streamline their office portfolio whilst improve the office quality so to attract employees back to the office and realise savings. The flexible office operating model, also known as serviced offices, is a fully furnished office space that is ready for use with facilities provided and managed by an operator. It offers the business flexibility in terms of space required, whilst improving the quality of the accommodation. The serviced offices allow them to tailor their workplaces with room for growth.
What are some aspects to improve the office quality?
Wellness - from providing an equipped kitchen with amenities (e.g., fresh fruit and coffee), biophilia, break out areas, mindfulness space for prayers, yoga, exercise etc.
Collaboration & Efficiency - Activity based working: areas for private calls teamwork, private study, etc to meet employee needs and promote productivity.
Building amenities - cycle racks to promote sustainable transport & exercise, showers / lockers, a gym / health suite.
How do long term versus short term real estate strategies differ?
Short term strategies may consider and evaluate the progress and challenges in the present and create an action plan to improve the performance and overcome challenges in the short term.
By contrast, long term strategies may assess a comprehensive framework that comprise business objectives / goals to be met within e.g., 5 years+.
Short and long term strategies may ultimately differ in scope and execution. Ideally, short term strategies tie into long term objectives, however short term goals are likely reactive to meet business needs. Additionally, the execution of short term strategies depend on current operations, whilst long term strategies are based on whether short term goals are met.
What was the outcome of your office simplification strategy for your client’s Japanese portfolio?
After presenting the data to my client, we discussed the options and created a shortlist which best aligned with my clients requirements in terms of location, costs, size, and quality.
My client discussed the shortlist internally with the local business. Following which, the requirement evolved, as the local business required a workshop element in addition to the office.
As such, the flexible operating model did not suit my clients needs, as the serviced operators did not permit workshops. Instead, we looked to consolidate the regional offices and retail the traditional light industrial workshop within the office model.
Why was a parking strategy important to your client (Manchester example)?
The nature of my client’s business meant that parking is fundamental to the success of the business, as patients need to have immediate access to the property, particularly those that are disabled or elderly. In city centre locations, the general public often use the car park, leading to issues with parking for customers, and staff. Therefore, it is imperative to my client that they have sufficient parking and security in place.
How did you go about finding a consultancy for the car parking acquisition?
From my initial searches on google maps, I established that there was a large supermarket and multi-storey car park adjacent to my client’s property. I researched the supermarkets website and contacted the real estate managers to establish who manages the car park on their behalf. Thereafter, I was passed through various contacts until I found the consultancy and began discussing terms.
What terms did you discuss with the car park consultant?
Once I established my client’s requirement, I negotiated with the consultancy in respect of the number of spaces, accessibility (5 or 7 days a week), duration (weekly, monthly, quarterly etc), and fee. The consultant proposed a standard fee, however I offered a counter-proposal of a lower fee for a longer term.
How did my parking solution of considering to book the parking spaces directly through the management company influence their business needs?
As the parking requirement was dependent on the growth rate of the business, the internal business case, and approval of the fee from Regional Managers, my suggestion to consider booking directly through the management company provided flexibility int he short term whilst the business determined their long term requirements The parking requirement would b met at the most competitive fee, and would support the business case to secure the necessary spaces once the long term requirement is established.
What is benchmarking?
Benchmarking is a strategic management tool used by businesses to compare their processes, products, or services against industry comparables, standards, or best practices. This comparison provides valuable insights into areas of strength and weakness, guiding efforts to improve performance and maintain competitiveness in the market.
How did you benchmark the operational expenditure in the site option appraisal in Italy?
Using CoStar Real Estate Manager, I had access to the existing sites passing rent and ‘4-wall costs’, which encompasses the sites operational expenditures (taxes, service charge, insurance). To benchmark this data against potential sites, I used the quoting rents and my client’s standard 4-wall cost multiplier. This multiplier is based on the asset type (office, industrial , warehouse) and location (EMEA, APAC, Americas), which I can then multiply by the floor area to produce an indicative figure for comparing. This creates consistency when analysing sites, meaning it is more reliable and accurate to formulate a strategy.
Why was a widened search necessary for the site option appraisal project in Italy?
Through my due diligence, I concluded that due to the city centre location, the available units in the vicinity were typically light industrial units occupied by small businesses which did not have the docking capacity, and had basic voltage output, were often basement level, or were of basic specification and condition. However, the industrial locations surrounding the city were more fit for purpose, but did attract higher rents, I presented both options to my client for their review.
How does your site option appraisal in Italy differ from a traditional and standard leasing and letting example?
In this example, I did not act as an agent or broker, as I did not have the local market intelligence to advise knowledgably. Acting in the capacity of a transactional manager, and working closely with my client, I used local agents to create an options appraisal report which I could assess and analyse in the context of my clients requirement, portfolio strategy, and business objectives. From this, I could effectively advise on a strategy which would meet their requirement.
In respect of your Health and Wellbeing example in Milton Keynes, why was your client’s strategy focussed on local businesses as opposed to perhaps superior national occupiers? Did you advise differently?
My client wished to align their ESG objectives with their real estate provision, whereby the ‘Social’ element of supporting the local community could be evidenced by the operator of the health suite. Additionally, my client wished for the building to be unique, and a point of difference to neighbouring commercial buildings. As such, a local operator supported these ambitions.
Whilst I initially sought local small operators who were directly opposed to traditional national operators like Pure Gym or David Lloyd so to meet the brief, I did advise that the local operators did not have the experience or expertise to manage a health suite of its size or calibre. Therefore, I advised that mid to large independent operators should be encompassed into the brief to target businesses with the skills and contact base to successfully operate the health suite.
What data did you present to your client during the health and wellbeing operator project calls and how was that strategic advice?
I presented updates on the progress of the project, which included discussing the proposals that I sought from businesses, how they aligned with my client’s objectives, details of their business (locations, size, founders, specialisms / expertise), and key takeaways from our discussions with them (comments they made, advice on equipment required etc).
As I am not a health and wellbeing expert, I had to undertake extensive market research and gather the proposal to assess and analyse the options. Discussing options with colleagues, I would present to the client contacts and they would present to the key stakeholder during operational meetings to provide their feedback. With this, I formulated the strategy to hire a manager to run the space, and use my contacts to run sessions and classes.
