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Chicago

Jones Lang LaSalle Reveals Top Seven Leading Concerns for Today’s Corporate Real Estate Executives

Workplace mobility, sustainability, flexibility top-of-mind with CRE executives


CHICAGO, Oct. 13, 2010 — The continued slow pace of a steady economic recovery still weighs heavily on the minds of corporate real estate executives, according to conversations Jones Lang LaSalle’s Corporate Solutions experts recently held with a wide base of clients and partners. Jones Lang LaSalle highlights the top seven leading concerns among corporate real estate executives (CRE) today.

 “Corporate real estate has evolved tremendously within the last 20 years, and is now bringing unprecedented value to companies beyond simply driving cost-cutting measures,” said Kenneth Rudy, President of Strategic Consulting for Jones Lang LaSalle. “The complexity and rapid-fire pace of today’s world is making CRE executives take a careful look at the real issues confronting their organizations, and transform that knowledge into support for the corporate value proposition and the workforce.”

According to Rudy, the CRE department has evolved from simply filling the space requirements of business units to acting as a core strategic growth lever. Today’s corporate real estate leaders are accountable for future expansion and consolidation, managing portfolio and operating risks, advising senior management on location strategy to attract top workers, managing hundreds of millions of dollars in operational costs and capital investments annually, and adapting to the way employees prefer to work.

“There are significant opportunities for corporate real estate executive to reduce cost and risks, improve service delivery, and enhance portfolio flexibility via a strategic approach that adopts the latest tools, processes, and management philosophies available to the broader corporate management,” said Rudy. “Focusing on the top issues we’ve identified as most critical is an incredibly impactful way to accomplish the numerous objectives of the corporate real estate function.”

The top seven leading concerns for today’s corporate real estate executive include:
  • Worker Mobility – Laptops, cell phones, PDAs and other innovations of recent years have created a virtual workplace. Through a process known as Workplace Strategy, CRE departments are adapting the physical workplace to maximize productivity and teamwork of people in the office and communicating from the outside in virtual work environments. The process may also reduce costs by requiring less space per employee, and should support employee attraction and retention by appealing to dynamic workers, meeting the needs of employees as individuals as well as members of a group.

  • Sustainability -- In recent years, CRE directors have consistently ranked energy and sustainability among their chief concerns. Given that buildings are indirectly responsible for a third of all carbon emissions, facilities teams often are a key element in companies’ carbon reduction goals, and lease negotiations increasingly involve green features.  This may include elements of Workplace Strategy as reducing worker commuting patterns has a significant impact on carbon emissions.

  • Occupancy Planning – As business units grow and shrink, companies may be left with more “dark space” – vacant or underutilized areas in their portfolios and individual occupancies – than they realize. Occupancy Planning is the first step toward figuring out how to use existing space more effectively through better planning and matching of dynamic supply and demand scenarios.

  • Flexibility – Demographic shifts, a change in strategic direction, and a volatile economy are all unpredictable factors that can suddenly cause a need for contraction or expansion, but real estate occupancy tends to be a long-term decision. CRE departments strive to maintain flexibility in their portfolios through shorter lease terms, expansion/contraction options and staggered lease expirations, as well as space layouts that can be changed easily to accommodate more people.  A portfolio strategy well matched to the various demand and risk profiles of a company’s space requirements can introduce the desired flexibility and at the right cost.

  • Accessing the Right Labor – Notwithstanding the high levels of unemployment in the current environment, companies are still in a war for the right talent in the right location.  That means labor that is competitively priced, skilled and stable.  Labor-based location strategies that utilize leading edge demographic and geo-spatial analysis can help companies pinpoint the right location to relocate or place new operations.

  • Capital Planning – Budgets are tighter than ever, but facility maintenance, repair and renovation work must continue to ensure employee safety and comfort, as well as to achieve many of the other strategies discussed here. CRE departments must prioritize the most urgent capital requirements across hundreds or thousands of locations, develop a sound business case, including ROI or payback periods, and ensure that projects are completed on time at minimal cost.  Using Life-Cycle Asset Management tools, CRE executives can better rationalize those expenditures.

  • Lease Accounting – An upcoming change in how companies account for lease obligations will turn operating leases into capital leases in the next few years. For CRE departments, this means major changes in the way leases are administered and reported, similar to the way Sarbanes-Oxley affected companies a decade ago. The change also has far-reaching implications for the way companies lease and own space in the future, potentially affecting the lease-versus-own decision, sale-leaseback and build-to-suit transactions, and the length and other terms of leases going forward.  Having an appropriate governance model, as well as the right analytical framework and lease administration system, will be critical to complying with the new requirements.
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 209 global revenue of $2.5 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.6 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 approximately $38 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.