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05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 1/22
“Best Practice, Best Fit, Best Model?” Strategic configurations of Corporate Real Estate Management in Europe
European Real Estate Society Conference 2013
Vienna, Austria, July 5th
2013
Dr. Annette Kämpf-Dern
Prof. Dr. Andreas Pfnür
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 2/22
“Best Practice, Best Fit, Best Model?” Strategic configurations of CREM in Europe
AGENDA
I. Introduction and Research Question regarding a CREM concept:
What is CREM and how should a CREM management concept look like?
II. Framework: Literature Overview and the CREM Map
III.Research Design: Exploring the most advanced using CA-QDA
IV. Findings: Some “Best Practice”-Principles, but heterogeneous designs
V. Discussion: “Best Fit”-Designs that need further research to identify systematics of well-functioning configurations
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 3/22
Wide consensus about what CREM generally is aboutCREM definition
Purpose: Providing the strategic direction and supervision” that ensures “that land and building matters are dealt with so that they operate efficiently and effectively”.Thorncroft (1965); Stapleton (1986); RICS (2008)
Function: Establishing and maintaining a “close match between an organization’s business and property strategies”. Bon (1994)
Activities: Forecasting, planning, directing, coordinating and controlling real estate activities necessary to provide (acquire), operate (use) or liquidate (dispose) real estate assets.Thorncroft (1965); Stapleton (1986); Kaganova et al. (2006); Kämpf-Dern and Pfnür (2009)
Objects: Managed are buildings/parcels of land, building clusters or portfolios of buildings and land holdings. Bon (1994); Ching
Application: Corporates whose business is not real estate. Bon (1994); Pfnür (2002)
I. Intro
Definition used: Corporate Real Estate Management (CREM) denotes the planning, decision, organization, implementation and controlling of all those real estate
activities necessary to provide, operate or liquidate real estate from all perspectives (the owner, the user and the producer) of corporates whose business is not
real estate.
The goal of CREM is to support the overall corporate strategy acknowledging user-oriented (cost-benefit-ratio), financial (capital invested) as well as operative
aspects.
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 4/22
CRE Management Tasks:
Governance, Portfolio Management, Asset Management,
Operative RE Facility Management
Yet, tasks to be performed can differ considerablyOverview of CREM tasks
CRE Core Tasks („Services“)
Interaction with Core Business and other support functions
Communications, IT, HR, Accounting, Legal, …
Supply
• Leasing
• Acquisition
• Project Development
Usage/Operations
• Technical
• Infrastructural
• Commercial
Services
Recovery
• Letting
• Sale
• Project Development
Source: Own graph based on Management Model St. Gallen; Hartmann/Lohse/Pfnür (2007), p. 8f.;
Kämpf-Dern/Pfnür (2009), p. 26; DIN EN 15221 Facility Management
I. Intro
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 5/22
Focus of Corporate Real Estate Management moves: From task manager to strategically relevant function
CORE TASKS
MANAGEMENT TASKS
Def. of policies, objectives & standards, systems set-up, controlling & improvement Governance
Assessment/determination of requirements, portfolio planning & controlling Portfolio Management
Strat. planning, organizing & controlling building clusters/individual buildings Asset Management
Operative (day-to-day) planning, organizing & controlling tasks RE Facility Management
SUPPORT TASKS
Communications, IT, HR, Accounting, Legal, …
Source: Own graph based on Management Model St. Gallen; Hartmann/Lohse/Pfnür (2007), p. 8f.; Kämpf-Dern/Pfnür (2009), p. 26
Supply
• Leasing
• Acquisition
• Project Development
Usage/Operations
• Technical Services
• Infrastruct. Services
• Commercial Services
Recovery
• Letting
• Sale
• Project Development
I. Intro
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 6/22
Moreover: CREM tasks can be in one, two, or three perspectives
Source: Kämpf-Dern/Pfnür
Maximization of
benefit-cost ratio
of RE resources
Maximization of
capital value
invested in RE
Maximization of
profit from producing
RE and RE services
CREM USER perspective CREM INVESTOR perspective
CREM PRODUCER perspective
CREM Activities
I. Intro
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 7/22
Summarized: Breadth and depth of CREM in corporates and over time varies considerablyCREM responsibility/influence areas
Strategic level
Operative level
Behavioral/
intangible orientation
Financial/
tangible orientation
e.g. Corp. Finance,
RE Invest./RE Portf. Mgmt.
e.g. Corporate Identity,
Employer Branding,
Productivity,
Sustainability
e.g. Green Building,
Workplace Design,
Building Flexibility
Sickness Rate
e.g. Technical Functionality,
RE Accounting
Production
InvestmentUsage
I.
II.
III.
IV.
I. Intro
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 8/22
So: What is a “good”1 CREM system? How can CREM be institutionalized2, a “CREM concept” look?Research question
What we see: Set-ups that are highly diverse in every aspect !
What we want to know: What are the relevant determinants for CREM institutionalization? How are they interrelated?Does a “super ordinate plan” for CREM exist?
What we are looking for: A systematic, theory-based recommendation
Guiding on: CREM strategies, structures, processes, qualifications, culture, KPIs, …
A CREM Management Concept
1) Effective and efficient
2) „Institutionalization of CRE Management means the whole complex of measures that are necessary to develop and implement a real estate strategy that fulfils the purpose and goals of CREM.” (Pfnür 2002)
I. Intro
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 9/22
Majority of CREM research deals with parts of CRE management setup – none with the wholeOverview of CRE management institutionalization research (selection)
Which design to make ALL parts together be effective and efficient?
Holistic approach needed! (also: Veale 1989)
Kimbler and Rutherford (1993);
Manning et al. (1997);
Gibler/Black (2004)
CREM outsourcing functions
Manning/Roulac (2001);
Gibler et al. (2002);
Bon et al. (2003);
CREM strategiesBusiness goals and context
CREM goals
CREM partly holistically
Schaefers (1999)
Pfnür (2002)
Acoba/Foster (2003)
Lundstrom (1993);
Nourse et al. (1993);
Lindholm et al. (2006);
Lindholm (2008)
Hartmann et al. (2010)
Manning/Roulac (1996);
Kämpf-Dern (2010)
Hartmann (2011)
CREM organization
Lundstrom (1993);
Lindholm/Nenonen/Gibler (2006);
CREM controlling / KPIs
II. Frameworks
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 10/22
CREM-Map proposes CREM institutionalization parameters: targets, strategies, organization & controlling systemInstitutionalization framework
Sector, regulations, competition, …
Company targets
& strategies
CREM-targets
CREM-influence of
stakeholdersCREM-history &
mandate
CREM-
strategy
Shape and
operationalization
Degree of integration into the corporate
strategy
Width and depth of the content
Ownership rate
Centralization
CREM-organization
Process-
management
Sourcing Organizational
structure
CREM-
controlling
Spheres of
activity
regarding
CREM-
institutiona-
lization
External corporate
environment of interaction
Internal corporate environment of the CREM
HR/
culture
Source: Kämpf-Dern/Pfnür
CREM
Municipality/
public
External
servicers
Corporate-
management
Real estate
division
User
(BUs, staff)
Controlingl
system
Customers
Size, international-
ization, portfolio, ...
Investors
II. Frameworks
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 11/22
New/young function that touches multiple disciplines simultaneously (e.g.
finance, building management, production, IT, HR, ..)
Needs to consider three equally important perspectives high complexity
Needs to adapt/establish theories
theory generating
Why? How?-Questions
System analysis
Explorative research methods (e.g. case studies, fuzzy cluster analyses, primary data)
Analysis of leading/trendsetting companies
Usually within one established discipline/ function (e.g. finance, marketing, sales,
production, …)
Considers one or two perspectives
Can build on established theories
theory/hypotheses testing
What? How much/many?-Questions
Correlations, Structural equation analysis
Quantitative research methods (e.g. large scale surveys, dyadic surveys, secondary data)
Analysis of large number of average/ comparable individuals/companies
CREM research approach needs to be considerablydifferent to majority of established business researchComparison of situation and approach rationalization
III. Research
Majority of business economics research CRE management research
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 12/22
Research Design: Explorative CREM-ResearchUnits of analysis: Large European corporates
Selected by the following criteria
advanced stage of CREM development
great quantity of existing space and heterogeneous type of use (office-, retail- and/or service space)
willingness to collaborate
Comparison of the institutional designs of the Corporate Real Estate Management from European large-
scale companies (case studies), notably
guiding target system and typical strategies
integration of the CREM into company organization and organizational CREM-configuration
CREM-relevant framework of the company
CREM control system
Target of the research
Reference Companies
III. Research
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 13/22
(DT, SC) (AL) (DP, FT, TS) (T, ABB, CB, SI)
10 European companies with highly diverse context parameters participatingCase study approach
Context-Parameters Characteristics
Industry
Telecommunication FinancialServices
Production/Logistics
Business & portfolio structure
Office Logistics Retail Technology Industrial
Size & internationalityHomeland Several
countriesEurope Global
Background & experience with crises(“Burning Platforms“)
(Formerly) state owned,
no crisis
Private, no crisis
(Formerly) state owned,
crisis
Private, crisis
Office & retail: 2
Office & retail & technology: 5
Office & logistics respectively industrial: 3
1 3 2 4
2 1 3 4
5 2 3
X = Number of companies by major characteristics
III. Research
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 14/22
Heterogeneity of sample and in-depth-informationrequire alternative method of analysisQDA comes from Social Sciences, in business rather innovative
Research question / theory
Definition of selection criteria and categories
Review of material line by line: Subsumption or
new category formulation
Revision of categories after 10-50% of material
review
Final material review
Analysis and interpretation
Computer-Aided Qualitative Data Analysis (CA-QDA)
III. Research
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 15/22
CREM-Map Topics Individual specification
Context & Organization
Industry; Background; Portfolio Structure; Size; Internationality
Telecom; formerly state owned; huge diverse and international RE portfolio
Context CREM Experience, History & Mandate
Long-term experience; partly “burning platform”; mandate: global partner, (yet focus on home country); central control
Targets/ Strategy
Corporate objectives & strategies; CREM-targets and strategies; kind of fixation/communication
Among others: reduce costs through standardization and efficiency increaseMaximize ROCE; minimize RE costs;Written form; communicated extensively
Targets CREM strategy development and strategy operationalization
Cost reduction: Operating & user cost; increase cash / reduce capital employed; add value /maximize of RE not core business relevant any more
Strategy Strategy width & depth Primarily financial orientation (strategic & operational)
Strategy Ownership rate Target: Minimize!
Organization Positioning of CREM executive 2nd level; reports to CFO
Organization Centralization & Organizational Structure
RE Portfolio Management: CentralizedRE Asset Management: Centralized (partly regional)PrM/REFM: Local (Operations), Centralized (Monitoring & Controlling)
Organization Sourcing Model Outsourcing of REFM & RES; more outsourcing intended
Control Kind/degree of transparency Very high: objects/contracts/costs in home country (HC); medium: space utilization (HC), objects/costs international (INT); low: contracts and space utilization (InN)
Control Center type; Control systems (budgeting, transfer pricing)
Revenue, center; “Carefree total rent”
Research results documented in Case Vignettes used to identify/compare general principles & influential parametersVignette-Example Telecommunication company
Source: Results of interviews
1
2
3
4
5
6
7
8
9
11
10
III. Research
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 16/22
Increase core business productivity
Diverse bundles of objectives and prioritizations …Examples
Real Estate USER perspective
“Add value / maximize return
from real estate“
Real Estate INVESTOR perspective
Real Estate PRODUCER perspective
Improve sus-
tainability/ecologyReduce operating costs
Increase cash-balance/ cashReduce user costs
Become “best employer“
Legend:
Very important
Corporate 1
Corporate 2
IV. Findings
CREM
Professionalize
CREM internally
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 17/22
MandateEfficient ser-
vice contractorConsultant &
“Last Call”Global Partner,central control
CREM = BU
Center type Cost centre Revenue centre Profit centreInvestment
centre
Target system& strategy prior.
MAX ROCE MIN real estate costs MIN cumulative costsMAX core business
Target-ownership rate
Overall min! Commodity min! Specifically higher Overall > 65%
CREM-board Finance Service HR BU/Operations
Organizational structure/
sourcingmodel
“Full-outsourcing”
“Managing Agent”
REAM, REFM
OutsourcingREFM & RES
“Managing Agent” REFM
& RES
Integrated,“traditional”
Control of users“Carefree total
rent”“Price element
systems”“Transfer of third-party
costs”Global CREM-
budget
... resulting in very different, but all well-performing constellations of institutionalization parametersExamples
Telco 2: State-owned background. real estate-mix (many aren’t necessary anymore). present core business is decreasing.
Produktionsunternehmen. Core business specific RE; high need for flexibility; high degree of own usage
Telco 1: Private background. commodity-real estate, mobile communications. growth strategy, international.
FS-Companies (Retail). Predominantly commodity-usage. corporate identity is important (Customers & staff).
IV. Findings
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 18/22
CREM-Map
“Best practice“ “Principles”(universally valid trends increasing
effectiveness)
Specification of individual design parameter
depends on ... / varies with ...
Targets/ Strategy
Distinctively derived from corporate objectives, corporate strategies and CREM-targets; written fixation and extensive communication
Content and focal points of corporate target system as well as time frame planned for
…. ….
Strategy Understand business & provide integrated workplace
Individual business needs & corporate culture
…. ….
Orga Maximal reasonable bundling of similar tasks, internal/external outsourcing
Size, CREM professionalism, experience with outsourcing
…. ….
Control …. ….
Guiding “principles” can be identified, butspecification of design parameters varySummary from observations (selection)
Source: Results of interviews
V. Discussion
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 19/22
Conclusion & Hypothesis: Not one „Best Model“ – Instead: „Best Fit“-Approach needed„Fit“ of Vision/Mission/Targets, Situation, Design Parameters
Source: On the basis of Kämpf-Dern (2010): Organisation des Immobilienmanagements als Professional Service, p. 69
Inter-
System-
Fit
A B C D
CREM Targets (Target System)
Design Parameters
of management system
Strategy
Situation (Constraints)
Internal Corporate Environment of the CREM External Corporate Environment
Organi-zation
Context -
System-
Fit
Intra-
System-
Fit
Vision/Mission/Corporate Targets
Control-
System
Next step research: Which parameter constellations make a “best fit”?
Theoretical foundation: Configuration framework (Mintzberg, Miller/Friesen, etc.)
V. Discussion
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 20/22
Next step: Specifying and testing emerged hypotheses regarding well-performing CREM configurationsInitial hypotheses regarding CREM institutionalization
CREM-Map
Questions of research Hypotheses regarding institutionalization
Targets/Strategy
When choose which superior orientation/ positioning?
Positioning depends mainly on industry & portfolio structure; positioning drives priorities of professionalizing activities
…. ….
Strategy Requirements of/ impact on space efficiency/effectiveness?
Transparency of business strategies, requirements & behavior major prerequisite for space efficiency (costs) & productivity optimization
…. ….
Orga Degree, type & control of outsourcing?
„Case-by-case-subcontracting if existing management competence & national portfolio„ otherwise trend to general contractor
…. ….
Control …. ….
V. Discussion
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 21/22
CREM management concept not to be constituted on „best model“, but on „best fit configuration“Summary & Outlook
Identify or develop a CREM management concept that supports CREM to fulfill its (respective) purpose effectively
and efficiently
Research question
No “Best Model” identified, instead configurational approach
Next: Testing hypotheses emerged with larger number research
Conclusion & Outlook
Model structure & contents confirmed by interview partners
General “principles” are followed by companies, but well-functioning constellations are highly diverse
Major findings
Develop a CREM management model based on general management research as well as CREM research
Explore renown CREMs to validate & concretize model
Research design
CREM’s role and purpose quickly developing and changing
Several surveys/research approachs but no integrated concept to guide institutionalization
Problem
V. Discussion
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 22/22
Contact information
Dr. Annette Kämpf-Dern
Head of Real Estate Management &
Project Development FBI
Tel.: +49 (6151) 16-5264
Fax: +49 (6151) 16-4417
Email: [email protected]
Prof. Dr. Andreas Pfnür
Head of FBI - Forschungscenter
Betriebliche Immobilienwirtschaft
Tel.: +49 (6151) 16-3717
Fax: +49 (6151) 16-4417
Email: [email protected]