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8/6/2019 CRE Global Survey 2011 Final
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Opportunity Emerges from Crisis
Global Corporate Real Estate Survey 2011
In partnership with
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Jones Lang LaSalle
The challenges facing CRE are signi cant.
CRE leaders who address these challenges
head on and who think and invest in
developing CRE talent, recruiting key talent
from the industry, or from outside traditional
boundaries, will be those operating at the
vanguard of the industry. New thinking is
required and the rewards for delivering such
will be signi cant.
Survey respondents rmly believe that
transformations in the role and structure
of the CRE function are underway and will
intensify over the next three years. We
concur. We believe that this period is a
pivotal time for CRE in terms of elevating the
awareness of CRE inside the organization
and with this awareness, the realization of
the potential strategic contribution of the
overall function.
IntroductionWe are delighted to introduce Jones Lang
LaSalles inaugural Global Corporate
Real Estate Survey, providing insight
from within the industry about the future
path, challenges and opportunities facing
corporate real estate (CRE). With over 500
CRE executive respondents globally, this
survey has captured data not previously
presented in any of our research.
The corporate operating environment has
hardened over the last 36 months. CRE
teams have been required to respond with
greater agility, expediency and improved
productivity. They have increasingly done so
by working closely with service providers,
and throughout the crisis, we have been
working with clients across geographies and
sectors to help them deliver sizeable real
estate cost savings.
This survey represents the rst global
attempt to identify the future challenges
facing the CRE industry and their likely
consequences over the next three years.
We sincerely thank those of you who shared
your thoughts and perspectives. Your input
has helped form a clear picture of where
next for CRE.
Going forward, we will address many of the
speci c challenges raised within this report
in more detail via our continuing thought
leadership program, which we will deliver to
you throughout 2011 and beyond.
Opportunity Emerges from Crisis
Stu rt Hicks Americas
J h F rrest
Asia Paci c
Vincent Lotte er Europe, Middle East and Africa
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Global Corporate Real Estate Survey 2011
1Higher em s pr uctivity:
CRE teams are required to be
more relevant and resourceful,
enabling CRE leaders to further enhance
productivity and ef ciency
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 via the
implementation of more strategic real
estate initiatives will de ne best-in-class
CRE organizations. A shift from short-
term, survival tactics towards medium-
term, strategic initiatives aimed at driving
productivity enhancements is both possible
and required.
Executive SummaryThe Global Financial Crisis (GFC) generated four overarchingglobal trendsimpacting the future state for CRE, which are summarized here
and expanded further throughout the report:
2 B l ci g the u l f rces f gr wth right-sizi g:CRE organizations are exposed to complex targets, such as dealing with
the contrary pressures of growth and
right-sizing
Charged 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 organizations
engagement with leadership.
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.
Pr gressi g t w r sp rt erships:CRE teams are moving towardsmore sophisticated partnership models
To meet the challenges of the next three
years, CRE teams will need help from
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 value and bene ts are beingextracted to the satisfaction of higher levels
of the organization.
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Resh pi g CRE structures skills: A new talent requirement isemerging, resulting from a tougher
operational environment, forcing CRE
leaders to rethink team structuresand skills
CRE teams were exposed during the
economic uncertainty as 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. Either through investment
in up-skilling existing staff or acquiring freshtalent including talent from both within the
industry and possibly outside the traditional
boundaries CRE leaders should broaden
the set of skills residing in their organizations
today.
Over the next three years, the challenges
of managing CRE will intensify. Strong and
sustained interest from senior business
leaders in real estate costs and strategyrepresents an unparalleled opportunity
to elevate the CRE function and its
contribution even further. Along with this,
CRE professionals have an unprecedented
opportunity to accelerate their careers.
Five keys t CRE success:
CRE teams will need to change in
order to be relevant and responsive
to their business needs. There are
ve fundamental strategies that can
drive change and adaptation in the
CRE function as outcomes from our
global survey:
Generate a long-term plan for theevolution of the CRE team that
supports and facilitates the wider
business growth.
Place a strong focus on real
estate strategies that drive
enhanced productivity and are
highly ef cient and align with top
business goals.
Make the most of the serviceprovider market to nd partners
that help increase capacity and
capability to tackle the twin
pressures of right-sizing, while
pursuing selective growth.
Re-focus and restructure the CRE
team both in response to growing
scrutiny from senior business
leaders and in order to drive amore strategic agenda.
Focus on talent investing in
current CRE teams tapping
talent from within the industry,
accessing talent from outside
the traditional boundaries to
ensure the CRE function is suited
to engaging and managing the
raised expectations of an informedC-suite.
1.
2.
3.
4.
5.
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Global Trend #1: Higher demands on productivity
Throughout the GFC, CRE teams were focused on delivering short-term tactics
to generate direct cost savings and/or generate capital from the sale of surplus
assets, in support of wider corporate survival strategies.
Corporate leaders are more aware of real estate portfolio costs and will continue
to set tough performance targets for CRE teams. This requires greater focus on
strategic action as CRE leaders report being exposed and elevated to a higher
discussion within the organization.
CRE teams should pursue more strategic initiatives in order to meet these toughtargets. Reducing uncertainty and using the increasingly available investment
capital smartly will assist. Key among these strategic initiatives will be the effort to
improve workplace ef ciency, mobility and productivity.
Key St tistics97% of respondents reacted to theGFC via one or more tactical realestate plays
85% believe that the CRE functionhas developed greater visibility andengagement with senior businessleaders in response to economicuncertainty
91% believe that they now havegreater ability to in uence decisionsand strategies within the wider business
81% maintain that they had beenplaced under greater scrutiny bythe wider business, with the sameproportion being tasked with moredif cult performance targets
75% are now required to report tosenior business leaders on portfoliostatus and costs with increasedregularity, with 78% being asked toarticulate the true costs of the realestate portfolio to the wider businesson demand
CRE Implic ti sImprove your ability to respond inreal time to demands from senior management and anticipate changingbusiness dynamics. Seek necessaryinvestment to be able to quantify andqualify the portfolio at any given timethrough effective reporting tools.
Adopt a scenario planning approachtowards CRE strategy formation thatgives the business options to acteffectively over the short, medium andlong term. Be clear about the role,remit and structure of the CRE teamwithin each of these scenarios.
Establish a workplace mobility/productivity strategy. Be preparedto use the changing operationalcontext for CRE to drive this intothe business, overcome resistanceand sell the bene ts of change in
both hard quanti able ( nancial andproductivity metrics) bene ts and softqualitative (talent) terms. A partnershipwith Human Resources will fortify thediscussion.
1
2
3
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CRE st s t the fr t-li e f c rp r te c st s vi g, pti gsh rt-term t ctic l resp ses
As global corporations responded to
tightening nancial conditions and shrinking
revenues, attention predictably turned
quickly towards real estate, which typically
accounts for 7-12% of a business total
operating cost base. This pressure was
rmly felt by CRE teams across the worldwith 97% of survey respondents supporting
their business with one or more tactical real
estate plays to reduce cost (Fig 1).
Prep re ess is evi e t, but s re cti t curre t sh rtc mi gs During the GFC, more than half of our
respondents took the opportunity to review
existing real estate strategies and revise or
devise new plans for implementation. This
suggests a return to the basics of portfolio
planning with 57% seeking to gather
portfolio and lease information in order
to inform strategic decision making.
Pre-crisis, some CRE teams were
insuf ciently equipped to readily provide
portfolio metrics or identify opportunities.
In the future, speed and information will be
crucial as economic uncertainty lingers.
Pl i g h riz s re l g typic lly l ck i sight i t
lter tive sce ri s str tegies
The wave of uncertainty ushered in by theGFC is entirely at odds with the typical
planning horizon for most CRE strategies.
Fifty-four percent of our respondents had a
CRE planning horizon of more than three
years, while just 5% had a horizon of up
to one year. While lease structures and
negotiation periods around leasing events
typically preclude an extremely short-term
strategic focus, a planning horizon of threeor more years has often been unable to
deliver the immediate added value and
strategic guidance that businesses required
during the crisis.
Portfolio/lease gathering to aidinformed decision making 57%
Preparing/revising CRE plansfor future implementation 57%
Taking out cost from the portfolio 72%
Consolidating into fewer buildings 73%
Disposal of surplus space throughsub-letting
55%
Fig 1 >>T p 5 str tegies pte i resp se t the Gl b l Fi ci l Crisis
BaSE: 316 RESPondEnTS
Which of the following corporate real estate strategies did your organizationimplement to cope with the global nancial crisis?
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Survey results also illustrate that mostCRE strategies developed over this lengthy
planning horizon pay little attention to the
direction and shape of the CRE function
itself. A large proportion of respondents
struggled to articulate effectively what
the role, remit and structure of their team
will be three years from now. There is
an opportunity for CRE leaders to start
thinking differently and to move away fromthe tactical, everyday actions encouraged
by lease structures. Offering up future
scenarios and a menu of potential responses
(together with the broad implications of these
responses) will be at the heart of making
a more valuable, distinguished and truly
strategic contribution to the wider business
and its growth.
Leveraging covenant/landlordrelationships to achieve exibility
Exiting non-core markets andlimiting exposure
Monetizing owned assets
Preparing/revising strategicreal estate plans for future
implementation
Upgrading of workplace/space
8%
8%
8%
10%
16%
Fig 2 >>T p 5 str tegies th t resp e ts w ul h ve like t h ve pte but i t
BaSE: 316 RESPondEnTS
Which of the following strategies would you have liked to implement but did not?
Internal resistance
Unfavorable market conditions for implementing disposal strategies
Economic uncertainty
Capital expenditure constraints
Uncertainty around the futureshape and size of the business
26%
26%
36%
42%
44%
Fig 3 >>T p 5 c str i ts up cti
BaSE: 316 RESPondEnTS
What factors limited your ability to execute those strategies that you would haveliked to have?
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alter tive str tegies re twell f rme r utes timpleme t ti re see sc str i e Our survey asked respondents about
those strategies they would have liked
to have implemented in response to the
GFC but were unable. A summary of these
strategies is shown inFig 2. Only a very
small number of respondents were able toidentify alternative routes of action limiting
innovative thinking and action within CRE.
There were real constraints to the delivery of more strategic action as recognized inFig 3.
The sense of underlying uncertainty appears
to have served as a substantial brake.
However, as some semblance of stability
returns and con dence levels improve,
the majority of these constraints are being
removed.
GFC leg cies re str g h vei cre se the pressure bei gpl ce up CRE te ms The capacity to develop more exible and
valuable CRE strategies is dependent
upon effective and regular engagement
with business leadership. Results from
this survey suggest that this dialogue is
emerging and provides a platform for a
step-change in the role, remit, and structureof the CRE function going forward. Survey
respondents were asked for their views on
the likelihood of the emergence of future
operational scenarios and a large proportion
of respondents were aware of these
scenarios emerging within their business
and day-to-day activities(Fig 4).
Sce ri H s t will
t h ppe
H s t h ppe ebut will i the ext
3 ye rs
H s p rtlyh ppe e
H sh ppe e t l rge exte t
CRE function gains greater visibility and ability to in uence 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 dif cult 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 estateportfolio to the wider business on demand
5% 17% 34% 44%
Fig 4 >>The likelih f tr sf rm ti sce ri s i the CRE fu cti p st GFC
BaSE: 316 RESPondEnTS
These are some possible legacies of the global nancial crisis on the role of the corporate real estate team. In your opinion, to whatdegree have they taken place in your organization?
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Today, the CRE function has greater visibilitywithin the business than it has had at any
other time. This visibility is a route to greater
engagement that is further enhanced by
senior business leaders now having an
active interest in real estate, a growing
understanding of real estate portfolio costs
and a desire to work this area of operations
harder and smarter. This provides an
opportunity for the CRE community toengage and make a greater contribution.
W rkpl ce m bility pr uctivity will be key successr ute f r CRE i this ch gi gclim te This contribution can be made through
a more intense focus upon transforming
the nature and culture of the workplace.
Seventy-seven percent of survey
respondents regard the need to attract
talent, the quest for enhanced productivity,
the right-sizing of the portfolio for a new
Fig 5 >>St tus f resp e ts curre t ppr ch t w rkpl ce m bility
BaSE: 244 RESPondEnTS
How would you describe your organizations current approach to workplace mobility(i.e. ability to work from multiple places)?
25%
13%
41%
14%7%
Limited or partial program has beenimplemented
Comprehensive program is in placeand underway
Workplace mobility program is in theplanning phase
Plan has been proposed but not yetscoped out or developed
No plans underway at this time
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Jones Lang LaSalle 11
organizational reality or a desire to changethe culture and nature of work as top
in uences on future real estate strategies.
Creating more ef cient workspace that
is conducive to modern work styles and
receptive to the work-style demands of
knowledge workers i.e., to make the
workplace more productive will assist
CRE leaders in building additional value
for their businesses.Fig 5shows that the
current level of implementation for workplace
mobility programs can be best described as
patchy. More comprehensive programs can
assist organizations to meet required targets.
The barriers to implementation, outlined in
Fig 6, need to be addressed and overcome
in partnership with senior business leaders
if improved workplace productivity is to be
achieved.
Maintaining organizational culture
Technological de ciencies
Lack of executive buy-in
Resistance/fear of change
Management and/or employeeengagement
17%
17%
39%
44%
44%
Fig 6 >>Perceive gre test c str i ts t the pti f w rkpl ce m bility pr gr ms
BaSE: 18 RESPondEnTS
In your opinion, what limits the adoption of workplace mobility in your organization?
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Key St tistics39% of respondents forecast anincrease in the total size of their globalreal estate portfolio over the next threeyears, while 31% predict a reductionRespondents forecast their portfoliogrowth to be strongest in North Asiawith a 60% net growth in portfolio sizepredicted over the next three years,followed by Latin America (34%) andCentral and Eastern Europe (34%)
The nance sector is forecast to growmost notably in North Asia with 63%of respondents predicting portfoliogrowth. The technology sector is alsopredicting portfolio growth in North Asia(67%), Latin America (44%) and SE Asia (44%)
CRE Implic ti sThe varied global growth trajectorydoes not lend itself to a one size tsall approach and CRE leaders willneed to be selective, innovative andrun a number of strategies in parallel.
CRE leaders will need to ensureteams are effectively structured andskilled to tackle the twin requirementsof driving growth and right-sizing.
Emerging and opaque marketswill challenge CRE teams tobuild a knowledge base quickly.Understanding of market practice,orthodoxies, and conditions will beessential for CRE teams to presentdeliverable options to their business,
be able to communicate risks and giveguidance on realistic lead times.
1
2
3
Respondents are seeing the return of growth pressures within their businesses,
but in select geographies. These growth areas typically coincide with opaque real
estate markets which present operational challenges and where we advocate
using locally adept and in-situ real estate professionals who understand market
nuances.
Net portfolio growth is anticipated to be strongest in the Asia-Paci c region and in
particular North Asia, driven essentially by the growth of China.
In contrast, net portfolio growth is predicted to be at or negative across North
America and Western Europe as corporate occupiers seek to rationalize or
consolidate portfolios often enabled by workplace mobility programs.
Global Trend #2: Balancing the dual forces of growth and right-sizing
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a retur i g gr wth y mic willin uence real estate strategy Survey respondents identi ed a growth
dynamic returning to their businesses over
the next three years. Growth was the
standout issue shaping respondents futurereal estate strategies (Fig 7).
V ri ce i gr wth r tes is high will f rce c rp r te ccupiers
t m ke selecti s Projected GDP growth rates across the
world show a tremendous variance(Fig 8).
Corporate occupiers are prioritizing targeted
opportunities in their attempts to bene t
from the return to a more stable economic
climate. However, the speci c location of
the selected growth presents a challenge
and will add to the pressure already being
felt by CRE teams. Growth most likely will
be pursued in rapidly emerging markets and
therefore concentrated in markets where
local real estate expertise is most valuable.
China 9.0
India 8.6
Brazil 5.4
Russia 3.7
Australia 3.1
United States 3.1
United Kingdom 2.3
Germany 2.1
France 2.0
Fig 8 >>Select GdP gr wth r tes 2011-14 (% p )
Source: Global Insight, January 2011
Fig 7 >>The most in uential factor shaping future real estate strategy
Upgrading the quality of space
Rationalizing/consolidating space
Uncertainty and risk minimization
Cost pressures
Growth
4%
5%
7%
11%
35%
Attracting talent 4%
BaSE: 316 RESPondEnTS
As we emerge from the global nancial crisis, which of the following will bemost in uential in shaping your current and future (3 years from now) realestate strategy?
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This selectivity in growth is represented inFig 9, which illustrates where respondents
expect to see net growth in portfolio sizes
over the next three years.
Net growth is strongest in the Asia-Paci c
region. Three sub-regions dominate with a
number of respondents predicting portfolio
growth (for a listing of which countries are
included in regional breakouts, see page 25):
North Asia (primarily China) 60%
South Asia (primarily India) 43%
South East Asia 37%
In the EMEA region this same Eastwardsand Southwards shift is evident. Strongportfolio growth is predicted for Central andEastern Europe (34%) and the Middle East(24%).
In the Americas the growth dynamic isSouthwards, in the Latin America region(34%).
The emerging market dynamic is apparent
and the opportunities presented by the BRIC
nations are being responded to by global
businesses particularly in the absence of
strong economic growth forecasts within the
more mature sub-regions of the world.
1.
2.
3.
Pr vi i g the pl tf rm f r gr wthprese ts ch lle ge The challenge facing corporate occupiers is
the relative lack of transparency and varying
degrees of maturity around real estate.
It is revealing to compare the previous
growth map(Fig 9)withFig 10, drawn from
Jones Lang LaSalles most recent Real
Estate Transparency Survey, which shows
the varying levels of market transparencyacross the world. It is clear that the markets
in which respondents are pursuing growth
are also the markets that have low levels of
transparency.
Where opaqueness exists, CRE
organizations may experience:
Slower speed-to-market
Higher barriers to entry
Cost and complexity around routes tomarket exit
The need to deliver the platform for growth
in real estate markets places pressure on
CRE teams over the medium term. CRE
teams need to enable the pursuit of growth,
but the wider business may be ill-informed
about the practicalities of expanding within
an opaque, emerging market. Entering
emerging markets is not new, and ensuring
CRE teams are equipped with options and
clarity around cost and risk should enable
them to meet the broader company growth
objectives.
1.
2.
3.
L wer gr wth r tes i m turem rkets pl ce w w r pressure
p rtf li size Respondents suggest that in the United
States and Western Europe overall portfolio
size will remain at or reduce over the next
three years. This downsizing has already
been seen in these mature Western markets.
Over the last 18-24 months, corporate
occupiers have sought to drive consolidationwithin their portfolios and release surplus
space back into the market hence driving
vacancy rates in Europe and the United
States, for example, to new record high
levels.
Going forward, there will be a push to drive
better utilization rates within consolidated
portfolios, further dampening demand for
additional of ce space in mature markets.Utilization rates currently run at around
40%, which represents a huge cost and
inef ciency to corporate occupiers. This will
be a further powerful stimulus for strategic
real estate initiatives that aim to drive a more
ef cient and productive workplace.
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High Transparency
Transparent
Semi-Transparent
LowTransparency
Not Covered
Opaque
Jones Lang LaSalle 15
Note: Respondents provided views on likely portfolio growth at a sub-regional level. Results therefore mask clear differentials within sub-regions and are often in uenced by the presence of a strong emerging market. Projected growth in North Asia, for example, will be in uencedby the rise of China and does not suggest similar levels of portfolio growth in Japan.
Negative Net Portfolio Growth
Stability (0% Net Growth)
0-10% Net Portfolio Growth
10-25% Net Portfolio Growth
50%+ Net Portfolio Growth
30-50% Net Portfolio Growth
Not Covered
Fig 9 >>net p rtf li gr wth ver ext 3 ye rs
Fig 10 >>Gl b l Re l Est te M rket tr sp re cy
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Global Trend # : Progressing towards partnerships
Key St tistics23% of respondents were unable toarticulate their likely model of corporatereal estate services three years fromnow67% currently deliver CRE services viaa hybrid model this will rise to 70%over the next three years
24% deliver CRE services entirely in-house but this will reduce to less thana fth over the next three years
9% currently adopt a fully outsourcedmodel of service provision, rising to11% by 2014 70% will do so via anexclusive partnership arrangement
41% of those adopting a hybriddelivery model outsource propertymanagement; 34% also outsourcetransactional services to the market
72% of those adopting a hybriddelivery model retain portfolio strategywork in-house
CRE Implic ti sUndertake a skills audit of your existing real estate team. Identify gapsin your capability to respond to tasksgiven by your stakeholders.
Consider relationships that sharegoals, risks as well as rewards whereyou can achieve a true alignment of interests. Be clear on what you needfrom your service provider both nowand in the future and undertake athorough review of what the marketcan offer.
Evaluate current relationships in termsof the value delivered to ensure thatthe relationship remains relevant toimmediate circumstances and futurestrategy.
1
2
3
Hybrid delivery models, where services are delivered through a combination of
an in-house team and outsourced real estate service providers, will increase in
popularity over the next three years. While well established in the US, this trend
is growing stronger among EMEA corporates where tactical functions, such as
transaction services, have the greatest tendency to be outsourced.
Those currently operating a fully-outsourced model, or seeking to do so over
the next three years, anticipate developing fewer but stronger and deeper
relationships with service providers.
With a push for CRE to be more strategic around how they engage for real estate
services, CRE leaders should focus on their future delivery model. Currently,
nearly a quarter of respondents are unable to categorize their likely model three
years from now.
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Jones Lang LaSalle 1
Gl b lly there is m veme tt w r s p rt erships with servicepr vi ers s fully i -h use
elivery m els imi ish, rivi ggr wth f hybri fully-
uts urce m els ver the extthree ye rs Nearly a quarter of all respondents were
unable to articulate a clear vision of how
their real estate services will be delivered
in 2014. This inability is underpinned by a
range of potential factors:
Lack of understanding of the wider businessstrategy
Inability to see a clear future given the fogof uncertainty
Lack of understanding within CRE teams asto market options
Inertia in thinking about how to do thingsdifferently and bring about change
Even though CRE planning horizons aregenerally three years, there is little apparent
associated thinking around how the CRE
team needs to evolve and draw on the
external market in order to boost capability,
capacity and ultimately, productivity. Unless
clear long-term strategies about future CRE
service delivery are developed, there is a
risk that CRE will be seen as ineffective,
weak and hindering the evolution of thebusiness through a lack of innovation.
Currently, real estate services are most
typically delivered through a hybrid model
that combines in-house capabilities with
injections of additional capacity and
capability from external service providers on
a geographical or functional basis, or both
(Fig 11). Sixty-seven percent of respondents
currently adopt this model of delivery, risingto 70% by 2014.
Growing adoption of the hybrid modelover the next three years will come at the
expense of purely in-house service delivery.
This is unsurprising given the twin pressures
to facilitate both growth and right-sizing
and the inevitable resource pressure that
this generates. As CRE teams are required
to implement strategic programs aimed at
driving increased workplace productivity,
a turn to the market will be required to tapexpertise and best practice. Twenty-four
percent of respondents globally deliver
services in-house today, but this is predicted
to reduce to 19% three years from now.
On a global basis we will also see some
corporate occupiers evolve further up the
outsourcing curve and shed the hybrid model
to be fully outsourced. There is variation
in this trend both geographically and bysector, with US-domiciled corporations
Fig 11 >>Re l est te service elivery m els w 3 ye rs fr m w
19%
24% 67%
70%
9%
11%
Now
3 years from now
Fully in-house Hybrid Fully outsourced
BaSE: 316 RESPondEnTS
Which of the following best describes how your organization structures its corporatereal estate needs at present and how it will do so three years from now?
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and the technology sector being particularly
strong proponents. Nine percent of corporate
occupiers presently adopt a fully outsourced
model with this rising to 11% over the next
three years. A key constraint to greater
adoption of this model is the high level
of decentralization currently evident in
organizational and CRE structures. This can
lead to fragmentation and issues of control
that are complex for an external partner to
manage.
Th se evel pi g hybri eliverym els te t uts urce t ctic lc mp e ts with str tegiceleme ts bei g ret i ei -h use
Acknowledging that the hybrid delivery
model is most prevalent, our survey also
assesses which real estate functions are
currently outsourced and which were
retained in-house(Fig 12). More outsourcing
occurs with tactical or process-driven
functions such as transaction services or
property management. The motivation will
often be geographical coverage, resources,
expertise and also the instantly accessible
knowledge of market conditions, practices
and opportunities held within the service
provider community. Strategic functions,
such as portfolio strategy, have a tendency
to be retained in-house.
Source: Jones Lang LaSalle, 2010
out-t sk
Rel ti ship
Many vendorsPrice basedon scopeCommoditizedproductOne-off contract
Task-based,relationshipdrivenGenericproduct /serviceCost focusExpandedactivity
V a
l u e
/ B e n e
f t s
Time / Degree of Change
Preferre
ContractualrelationshipDe ned scopeMutual trustRecurringactivity
alli ce
More exclusiveagreementHigher degreeof trust andcollaboration(CRE, IT, HR)Focus on valueadd and mutualadvantageSenior managementinteraction
Str tegic alli ce
Supplier collaboration
Higher level of commitmentand investmentLonger-termstrategic valueaddSenior managementengagement
Equity
Common equityownershipCommon goalsCommon risks /rewardsLong-term
M els f r p rt eri g
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Jones Lang LaSalle 1
Those operating a fully-outsourced deliverymodel or who are planning to do so within
the next three years are moving towards
fewer and deeper partnership relationships
with service providers. Those respondents
adopting a fully-outsourced model were
further assessed in terms of the nature of
their current relationships and how these
are likely to evolve over a three year window
(Fig 13).
We asked respondents to classify their
fully-outsourced delivery model as involving
either a preferred vendor panel; as an
exclusive agreement either geographically
or functionally with a vendor; or as an
exclusive partnership-based relationship in
which goals, risks and rewards are shared
by both service provider and client.
Half of those with a fully-outsourced model
presently adopted this partnership model as
a means of fully leveraging service provider
platforms and innovation. Critically, this is
forecast to rise to 70% of those adopting
a fully-outsourced model by 2014. This
suggests an advanced market that is moving
towards the development of stronger, deeper
relationships with fewer partners.
Fig 12 >>Re l est te fu cti s prese tly elivere i -h use r uts urce i hybrielivery m el
7% 59% 34%
12% 59% 29%
23% 48% 29%
72% 24% 3%
20% 39% 41%
34% 53% 13%
TransactionServices
PM/Designand Build etc
Portfolio andFacilities
Management
Portfolio Strategy
PropertyManagement
Energy/Sustainability
Services
In-house Mixed Outsourced
BaSE: 316 RESPondEnTS
How would you best describe the current organization of speci c CRE tasks?
Fig 13 >>The structure f rel ti ships with fully uts urce service pr vi ers b thw 3 ye rs fr m w
12% 38% 50%
8% 22% 70%
Now
3 years from now
Outsourced topreferred vendors
via select panel
Outsourced to avendor with anexclusive agreement
Outsourced toexclusive partner or multiple partners withshared goals, risksand rewards
BaSE: 316 RESPondEnTS
What type of outsourcing do you currently practice or plan to practice three yearsfrom now?
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Global Trend # : Reshaping CRE structures
and skills
Key St tistics63% of respondents have a directreporting line into the C-suite
73% anticipate the CRE function tobecome highly centralized, driven by acore regional or global team within thenext three years
31% have seen no further investmentin the CRE function since GFC and donot anticipate this to change
41% saw no reduction in headcountwithin their CRE function during theGFC and do not expect future cuts
24% anticipate their teams will undergotalent upgrades within the next three
years74% have turned to service providersto provide innovative solutions tochallenges emerging out of the GFC,with a further 15% expecting to do sowithin the next three years
CRE Implic ti sIdentify other sectors outside of realestate that have a need for the typesof engagement and relationshipmanagement skills required bring innew thinking and methods to elevatethe existing team.
Generate a long-term plan for theevolution of the CRE team thatsupports and facilitates broader business growth strategy, anticipatesneeds and delivery constraints andensures that capability is aligned withchanging needs. Post a skills audit
to identify skills and capability gaps,and drive required change within your team so that core requirements areprioritized.
As non-real estate professionals takethe helm, there is a need to raise their understanding to ensure that CRE isaccurately represented at the boardlevel. Be able to summarize issuesfacing your portfolio, your team andyour ability to deliver.
1
2
3
The intensity and pressure being placed on CRE leaders is such that the
restructuring and re-skilling of CRE teams is becoming more urgent. Speci c skills
to drive a more strategic real estate agenda are required and generate the need to
invest in current CRE skills and possibly seek talent from both outside the industry
and from service providers.
Decentralization in many organizations is a constraint in delivering more ef cient,
strategic and consistent real estate services. Respondents anticipate a shifttowards greater centralization and the establishment of core regional or global
teams within the next three years.
Overall organizational structures are attening and CRE leaders are becoming
located within wider support or shared service functions being headed by non-real
estate professionals.
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Jones Lang LaSalle 21
Existi g CRE structures cr ssthe gl be re mixe withfu cti lity, fte ece tr lize
i s me c ses t eve withi e ic te CRE ep rtme t
The structure and situation of the CRE
function within the wider business varies
among our survey participants. While
there will always be idiosyncrasies based
on legacy issues, underlying businessstructures and the varying effects of the
GFC on the size and shape of corporate
occupiers, the diversity in CRE team
structures is signi cant.
One emerging structure that respondents
identi ed was the rise of a wider operational
or a shared service department under the
overall leadership of a Chief Operating
Of cer. The ultimate oversight of CRE by
someone drawn from a different operational
background may expose the function
to some different thinking. Consider the
evolution of technology outsourcing since
the mid-1990s and what could be learned
from leaders that have experienced that
market and its evolution as a possible route
to innovation and improving skills of current
CRE teams (Fig 14).
Fig 14 >>L c ti f the CRE le er withi the c rp r te ccupier structure
47% 3% 17%18% 1% 7% 2% 5%
Dedicated CREDepartment
Procurement Administration/Shared Services
Supply Chain/Logistics
CorporateOf ce/GeneralManagement
Technology Human Resources Finance
BaSE: 316 RESPondEnTS
Under which department does the person who leads corporate real estate sit in?
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22 Global Corporate Real Estate Survey 2011
The majority of CRE leaders currentlyreport to the C-suite(Fig 15). The growing
cost consciousness of corporate occupiers
is bringing CRE teams increasingly into
reporting alignment with Chief Financial
Of cers and nance departments. This will
likely intensify when proposed changes
to global lease accounting standards are
implemented in 2013* as property will have
an instant balance sheet impact and thus willbecome more central to corporate nancial
well-being.
With retur t ptimism gr wth, there is c cer ver thestructure skills f the CREfu cti s future re i ess We 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 (Fig 16). The structural scenario
that was most likely to occur according to
respondents is a shift towards 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, thereis not anticipated to be a strong reduction in
the headcount size of CRE teams over the
next three years.*Gl b l Le se acc u ti g Ch ges
The US Financial Accounting Standards Board (FASB) and its counterpart, the International Accounting Standards Board (IASB), have proposed changes to global lease accountingtreatment that will fundamentally alter the impact of leases on organizations income statementsand balance sheets. While the new rules are not expected to go into effect until at least 2013,given the need to report two prior years comparative information, companies will need to beginto prepare immediately, particularly those businesses that draw heavily on lease arrangements.
For more information about the changes, please visit our Jones Lang LaSalle website, LeaseAccountingChanges.com.
Sce ri Me V lue cr ss the survey
CRE function to become highly centralized and driven by a coreglobal team
3.4
CRE function to be overseen by the CFO/COO as an operationalpart 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
Fig 16 >>Me sc res f r future sce ri s f r CRE structures ver ll s mple bykey sect rs
1 = Will de nitely not happen5 = Will de nitely happenMean values exclude those respondents who believe scenarios already occurring
Fig 15 >>Se i rity f CRE le ers rep rti g li e
BaSE: 316 RESPondEnTS
What level in the organization does the CRE lead report to?
26%
10%
63%
1%
C-suite
Managerial level
Executive level
Operational level
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Jones Lang LaSalle 2
There have been some reductions in humanresources during the GFC with 24% of
respondents noting a reduction in headcount
during this time. Going forward, the dominant
themes seem to be those of investment
and, more signi cantly, of the upgrading of
talent. Forty-four percent of respondents
have witnessed some additional investment
into the CRE function, directly or indirectly,
with a further 25% anticipating investmentwithin the next three years. Similarly, 54%
of respondents point to upgrades in terms
of talent within their teams and a quarter
anticipate further improvements in this area
over the next three years. The key issues
are where that investment is made and
which talent is brought into the CRE function.
Investment should be prioritized toappropriately drive the reshaping of teams to
focus more time and effort towards engaging
with senior business leaders. CRE teams
need to better manage those initiatives that
reinforce the crucial productivity agenda that
is central to effective portfolio management.
Reporting higher in the organization is a
key driver for CRE to get more strategic
and either start or expand their outsourcedrelationships.
As the drive towards placing, as a minimum,
tactical real estate delivery with outsourced
service providers continues, the need
for strong technical real estate skills may
diminish. Greater importance should be
placed on attracting new talent that has
a track record of building and developingstrong inter-personal relationships with
senior business leaders. This is both a
challenge and opportunity for CRE teams
as this provides a catalyst with which to
enhance skill sets and accelerate career
paths.
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 con dence and showcase the added
value that CRE teams undoubtedly bring to
their organizations.
Busi ess a vis r
S luti Cre t r
Pr gr m I v t r
P rt er
M ger f outc mes
Re l Est te Expert
or er T ker
Pr ject Executer
Pr vi er
Ve r Cust mersG -Betwee
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About the survey
2 Global Corporate Real Estate Survey 2011
This report summarizes the results of JonesLang LaSalles inauguralGlobal Corporate
Real Estate Survey . The survey was
conducted between August and November
2010.
Over 500 responses were obtained from
CRE leaders across the world via a
combination of face-to-face interviews,
phone interviews and a web-based survey
tool. All respondents addressed the same
standardized questions, although face-
to-face interviews clearly enabled greater
elaboration of key points. These extended
points have been used in our analysis and
have assisted greatly in structuring this
report.
As is evident from gures to the left, our
survey responses were well balanced
and re ective of the views of CRE leaders
drawn from a diverse range of sectors and
domicile and operational locations, as well
as companies of varied size.
Jones Lang LaSalle used Harris Interactive
to help collect, compile and segment the
resulting data.
For the nal analysis, we used responses
from companies with 5,000+ employees
which totalled 343 out of the 504 responses
received.
>>d micile L c ti
7%
18%
5%
18%
52%
Americas
EMEA
Asia Pacific(excluding Australia)
Australia
Not Specified
>>C mp y Size by number f Empl yees
5,001 10,000
10,001 50,000
50,001 100,000
More than 100,000
20%
15%
30%
35%
>>Sect r
Banking and Finance
Technology/Telecom
Manufacturing/Industrial
Professional Services
Others
9%
19%
11%
30%
31%
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ab ut the auth rs
dr Lee Elli tt Head of Corporate Research, Europe, Middle East and Africa (EMEA)[email protected]+44 0 20 3147 1206
Based in London, and with more than a decade of property research experience, Lee isresponsible for delivery of Jones Lang LaSalles corporate research program in EMEA. He isalso responsible for delivering insight into occupier markets and corporate real estate trendsat a global level.
L ure Pic riell Head of Corporate Research, [email protected]+1 617 531 4208
Based in Boston, Lauren is responsible for the strategic development and implementation of the corporate research program in the Americas. She works closely with clients and leveragesher in-depth understanding of the of ce market to provide occupiers with a competitiveadvantage in the marketplace.
H lly Y gHead of Strategic Marketing, Asia Paci c [email protected] +65 6494 3844
Based in Singapore, Holly heads a team of marketing and strategy specialists, includingJones Lang LaSalles corporate research program for Asia Paci c region. She has spentmore than nine years working in corporate real estate and has over twenty years of experience researching and reporting on corporate audiences, trends, and behaviors.
Further suggeste re i gs fr m J es L g L S lle c be ccesse vi ur website t j esl gl s lle.c m
Best Laid Plans: Key considerations for portfolio planning, 2010
Lifting your game: Scenario planning for real estate, 2010
Global Real Estate Transparency Index (GRETI) - Mapping the World of Transparency - Uncertainty and Risk in Real Estate, 2010
EMEA Occupier Conditions - Quarterly Market Publication
United States Of ce Occupier Outlook - Quarterly Market Publication
Asia Property Market Digest - Quarterly Market Publication
Real Estate Standards Global IndexMaking CRE Partnerships Work in Asia Paci c, 2010
Better by Design CRE Structures, 2011
Asia Paci c Corporate Real Estate Impact Survey (CREIS), 2003-2005
#1 What Corporates Want
#2 Faster, Better, Cheaper
#3 Turning the Corner
#4 Reducing Real Estate Costs - New Motives, Old Objectives
26 Global Corporate Real Estate Survey 2011
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ack wle geme tsJones Lang LaSalle gratefully acknowledges the assistance of those corporate real estate professionals
who participated in this survey. We are also grateful to Thomson Reuters Real Estate team who are our
partners for this project. For more information, go to www.reutersrealestate.com.
We welcome any feedback on the published results in order to continue to improve future editions
and make them as meaningful as possible for our readers. If you have any comments or would like to
participate in future surveys, please email [email protected].
ab ut J es L g L S lle
Jones Lang LaSalle (NYSE:JLL) is a nancial and professional services rm specializing in real estate.
The rm offers integrated services delivered by expert teams worldwide to clients seeking increased
value by owning, occupying or investing in real estate. With 2009 global revenue USD2.5 billion, Jones
Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate
of ces. The rm is an industry leader in property and corporate facility management services, with a
portfolio of approximately 1.6 billion sq ft worldwide. LaSalle Investment Management, the companys
investment management business, is one of the worlds largest and most diverse in real estate with
approximately USD40 billion of assets under management.
ab ut J es L g L S lle C rp r te S luti s
As a pioneer of the corporate real estate offering, our platform provides unmatched services across
a single project, country or global portfolio. Our commitment to shaping our business around helping
our clients improve their productivity and by delivering on our promises keeps us at the forefront of
our industry. Our global platform of transactions, lease administration, 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.
With over 30,000 employees focused on serving business globally, we manage over 600 million sq ft
of facilities and 52,000 leases, and complete more than 4,450 projects and 13,000 transactions every
year. We have the experience and scale to drive greater ef ciency, risk management and sustainability
for our clients across the globe.
ab ut Th ms Reuters
Thomson Reuters is the worlds leading source of intelligent information for businesses and
professionals. We combine industry expertise with innovative technology to deliver critical information to
leading decision makers in the nancial, legal, tax and accounting, healthcare and science and media
markets, powered by the worlds most trusted news organization. With headquarters in New York and
major operations in London and Eagan, Minnesota, Thomson Reuters employs 55,000 people and
operates in over 100 countries.
Jones Lang LaSalle 2
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