Corporate Real Estate Management – the 3 Biggest Challenges in 2022

Corporate Real Estate Management – the 3 Biggest Challenges in 2022

Article Data & AI

In May, the Swiss Bankers Association (SBA; German: Schweizer Bankiervereinigung SBVg) published a guide on “Handling data in day-to-day business”. The document outlines six specific use cases to illustrate the existing risks and responsibilities when creating value from data. In particular, finding the balance between “seizing opportunities” and “avoiding risks” is a significant challenge for companies. We are using this guide as an opportunity to shed light on the topic of “handling data.”  

The 5 main objectives of Corporate Real Estate Management (CREM)

A typical feature of corporate real estate management is the focus on the company’s own use of real estate. The so-called non-property companies take on a supporting function in companies. The following list shows the five main objectives for successful corporate real estate management:

  • Increasing profitability through the provision of user-oriented real estate
  • Alignment of interdisciplinary strategies
  • Reduction or optimization of operational expenditures such as optimization of office space
  • Efficient use of resources and focus on sustainability
  • Visibility for corporate management 

Use of artificial intelligence (AI)

I found it very interesting that the SBA includes the topic of artificial intelligence, AI. This is a branch of computer science that tries to teach computers intelligent behavior in an automated way. Many companies are daring to take their first steps with corresponding use cases, and some are already using AI-based solutions productively. If the focus is placed on the benefit, the risks are often forgotten, starting at the drawing board through to established solutions.

We have already been able to review some AI solutions and have developed a framework for this purpose. We pay special attention to the following: 

  • Data governance should be established, especially in the area of data quality. A human operator can filter out erroneous data using common sense; this is not (automatically) possible using AI.
  • Regulatory aspects, which may be regulated by organizational measures, must necessarily be technically intercepted in the AI environment.
  • A transparent purpose of use is the prerequisite for the purpose limitation of the data, which is a key topic in data protection. At the latest for revoking consent – the right to be forgotten – it is central to know for what purpose the data was processed. It is also foreseeable that regulations in the AI environment will adopt such directories.
  • Questions about controllability examine whether decisions are made directly from AI algorithms and to what extent these are reversible. Ideally, the algorithms and models will be regularly checked for biases and possible discriminations.
  • Transparency is important to make decisions comprehensible. The extent to which those affected (e.g., applicants or customers) are and must be informed about the use and background of AI should also always be discussed here.

New Work: A change in the way we work

The world of work has been undergoing continuous transformation for centuries. In recent decades in particular, the pace of change has accelerated and heralded a paradigm shift. These changes have been driven on the one hand by technical development, demographic change and globalization. In contrast to today, there was hardly any talk of a 40-hour week until the end of the 18th century – nowadays it is commonplace in many professions. On the other hand, it also experienced an enormous boost from Corona and its new challenges during the pandemic.

Digitization in particular optimizes entire value chains and increases the competitiveness of companies. However, an increasingly digitized world does not only have advantages. Increasingly, it also confronts people and companies with new challenges that need to be overcome. In this context, leadership theory refers to the so-called VUCA world. In this context, the acronym VUCA stands for a working world that adapts to constantly changing conditions. The characteristics contained therein stand for:

  • Volatility
  • Uncertainty
  • Complexity
  • Ambiguity

Strengthen the attractiveness of the real estate company

The world of work is undergoing major change. This is shaped not only by external influences, but often also by internal ones. In particular, the attractiveness of the working environment offered by the organization is becoming increasingly important and can make a positive contribution to the war of talents. Especially in this context, CREM is gaining strategic importance within companies. Last but not least, it is operational real estate that also contributes to representing the vision and values of a company and carrying them to the outside world. A positive perception can thus lead to increased attractiveness for employees as well as investors. Furthermore, operational real estate can positively influence the service delivery process and thus increase productivity. The latter can be achieved in particular by means of modern office concepts and professional real estate management.

Adapt corporate dynamics in CREM target definition and make it measurable

The target definition is important for the alignment of the interdisciplinary strategies and enables the company to define key performance indicators for CREM. In practice, three different approaches can be taken to determine the available quantitative variables. 

  1. The first approach relates to the generation of income from the sale of value-enhanced real estate.
  2. The second approach pursues efficient use of resources, which is achieved through long-term and coordinated strategic measures.
  3. The third approach focuses on building metrics to achieve optimization of operating expenses. As the operation of real estate is one of the highest cost pools within companies, this approach also has the highest visibility in corporate management.

The biggest challenge of professional CREM is to fully exploit the available opportunities without changing or affecting the actual core business of the company. The corporate guidelines do not only focus on the location and the development, but rather on the effective land use and its demand. Consequently, the success of operational real estate management cannot be determined exclusively by quantitative approaches, but requires additional qualitative variables for a holistic view. These variables, such as user satisfaction, are the most decisive success factors in this context. They can be measured on the basis of continuous customer surveys or by determining user productivity.

The 4 phases of digitization

The change brought about by digitization has also arrived in the real estate industry and can be felt in the long term. Optimizations and increases in efficiency of existing processes can be achieved throughout the entire real estate lifecycle, and completely new business models can be created. Whether in planning and construction or in the operation and management of real estate. The digital transformation has also arrived in operational real estate management and requires a special focus due to its long-term approach. The progress of digitalization can be broken down into four different phases.

Phase 1: Digitization of content

The foundation for the digital transformation and for many other scenarios is laid. In most cases, this phase is initiated in day-to-day business and involves the digitization of analog content such as documents, products and information. Carrier pigeons and postal delivery of letters are replaced by e-mails. Even the dusty folders from the closets become digital documents through scans.

Phase 2: Digitization of processes and workflows

Real estate companies digitize their processes and workflows. Entire workflows gain efficiency through digital tools and are streamlined as a result. Customer inquiries are filled out digitally via a central input channel. These inquiries go directly to the person concerned via predefined steps for further processing. We often find that operational real estate management is in the process of transforming from the first to the second phase.

Phase 3: Automation thanks to digitization

The third phase involves not only the mapping of processes, but rather the resulting automation of this phase. This primarily involves the use of various technologies, such as sensors and actuators in buildings, to merge the virtual world with the physical world. The integration of artificial intelligence can then be used to draw conclusions about the future behavior of the buildings.

Phase 4: Digital business

The real estate company appears with new business models or even as a completely digital company. The mostly disruptive business models are often based on platforms and digital ecosystems. In this context, the adaptation of digital business models is regarded as digital transformation. In this process, the company coordinates its development in parallel with new customer requirements and digital technologies. It helps determine the future of the real estate world!

Conclusion: Use the challenges to open up new opportunities for your real estate sector

As already mentioned, the operational real estate management of office properties is facing trend-setting times. But if you know the future challenges and the new opportunities, you can actively shape your transformation. The combined use of appropriate methods and technologies helps to create real added value for your CREM.

This plays a particularly important role in today’s competitive environment. Because it is not just the dynamics of the market, but rather the progress of operational real estate management with a focus on successful digitalization and agility that is increasingly contributing to corporate success. We are also in a fast-living world where innovation cycles are becoming shorter and shorter. Hence my question to you: How do you feel about the current situation regarding the provision of office space and the current challenges?