Corporate real estate operation makes an integral contribution to a company’s value across the globe. Let us dissect the title into corporate, real estate and operation. Corporate represents a corporation, or a legal entity which is formed to undertake some business. These are limited liability entities. Now the term real estate is confused with other synonyms, but it must be known that real estate represents a certain piece of land along with any fixtures (buildings and objects that are permanently fixed to the land). The term real estate is very often used in common law (a system of law developed through tribunals and by courts). Operations refer to the activities carried out by an organization to achieve various goals.
Real estate is essentially a capital asset. It can be said that at least 30% of the total capital pool of corporations is real estate. Naturally, corporations must focus on corporate real estate operation strategy in order to manage this valuable asset. Corporate real estate operation strategies must act towards assisting the overall competitive strategy of the organization. Their business objectives must give high priority towards management of such a capital asset.
O’ Mara (1999) put forth a theory regarding corporate real estate operation strategy. According to this, organizations may pursue either of three distinct generic strategies for the corporate real estate operations and management. Standardization strategy, incremental strategy or value-based strategy can be applied into corporate real estate operations in order to enhance the contribution of real estate in building the business value of the corporation.
A value based strategy uses the medium of real estate to express the planned direction and values of the organization. This method influences the thought process of the stakeholders, employees and customers by representing its value through the physical settings. Corporate objects are used effectively to express the corporation-community relationship. The building design and its function are used to convey what the corporation wishes to communicate to the customers. While this strategy uses design to convey value, mould behavior, and encourage future expectations, it can be an expensive scheme with an uncomfortable trade-off between aesthetics and functionality.
An incremental real estate strategy defers strong commitment over matters that the corporation is as yet unsure of. The physical needs for operation are met, but there is no rigid plan regarding aesthetics. Now this is good because the corporation moves forward surely though in increments. The forecasting horizon is shortened comfortably and the organization’s flexibility is conveyed. Location remains a major commitment, and the buildings are put up somewhat at random. Financial investment remains sub-optimal.
Next is the standardization strategy relies upon confident predictions about facility requirements in future. The rational style of the corporation is exemplified through standardized corporate real estate operations. The allocation of resources is under control. The strategy employs strong use of real estate as an asset. These standard objects strengthen the dominant image of the corporation. But these standards can be perceived to be rigid, preventing the objects from adapting to fresh demands. The process of mere repetitiveness may not do much for the organization.
Any corporation must ideally employ feasible corporate real estate operations that best enhance the company’s perceived value in the eyes of the market.
Richard B. Chai is a freelance writer. He generally writes content for websites, and is available for projects. Some of his latest projects have included articles on management of entitlement processes, and project and development services.
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