“Behind payroll and benefits, real estate is typically the third highest fixed cost for a company,” says Wayne Lamb, a partner with CRESA Partners Orange County. “With this in mind, making a wrong move can be very costly for a company.”
Smart Business talked to Lamb and Anne-marie Dalton, a vice president at CRESA, about the essential role of strategy in effectively managing a company’s real estate portfolio.
What is the difference between strategy and negotiations?
Strategy matches organizations’ needs with the most cost-effective plans. It carefully determines how much space a company needs, what type of space it needs, and when and where it needs the space. A good plan prepares a company for growth and contraction, and is always designed to create operational efficiencies regardless of the type of business. The plan becomes the blueprint for the best possible outcome given any circumstance.
Negotiations, on the other hand, are the result of implementing a strategic plan. Skillful negotiation is designed to achieve the lowest possible cost given all the factors in the strategic plan.
Why does strategy trump negotiations?
The two go hand in hand, but so much more money and time can be saved with a good strategy. A good plan, which goes beyond bricks and mortar, can take into consideration all the factors important to a client, such as proximity to customers, labor costs, logistics, recruiting and retaining top talent, relocation costs and government incentives, to name a few.
Skilled real estate consultants that work closely with clients can create plans that take into consideration every aspect of their past, present and future real estate needs. This allows businesses to react quickly to changes in their real estate requirements, from decreasing manufacturing facilities to finishing new office space. It also prepares companies to take full advantage of opportunities that arise, such as buying into new development or relocating to a more cost-effective location.
What are the components of a good strategy?
The components of a good strategy are pretty simple. Develop a real estate plan that aligns with a client’s space needs at the least possible cost, while building in the flexibility for a company to guess wrong. Thorough strategic planning consists of analyzing the current situation, identifying future requirements, modeling alternative recommendations, and generating backup information and analysis.
Businesses must look at their current situation from every angle to have a complete understanding of their real estate status and all related variables, such as their financial strength, industry competition and work force issues. Companies must also anticipate future requirements created by internal and external changes to their business. This foresight will help businesses make quick decisions when faced with opportunities and challenges. Once companies have gone through the analysis and projection phases, they should carefully consider possible alternatives that are supported by research and analysis.
How can real estate consultants help companies develop a good strategy?
Real estate consultants should help with every aspect of the strategic planning process. Through their knowledge of real estate and expertise in different industries, they have a wealth of ideas, so they can offer unique perspectives on everything from in-depth situational analysis to unconventional alternatives.
Real estate consultants should thoroughly understand a client’s most important initiatives and help remove obstacles to achieving those initiatives. Outside advisers can also help businesses think about challenges and opportunities that they may not have considered.
Different industries have unique needs and the consultant works to satisfy these needs. For a call center, the cost of labor may be the most important factor. For a law firm, high-image real estate might be used as part of a recruiting strategy to attract top talent. For an international manufacturing firm, the need for efficiently shipping goods might be the primary driver. The consultant should be able to provide answers to any of these issues.
How do real estate consultants create more value?
They can no longer afford to merely facilitate transactions and businesses can no longer afford to work with professionals that don’t contribute expert knowledge and strategic planning capabilities. Real estate consultants need to create value by carefully gathering data, developing a plan, implementing the plan and then following up to ensure that the strategy continues to enable a client to succeed.
Vice president, CRESA Partners Orange County