A review of Journal of Corporate Real Estate, Volume 11 Number 2, 2009

Citation

Bottom, C. (2009), "A review of Journal of Corporate Real Estate, Volume 11 Number 2, 2009", Journal of Corporate Real Estate, Vol. 11 No. 2. https://doi.org/10.1108/jcre.2009.31211bae.001

A review of Journal of Corporate Real Estate, Volume 11 Number 2, 2009

Article Type: CRE critique and expert interpretation From: Journal of Corporate Real Estate, Volume 11, Issue 2

Value creation and the impact of corporate real estate assets: an empirical investigation with French listed companies

This paper concerns empirical research into the relationship between the proportion of real estate ownership in corporate property portfolios and corporate value creation in non-financial, non-property French listed companies. The paper is well structured with a review of empirical literature, definition of methodology and description of findings and conclusions.

The literature review is engaging and establishes themes such as real estate strategy maturity in the USA and Europe, ignorance of corporate real estate costs, role of improving shareholder value, previous studies into ownership and value in other world markets.

A good description of the sample firms is provided together with the processes that the researchers used for screening and validation of the final dataset. However, the authors describe how a panel regression model was used but provide no insight in terms of why this was chosen over other modelling methodologies.

The findings show that an increase in the proportion of owned real estate has a significant negative association with economic value added in service industries where there is relatively low real estate intensity (e.g. transportation, computer/software services). The longer term measure, market value added, has a negative association with increasing real estate proportion in non-service industry firms. In summary, the authors state that sales of real estate assets may be perceived positively by market participants in the industry sector, and advise that managers should consider both disposals and ownership when considering asset holdings.

The authors acknowledge that where corporate real estate ownership is not a strategic issue some of their sample firms have outsourced property in response to unstable financial markets and/or for the purpose of concentrating on core business activities. This insight into the changing economic circumstances of the sample firms and their markets is not often discussed in the paper, but would provide a beneficial context for the reader.

The valuation of sustainable freehold property: a CRE perspective

The complexities associated with the valuation of sustainable buildings are far reaching and this paper examines current thinking on a diverse range of issues including: corporate and social responsibilities; the cost of sustainable buildings; traditional, contemporary and new valuation practices; practitioner skills and life long learning; and the need for revolution in professional practice.

The paper is well written and enthrals the reader with a diverse review of literature and aspects of practical corporate real estate management. The paper points to the increasing relevance of sustainability to the occupier and/or corporate organisation. This point is important as it is the relatively recent emergence and growth of sustainable buildings that poses a problem for valuation methods and practitioners alike.

The authors establish the unequivocal link between the decision making needs of corporate real estate executives, confidence in valuers, their valuation methods and the inter-related effects on funders and occupiers. The paper concludes with an appreciation of the difficulties of incorporating sustainable criteria in valuation methods, the complexity of new techniques and the need for up-skilling professionals.

A critical reader might question if problems associated with the valuation of sustainable buildings are any different from those that have previously been debated, e.g. the impact of information and communications technology on buildings and/or the effects of obsolescence and depreciation. However, there is always an argument for reviewing/modernising methodologies and practice and this paper provides valuable foresight for academics, practitioners, professional bodies and educators alike.

Performance measurement in corporate real estate

This paper is an essential reference source and rulebook for high performing corporate real estate executives – or those that aspire to be. The paper is immensely practical and provides the reader with a step-wise methodology for designing a truly effective performance measurement system. The authors bring their guidance to life by providing many examples of good and bad practice. The paper establishes that good performance measurement systems that add strategic value are rare. I have to agree with this assessment and accordingly that is why I feel that this paper is essential, valuable reading for practitioners.

The paper introduces the relationship between performance measurement and winning advantage through Performance Analytics. The authors define their first rule of ensuring a “direct line of sight” between corporate real estate and stakeholder interests is established together with a set of common pitfalls. The authors have designed a six-step process which will lead to better practice. Perhaps, the most important steps are defining customers/stakeholders and understanding/gathering their requirements through effective dialogue. In today’s business environment it is all too common for corporate real estate teams to neglect good practice relationship management. The remaining steps ensure that a sustainable performance measurement framework will be implemented.

On this occasion I have great empathy for what the authors have developed and I cannot fault the arguments used, the guidance given, and sadly, the true reflection of poor practice that currently exists in the global industry.

FM dashboard: a facility management monitoring tool for planning, design and construction to optimize function and cost in operations

The development of an easy to use toolkit for monitoring and promoting value within construction project phases is of great significance to many practitioners. It has long been recognised that effective facility management planning and decision making at an early stage of a project can provide significant long term benefits; the facilities management (FM) dashboard attempts to provide a practical means for implementing such practices.

The authors provide a literature review which studies the theory of integrating facility management planning in construction processes. The authors are correct in identifying/discussing problems such as time and budgetary pressure, adversarial roles of the industry professions, motives of investors, owners and users and complexity of facility management as “blockers” to effective integration. The authors draw upon previous research and development work in the areas of construction process and facility management process definition. Such process classifications are used in terms of methodology (and toolkit) design.

The authors have developed a generic monitoring tool that can be adapted to other circumstances although they have designed and tested their tool on a single retail project in Zurich. The authors acknowledge this limitation but it does raise the question whether a generic, easy to use methodology would be widely adopted. It is more likely to be controlled by the nature of the project in which it is to be used, for instance, the commercial pressures that prevail or the motivations of individual players.

Putting aside such pessimistic arguments I cannot fault the approach as I acknowledge that facility management planning can add significant value at an early stage of a project – all too often mistakes made in the early stages of projects are turned into physical and financial long term problems for facilities managers to deal with. This paper provides an important building block for more research and development by academics and better practice in future projects.

Connel BottomPerformance Improvement Consulting, PricewaterhouseCoopers, London, UKM

About the author

Connel Bottom is a Chartered Surveyor with specialist knowledge in the discipline of facilities management (FM) and is an executive board member of the RICS FM Faculty panel. He specialises in assisting organisations to secure real cash savings and support for business transformation, through better management and procurement of building assets and facilities management (FM) services.