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Article
Publication date: 1 September 2005

Christian Stoy and Susanne Kytzia

This paper addresses the question as to what extent the outsourcing degrees of property management influence the operating costs of owner‐operated real estate. For this purpose…

814

Abstract

This paper addresses the question as to what extent the outsourcing degrees of property management influence the operating costs of owner‐operated real estate. For this purpose, the outsourcing degrees of technical, infrastructural and commercial property management of over 100 Swiss office buildings were reviewed. In terms of costs, the administrative costs as well as the costs of utilities, waste disposal, cleaning, upkeep and maintenance were included. As the analysis of the data revealed, commercial property management primarily impacts on the administrative costs. The office buildings of the four project partners that were examined incurred higher costs when commercial property management was outsourced. Similarly, the costs of utilities and waste disposal are higher for real estate with outsourced infrastructural property management. An inverse relationship was identified in respect of the cleaning costs, where the costs are lower when outsourcing infrastructural property management. The impact of technical property management becomes apparent with regard to the maintenance costs, which are lower for real estate with outsourced technical property management. On balance, the situation appears to be rather heterogeneous, as outsourcing results in higher costs for some cost groups and in lower costs for others. The reasons offered for these differences go far beyond the actual functions being outsourced. For instance, the project partners involved believe that it is, in particular, low service levels and reduced maintenance strategies that go hand in hand with high degrees of outsourcing. Therefore, the interviews with real estate owners, and also the data collected, give rise to the assumption that outsourcing is a measure for the implementation of cost reduction strategies. However, this assumption requires verification by way of further exploration.

Details

Journal of Corporate Real Estate, vol. 7 no. 3
Type: Research Article
ISSN: 1463-001X

Keywords

Article
Publication date: 1 October 2004

Christian Stoy and Susanne Kytzia

Nowadays, the so‐called management by objectives (MBO) is used as a management instrument of corporate real estate management (CREM), using cost targets as the yardstick of CREM…

1850

Abstract

Nowadays, the so‐called management by objectives (MBO) is used as a management instrument of corporate real estate management (CREM), using cost targets as the yardstick of CREM success. In Switzerland, CREM success is increasingly linked to cost reductions, with the cross‐company corporate strategy often requiring CREM to deliver a significant reduction in the level of cost. The cost concept used is material for the agreement or stipulation of cost targets. As the presented analysis shows, CREM has, for the most part, only very limited potential impact on costs. In particular, the use of the occupancy cost concept (sum of all imputed costs as well as costs recognised in the profit and loss account) poses a problem. This comprehensive cost type is determined by the following factors, which are in many cases outside the control of CREM: Book value as per balance sheet; Depreciation period of the basic shell structure; Main objective of the owner; Maintenance strategies; Degree of outsourcing of infrastructure management. Therefore, where the corporate strategy centres around cost reduction, CREM must be given the opportunity to control these drivers. This would require the inclusion of CREM in the development of the cross‐company corporate strategy, as otherwise the cost targets would have to be restricted to individual cost types (costs recognised in the profit and loss account). This is the only way to utilise a management instrument, such as MBO, within CREM.

Details

Journal of Corporate Real Estate, vol. 6 no. 4
Type: Research Article
ISSN: 1463-001X

Keywords

Article
Publication date: 1 November 2006

Christian Stoy and Susanne Kytzia

Today the costs of real estate are the second or third largest cost factor in most companies. The planning of so‐called occupancy costs, therefore, plays a particularly important…

1258

Abstract

Purpose

Today the costs of real estate are the second or third largest cost factor in most companies. The planning of so‐called occupancy costs, therefore, plays a particularly important role. Cost models that permit a forecast of these costs serve to assist in such planning. The objective of this study is to support occupancy cost planning and benchmarking.

Design/methodology/approach

Two regression models are presented. They permit a forecast of total occupancy costs as well as the subset of these costs that is recognized in the profit and loss account. Both models are based on 70 Swiss owner‐operated office buildings.

Findings

The forecast accuracy with mean absolute percentage errors (MAPEs) of 10 and 11 percent can be classified as good. The quality of the cost models is further tested on the basis of ten additional properties that were not used for building the models. The forecast accuracies again prove to be comparatively high (absolute percentage errors from 2 to 18 percent and from 0.2 to 25 percent).

Research limitations/implications

In order to be able to improve the quality of forecasting occupancy costs, future studies should focus especially on the strategic dimension of real estate management (e.g. maintenance and outsourcing strategies).

Originality/value

The proposed concept and the cost model forms the starting point for further studies.

Details

Facilities, vol. 24 no. 13/14
Type: Research Article
ISSN: 0263-2772

Keywords

Article
Publication date: 2 May 2008

Christian Stoy and Susanne Kytzia

The purpose of this paper is to examine the utility costs in Swiss office buildings. Owing to their high amount, as well as from an ecological perspective, the utility costs of a…

654

Abstract

Purpose

The purpose of this paper is to examine the utility costs in Swiss office buildings. Owing to their high amount, as well as from an ecological perspective, the utility costs of a building are a relevant aspect of facility management. Against this backdrop the provision of utilities and waste disposal of buildings must be optimized. Benchmarking is an important instrument in this effort. On the one hand, it requires indictors and on the other, it requires knowledge of how they can be influenced (relevant cost drivers).

Design/methodology/approach

A study of the specialist literature revealed, from a theoretical perspective, the relevant drivers of utility costs. Using regression analyses, these drivers are examined on the basis of a set of primary data collected within Switzerland (105 owner‐operated office buildings). In addition, this data set also provided indicators for utility costs.

Findings

For the properties surveyed, a utility cost median of CHF 39/m2 usable floor area and year was ascertained (with a lower and upper quartile of CHF 32 and CHF 47/m2 usable floor area and year, respectively). Furthermore, it should be noted that in principle it is the building characteristics (extent and standard of technical installations) that determine the utility costs, while aspects of usage (e.g. share of residential and recreational area) are of secondary importance.

Research limitations/implications

The majority of the projects studied are office buildings of banks and insurance companies. For this reason, it can be assumed that these properties have a comparatively high standard. Whether the interrelations found also apply to office buildings with other standards must be clarified by additional studies.

Originality/value

This study identifies cost indicators for utilities and waste disposal of Swiss office buildings.

Details

Journal of Facilities Management, vol. 6 no. 2
Type: Research Article
ISSN: 1472-5967

Keywords

Article
Publication date: 1 January 2005

Christian Stoy and Susanne Kytzia

As corporate real estate is increasingly being recognised as an important cost and production factor, senior management now pays considerable attention to this asset group. These…

2149

Abstract

Purpose

As corporate real estate is increasingly being recognised as an important cost and production factor, senior management now pays considerable attention to this asset group. These assets are managed, inter alia, by using benchmarks. In addition to monetary benchmarks, building efficiency (e.g. m2 of usable floor area per m2 of gross external floor area) and capacity benchmarks in particular (e.g. m2 of usable floor area per existing workplace) must be highlighted. Previously, specific values and their drivers for the assessment of buildings or portfolios were not available.

Design/methodology/approach

This study is based on a survey carried out in Switzerland, involving the collection of floor data (in accordance with DIN 277) of 116 owner‐operated office buildings. In addition, their drivers were ascertained using regression analyses.

Findings

The building efficiency may be assessed on the basis of the share of usable floor area or the share of office space in the gross external floor area. The main drivers are the shares of vehicle parking space, areas for residential and recreational purposes and areas for storage, distribution and retail. These drivers must be taken into consideration when assessing the building efficiency. It became apparent that capacity benchmarks are determined primarily by factors such as the space use management strategies, and only to a lesser degree by the building itself.

Originality/value

The study provides space benchmarks and their drivers. The results therefore permit an objective evaluation of office buildings. However, further work transcending the influence of the building itself will be required with regard to the capacity benchmarks.

Details

Facilities, vol. 23 no. 1/2
Type: Research Article
ISSN: 0263-2772

Keywords

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