CORPORATE REAL ESTATE ASSET MANAGEMENT
IN THE UNITED STATES
by
Peter Read Veale
B.S., Wharton School of Business
(1985)
Submitted to the
Department of Architecture
in partial fulfillment of the requirements
for the degree of
MASTER OF SCIENCE IN ARCHITECTURE STUDIES
at the
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
February, 1988
@ Massachusetts Institute of Technology 1988
Signature
of Author
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Peter Read Veale
Department of Architecture
January 15th, 1988
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Certified by
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Ranko Bon, Ph.D
Associate Professor of Building Economics
Thesis Supervisor
Accepted by
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Julien Beinart, M.C.P.
Chairman
Students
Graduate
for
Departmental Committee
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OF T0NL18Y
MAR 0 8 1988
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Corporate Real Estate Asset Management in the United States
by
Peter R. Veale
Submitted to the Department of Architecture on January 15, 1988
fulfillment of the requirements for the Degree of
in partial
Master of Science in Architecture Studies
ABSTRACT
This research is an assessment of the management of buildings
and land for large organizations -- both public and private -An
in the
real
estate
business.
that
are
not primarily
investigation of the current management practices, priorities,
of managers for
planning horizons, motivations, and attitudes
these assets
was conducted by way of an indepth survey of senior
real
estate
executives
at
284
large
U.S.
corporations
and
institutions.
The research shows that despite their tremendous value,
corporate real
estate
assets
are often under-managed.
The
and land typically
market value of a corporation's buildings
but ranges from 10 to 50
assets
represents
25 percent of total
Among those
percent and in some cases is reported higher.
real estate
surveyed, less
than half consistently evaluate their
center.
assets independently, either as a cost center or profit
One in five does not evaluate their real estate at all.
One of the most significant conclusions of the research is
that large numbers of corporate real estate managers do not
One
real estate assets.
maintain adequate information on their
in four does not maintain a real
estate
inventory.
Two out of
three do not maintain a real estate management information
system (MIS).
One in four is uncertain of the market value of
the organization's real estate and one in three is uncertain of
research conducted in
Based on similar
cost.
the acquisition
1981 by Harvard Real Estate Inc, the 1987 research suggests that
little
has changed over the six year span.
Statistical Hypothesis testing of the data using Chi-Square
1) Profit
centers do not indicate more
that:
methods reveals
and land than cost centers
effective
management of buildings
real estate
(but that
those who do not separately evaluate their
-- as either a cost or profit center -- are less effective than
those who do), 2)
Effective management of corporate real estate
is
unrelated
to the size of the real
estate
portfolio
(but
and 3) the use of
to management attitude),
related
directly
computers in corporate real estate does not necessarily indicate
effective management.
The research concludes with discussions of the role of
information and general management in corporate real estate and
-- both as an emerging branch
examines the future of the field
of management and an emerging academic discipline.
Thesis Supervisor:
Title:
Ranko Bon,
Ph.D.
Associate Professor of Building Economics
2
ACKNOWLEDGEMENTS
I would first like to thank the many executives who provided
their thoughts and comments during the research and who made
this study possible.
contribute to
Hopefully, their collective efforts will
a greater understanding of the field today.
This study, and previous research by the author, was made
possible with funding from the Shimizu Construction Co., Ltd.
am grateful for their support.
I am also indebted to the
I
Laboratory of Architecture and Planning at MIT which has
provided ongoing administrative and financial support throughout
my stay at MIT. In addition, the research was conducted in
cooperation with the International Association of Corporate Real
Estate Executives (NACORE) who provided considerable logistic
support.
Their help was instrumental
in the successful
completion of the research.
The genesis of many ideas presented in this thesis were borne
out of discussions and working sessions with countless
individuals, too numerous to acknowledge here. The following
individuals, however, are deserving of special recognition:
Dr. Ranko Bon for all of his help and his unerring sense of
professionalism, proficiency, and punctuality in his role as
thesis advisor and mentor at during my work at MIT,
Dr. Robert
Silverman (of Harvard University) for his invaluable advice and
enthusiastic support during all phases of this study, Mike
Joroff for a place at MIT without which I would surely not be
writing this today, Rodrigo Brana (of too many degrees to list)
for his contributions as a colleague and a sense of humor, Dr.
Eric Dluhosch, for his ongoing support and work together during
the past two and a half years, Professor Patrice Derrington (of
Carnegie Mellon University) and Young Chai for their thoughts
and comments on this and previous research efforts,
Carl Fisher
of GTE for sharing the results of his research at GTE, and
Bonnie Hafner for her adminstrative assistance in the early
going.
Finally, my fullest thanks go to Mary Dolden for her unlimited
kindness, understanding, friendship and hot-coffee.
*
*
This thesis is dedicated to my good friend Louis Eyre Keene,
with no fixed address, who was certifiably nuts and right as
rain.
Pete Veale
Cambridge.
January, 13th, 1988.
3
TABLE OF CONTENTS
Abstract
..........................................
2
Acknowledgements
..........................................
3
Table of Contents
....................................
4
List of Tables
7
I. Introduction
1. Background
.
9
a. Research Rationale
...............................
b.
...........
Previous Research
c. Preparing the MIT Survey
2. Structure of the Thesis
12
...
...
...
.
..
.
............
13
....
....
.....................
...
16
...
18
II. The Evolution of Corporate Real Estate As s et Management
in the 80's: Stasis and Uncertainty
1
Introduction to the Survey Results
2
The HRE and MIT Surveys Compared
3
The Nature of Corporate Real Estate
a.
.............
21
.........
The Size of Real Property Portfolios
b. The Value of Real Property Portfolios
22
.....
.............
25
29
4. Organizational Structures for Corporate Real Estate
a.
Form of Real Estate Unit
b.
Reporting Structure
c. Activities Reported
..........................
32
...............................
33
...............................
35
5. Real Estate Performance and Evaluation
a. Evaluation Method
.................................
36
b.
................................
40
Inventory and MIS
c. Real Estate Accounting
............................
d. Real Estate Investment Analysis and Return
4
41
........
43
6. Decision Making in Corporate Real Estate Asset Management
a.
The Corporate Real Estate Executive Profile ........
45
b.
Decision Support
49
c.
Management Attitudes
..................................
..............................
51
III. Selected Research Hypotheses
1.
Introduction to the Hypothesis
.......................
56
2. Hypothesis Testing Methodology
a. Dimensions of Effectiveness
b. Statistical
Tests
3. Hypothesis I:
....................... 58
...................................
60
Profit Centers are More Effective in the
Management of Buildings and Land Than Cost Centers
a. Background
... ...............................
b. Statistical Test of the Hypothesis
4.
............ 72
................
Interpretation of the Results
c.
67
75
Hypothesis II: Effective Management of Corporate Real
is
Estate
Unrelated to
Size of the Real Estate
a.
Background
b.
Statistical
c.
Interpretation of the Results
............
Portfolio
........................
Test of the Hypothesis
80
...........
................
84
87
The Use of Computers in Corporate
5. Hypothesis III:
Real Estate Indicates Effective Management.
a. Background
.... ..............................
b. Statistical Test of the Hypothesis ............
c. Interpretation of the Results
94
95
................. 100
IV. Conclusion: Towards Accountability and the Emerging
Discipline of Corporate Real Estate Asset Management
1. The
Importance of Information in Corporate Real Estate 104
2. The Importance of General Management in
Corporate Real Estate
5
...........................
109
. 112
3. The Future of Corporate Real Estate Asset Management
a. A Developing Field of Business
.................
113
b. An Emerging Academic Discipline
...............
115
4. Real Estate and the Corporate Mission:
118
Beyond Deal-Making and Towards a Strategic Approach
Bibliography
......
.
.
...
..
.
........
Appendix A: Questionnaire and Cover Letter
....
......
............
Appendix B: Statistical Summary of Survey Results
123
128
.....
Appendix C: Abstract of Harvard Real Estate Inc. Survey
6
.
137
153
LIST OF TABLES
Table A:
Earlier Surveys
15
Table B:
Comparison of MIT and HRE Surveys
Table C:
Rationale for Cost Center Operations
Table D:
Rationale for Profit Center Operations
Table
E:
Primary Activities of Profit
and Cost Centers
Centers
Table
F:
Real Estate Responsibilities
of the
.
.
.
.
.
. .
.
.
.
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.
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.
.
. 36
.
.
.
.
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.
. 38
.
.
.
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.
.
. 39
.
.
.
.
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.
41
.
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.
46
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.
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.
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.
. 48
.
.
. 52
23
37
Real Estate Unit and the Line Unit
Table
G:
Barriers for Developing Real Estate
Inventory / MIS
Table
H:
Mean Hours Spent Weekly by Senior
Real Estate Executives
Table I:
Primary and Secondary Bases
.
for
Decision-Making
Table
J:
Corporate Real Estate Executive Attitudes
Table K:
Chi-square Testing Method
Table L:
Comparison Between Methods of Real Estate
Evaluation
.
.
.
.
.
.
.
.
.
63
70
Table M: Effectiveness by Profit Center vs. Cost Center
Table N:
Effectiveness by Profit Center vs.
No Separate Evaluation
Table 0:
Comparison by Portfolio Size
Table P:
Effectiveness by Square Feet Owned
.
Table Q: Effectiveness by Number of Sites
Table
R:
Table S:
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.
.
73
.
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.
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.
81
.
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.
86
.
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.
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.
74
87
. 89
Effectiveness by "Real estate plays a
critical role in my organization"
. . 91
Industry Type of "Real Estate Plays a Critical
Role in My Organization" Compared to Entire Survey
Table T:
Computer Use Broken Out by Method of Evaluation
.
.
96
Table U:
Computer Use Broken Out by Size of Portfolio
.
.
.
96
7
Table V:
Computer Use by Profit Center vs.
No Separate Evaluation
Table W: Computer Use by Cost Center vs.
No Separate Evaluation
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Table Y:
Computer Use by Square Feet Owned
Table X:
Computer Use by Number of Sites
Table
Uncertainty vs. Availability of Information
Z:
8
.
98
.
.
.
.98
.
99
.
100
.
107
Introduction
In
April
of
Architecture
1987
the author,
and Planning
through
(LAP) at MIT,
the
Laboratory
of
conducted a survey
of
senior real estate executives in America's largest
corporations
following a similar survey conducted by Harvard Real Estate Inc.
(HRE)
in
1981.
The
objectives
of the MIT
survey
were
as
follows:
o
To assess the current state of real estate asset
management
in U.S. corporations and to compare with the earlier
findings of the HRE research.
o
To
investigate the underlying reasons for the
current
practices
observed and to determine the motives and
rationales behind decision-making in the field today.
o
To construct a profile of the senior corporate real estate
--
executive
mapping
out
individual's activities,
and attitudes.
priorities
the
full
concerns,
range
of
planning
This research is important for several reasons.
To date, the
of buildings and land within large organizations has
management
been largely under-researched.
What studies have been conducted
This survey is
indicate that these assets may be under-managed.
an
that
horizons,
attempt
to
investigate
that
claim
and
provide
a
and critical assessment of corporate real
estate
real
estate
management practices are known to exist in organizations
today,
not
always
comprehensive
asset
the
management
underlying
entirely
clear.
today.
and
motivations
While
while certain
Second,
rationales
management
are
inefficiencies
can
be
identified and even measured, prescriptive remedies must proceed
9
from
a
clear
behavior.
understanding
of
the
motivations
behind
the
This survey is an attempt to ascertain some of those
motivations
and
research
will
progress
at
rationales.
Finally,
the
results
complement other research efforts
the
LAP
and
help
guide
future
of
the
currently
in
direction
by
identifying new inquiries worthy of investigation.
This
introduction
will
first
discuss
the
rationale
research in this area and the genesis of the MIT survey.
a
brief
background
on previous survey work in
the
presented including a summary of the major surveys.
of the MIT survey is discussed next,
and
mailing.
Finally,
the
including its
structure
presented to guide the reader through its
10
of
thesis
contents.
for
Next,
field
is
The design
preparation
itself
is
1. Background
Past
work by the author and research members of the LAP
focused
on
the
management
--
organizations
both
of buildings and
public
and
private
primarily in the real estate business.
corporate real estate,
just
--
for
who
large
are
not
Whether referred to as
physical facilities,
buildings and land,
land
has
real property,
these assets typically represent
or
one
quarter of total corporate worth, and collectively, an estimated
$.7
to $1.4
Partners
the
trillion
(Silverman &
Zeckhauser
1981).
estimates that real estate accounts for 22 percent
assets
Ibbotson
on
the books of the Fortune
estimates
500
(Bennett
investable
bonds
(3.4 percent) or government treasury bills
wealth,
greater
than the total of
(Conroy, Miles, & Wurtzebach 1986).
of
associated
occupancy
these
are
rate
Total
significant
for corporations can range
cost
a
The
estimates the
single
workstation
between
authors of the Orbit
rates in excess of 40 percent.
of
five
and
which can be upwards of
(Bell 1987).
Association
between
International
average
churn
an organization at 30 percent with the direct cost
Harbinger Goup,
churn
percent).
with maintaining them on a day-to-day basis.
Management
in
moving
(4.0
costs
or 50 percent of net income
Facility
corporate
Beyond the market or book
eight percent of (pre-tax) gross sales,
40
total
operating
costs
assets,
of
1987).
corporate real estate at 7 percent of
U.S.
value
LaSalle
relocating a single
11
$200
and
$300.
II study estimate
of
The
average
Estimates of the average
employee are as high
as
$15,000
(Bell 1987).
The Institute of Real Estate Management estimates
the median occupancy cost for downtown office buildings at $5.83
a square foot
(IREM 1987) but this figure can go as high as
(Bennett 1987).
Rates
for heating and cooling alone for office
buildings can reach several hundred dollars an hour
Collectively,
buildings
a
vast
the
ongoing
(Wald 1985).
costs and appreciable
value
of
and land represents a substantial corporate asset and
management effort.
physical
environment
corporate mission is,
important
itself.
$40
than
the
In addition,
on
the
organizational
impact
of
productivity
while more difficult to measure,
cost
(see Zahn 1987.
or value of the
Becker 1985.
the
real
no less
estate
Margulis
and
asset
1985.
Marans
1985.)
a. Research Rationale
The
main
thrust
of the research at MIT
has
centered
on
senior decision-makers responsible for buildings and land within
the corporation.
The work is
focused less on the improvement
the individual components of corporate real estate --
of
i.e. space
building operations,
capital
budgeting, energy management, lease negotiation, etc. --
than on
planning,
property
of upper management's ability
improvement
the
these
many
acquisition,
components in an
effective,
fashion.
management
nor real estate proper,
management.
Real
both
managing
proactive,
The approach does not concern
understood
of
to
from
orchestrate
and
facilities
but rather the larger
the perspective
of
senior
well
task
corporate
This approach has been labeled, at different times,
Property
Portfolio Management
12
(RPPM)
and
also
Corporate
Real
Estate
referred
Asset
to in this thesis.
management"
is
activities
(CREAM).
Both
terms
(The term "corporate
in
RPPM or CREAM
and,
be
estate
range
unless
meant in the traditional sense of
not
may
real
used throughout to describe the full
involved
is
noted,
Management
of
otherwise
formal
real
understanding
and
estate transactions only).
The
work
at
has
aimed
been
at
the principles behind the effective management
articulating
large
MIT
portfolios
building
objectives,
the
and
has,
of
as one
its
development of methodologies and
author
the
attempted
has
process
decision- making
and
through primary research.
the
to
for
Towards that
the
understand
further
themselves
decision-makers
Hopefully,
central
systems
supporting corporate real estate decision-makers.
end,
of
the results of this work
can better inform the designers of methodologies and tools, such
as
decision
future
support
understanding of the needs,
systems,
priorities,
through
a
greater
and practices of those
who will use them.
b. Previous Research
In
ten years several primary
past
of
business
facilities.
and
constituency
however,
to examine
managing
a
corporation's
real
and
estate
These studies each approach the topic from various
vantage points;
dimensions
investigations
through surveys and questionnaires,
have attempted,
the
research
of
each concentrating on particular activities
each seeking selected information for
professionals
relatively
little
or
specialists.
work has been done to
13
In
its
or
own
general,
date
which
takes
a
real
more holistic and top-down approach to
estate
management
understanding
of the
process
the
and which aims
corporate
at
senior real estate executive
a
better
within
the
organization.
Many
studies
were reviewed in preparation of the MIT
study
and, where appropriate, used in later comparative analyses.
purposes
origins
and
Cushman & Wakefield,
Harris
&
opinions
of these
studies
and
continuing
significantly.
range
for example, has engaged the
Associates to poll and report upon
firm of Louis
the
plans of corporate real estate
perceptions,
executives
The information gathered,
less
for
the benefit of the real estate executives
than
for
the
real
brokerage firms,
range
demographics,
in
that
themselves
polled
their
attitudes.
inquiries
of
and
activities,
--
today using its
roles
own
has
into
the
of
facility
membership
on
their
few corporations,
respective
such as GTE,
of
Several
such as Corporate Design & Realty,
readership
A
them
(IFMA)
facility professionals as a source for data gathering.
industry publications,
Real
leasing agents, consultants, etc.
well-organized
corporations
a
however, is
supports
Facility Management Association
several
conducted
industry
estate
developers,
International
managers
in
series of Cushman & Wakefield Business America
Estate Monitor studies.
The
The
practices
have
and
have themselves
conducted polls of real estate managers in other firms to better
inform
the
interesting
been
management
of
their
own
real
estate.
It
to note that very few academic investigations
is
have
conducted in this area and those that have been tend to be
14
singular in scope and intention.
The following table lists those surveys conducted in the area
of corporate real estate and facility management which
the
preceded
1987 MIT survey:
Table
A:
Earlier Real Estate and Facility Management
Surveys
Compiler
Year
Target Group
# Mailed
Stevenson
1975
NACORE
205
107
52
Hubbard
1976
Fortune
500
111
22
Double 500
1000
91
9
Industrials
Marling
1980
# Returned
% Resps.
Fortune
*
100
29
IDRC
1981
IDRC members
350
Harvard
1981
Fortune 800
NACORE
non-profits
1377
300
22
100
27
27
1983
GTE
various large
industrials
*
Real Estate
1984
Research Corp
IDRC members
70
Farragher
1984
NACORE members 455
129
Corporate
Design &
1986
CDR readership
474
Cushman &
Wakefield
1986
Dun & Brad-
201
IFMA
1986
IFMA members
MIT
1987
Fortune 1000
Realty
*
28
(CDR)
street (service
and industrials
1300
*
(telephone)
interviews
488
37
284
15
NACORE
non-profits
*
= Approximately
15
1898
*
It
is
the
conducted
opinion
within
comprehensive
the
of the author that
among
last decade the HRE
and representative
work
the
is
studies
the
most
of senior management attitudes
to date. The line of inquiry developed in that study appeared to
be
closest in approach to that which had been developing
the MIT research team since 1984.
Thus, a
among
follow-up of the 1981
HRE study seemed the most appropriate vehicle for conducting the
1987 MIT study.
c.
Preparing the MIT Survey
The MIT survey was designed with two objectives.
reexamine
were
the
those
questions from the original HRE
First,
survey
which
still deemed relevant in 1987 and to observe changes
six
year
questioning
span.
which
Second,
would
to
pursue
go beyond
the
a
second
mere
to
over
line
of
observation
of
various conditions or decisions being made in corporations today
and investigate the underlying reasons or rationales.
Dr.
study,
Robert
acted
advisor
of the two authors of
the
throughout
survey
the
HRE
conception,
Where original questions were
care was taken to phrase the question in its original
repeated,
another
as
one
production and analysis.
design,
form.
Silverman,
Out
of the 19 original questions,
11 new questions added.
8 were retained
and
A slightly revised version of
the survey was developed for non-profit organizations.
The
four
background;
areas
of
inquiry
real
organization;
were
as
estate
evaluation; and real estate decision making.
16
follows:
general
performance
and
The
1987
MIT
survey,
like the
earlier
HRE
survey,
conducted
in cooperation with the International Association
Corporate
Real
Estate
Executives
addresses
and
titles
of
the
(NACORE).
NACORE
was
of
Specifically,
membership
were
made
available as well as general clerical assistance when necessary.
In
addition,
NACORE preceded the actual mailing of the
survey
with a membership-wide letter endorsing the study and urging its
members
to complete the survey.
It is the author's belief that
NACORE support was very influencial in the success
the
of
the
survey.
In addition to the NACORE membership, addresses
and titles of
the Fortune 500 and Fortune Service 500 were collected using the
1987
Standard and Poor Corporate Directory.
available,
Where
In all
the title of the senior real estate executive was used.
cases,
other
either
the Vice President of Operations or
Vice
President of Finance was selected as the target individual.
June 1st,
On
1987,
surveys were sent out to the
following
groups:
o
The Fortune 500
500
o
The Fortune Service 500
500
o
Public Agencies
197
o
Academic Oraganizations
34
o
Non-Profit Institutions
4
o
NACORE Members (not included
in the groups listed above)
Total
By August 1st,
that
number,
663
1898
approximately 320 surveys were returned.
295 were considered to be adequate
17
(in
terms
Of
of
number of answers completed) for inclusion in the analysis.
An
additional
it
was
eleven surveys were dropped from the sample when
discovered
that the respondents were engaged in
estate industry as a primary line of business
brokerage,
asset management,
etc.).
response
withhold
rate.
their
Since
company
confidentiality,
it
is
name
many
and
real
(e.g. development,
The remaining 284
were used in the analysis that follows.
percent
the
surveys
This represents a
respondents
address
not possible to
for
determine
15
elected
reasons
to
of
individual
response rates for the various groups listed above.
2. Structure of the Thesis
This thesis is arranged in three chapters.
Chapter I --
"The
Evolution of Corporate Real Estate Asset Management in the 80's:
Stasis
and
Uncertainty" --
survey results.
are
Next,
the
responses to the questions in the
survey are presented in basic percentage form
appropriate,
of
Similarities between the 1981 and 1987 surveys
first examined.
1987
is an indepth presentation
cross tabulation with other survey
by
and,
where
responses.
The individual findings are discussed in the broader context
of
Findings
of
real
estate
asset management
as
appropriate.
earlier surveys are also referenced as appropriate.
Chapter
exploration
--
II
--
of
several focused research hypotheses which
"Selected
Research
conducted using the data from the survey.
Hypotheses"
conducted nor are they necessarily the most critical
18
an
were
These investigations
are not meant to be all-inclusive of the full range which
be
is
could
issues
in
the
field today.
They were selected subjectively
by
the
author.
They are as
follows:
H:I
Profit centers are more effective in the management of
buildings and land than cost centers.
H:II
Effective management of corporate real estate is
unrelated to the size of the real estate portfolio.
H:III The use of computers in corporate real estate indicates
effective
management.
Statistical
--
methods
--
tests
were
chi
square
hypothesis
employed utilizing the survey data
support or reject each hypothesis.
presented
and
followed
testing
to
either
The results of the tests are
by a discussion and interpretation
of
the
Towards Accountability and
the
results.
Chapter III --
Discipline of Corporate Real Estate Asset
Emerging
--
"Conclusions:
addresses
research
some
broader
themes that
recur
Management"
throughout
the
in terms of implications for present day practice
and
future
directions for the overall discipline of corporate
estate
asset management.
the
survey --
Two issues which surfaced throughout
information needs and general
discussed
indepth.
discussed
both
emerging
academic
as
The
an
real
management
of corporate real
future
distinct field
of
Finally,
discipline.
are
estate
is
and
an
management
the
--
management
dimensions of a strategic approach to corporate real estate
are
examined and the implications for future research are discussed.
References to previous studies,
working papers,
presentations,
19
articles, books, unpublished
interviews, and project reports
parenthetically by author throughout the
are
included
The
full title and date of each reference may be found
bibliography.
20
thesis.
in
the
I.
Evolution of Corporate Real Estate Asset
in the 80's: Stasis and Uncertainty
The
Management
1. Introduction to the Survey Results
This
and
chapter
begins with a comparative analysis of the
HRE surveys.
The sections that follow provide a
MIT
detailed
discussion of the survey responses for each of the areas covered
These sections are arranged according
the survey.
in
four basic components of the survey:
Real
Estate,
Estate,
3)
results
Estate Performance
Real
in
the
The Nature of Corporate
Real
Organizational Structures for Corporate
2)
Decision-Making
1)
to
and
Evaluation.
Corporate Real Estate.
and
Individual
four
may be found as sub-headings under these
4)
survey
general
survey components.
The survey questions are included in Appendix A
together with
a copy of the cover letter that accompanied the survey.
Before
to
evaluating the results of this survey it is important
First,
consider several points.
the results presented
in
this thesis reflect only the answers reported by the real estate
themselves
executives
reality.
As
such,
the
and not necessarily the
answers provided
true
indicate
state
of
management
attitudes and do not necessarily correspond to actual management
behavior.
Second,
be assured.
the completely random character of the sample cannot
Similar to the 1981 HRE survey, a certain degree of
self-selection
necessary
--
with
regard
to
to fill out the survey --
study reports the following:
21
the
availability
can be suspected.
of
data
The HRE
"Those companies with the most organized real estate records
would
have
found
it
easier
to
respond.
The
survey,
therefore,
almost
certainly
understates
the
lack
of
organized
thinking
about
real
estate
in
American
corporations."
Finally,
sample
self-selection
provides
reliability.
for
a
a
reasonable
For example,
maintain
plus-or-minus
.05
repeated
assurance
e.g.
a real estate
of
data's
what proportion
inventory
--
of
to
estimation)
the
true population proportion will fall
plus-or-minus
.05
of
the
a
Thus,
American
corporations,
of
the
accurate
(Ott & Hildebrand 1983).
answer 90%
the
interval
samples are drawn from the population of
the
of
the
(using the most conservative
sample size of 271 is required.
if
the size
to obtain a 90% confidence
survey question --
given
respondents
notwithstanding,
time.
within
(Ott
&
Hildebrand 1983).
2. The HRE and MIT Surveys Compared
Corporate
real
estate
in 1981,
as indicated
by
the
HRE
survey, represented a vast proportion of corporate assets which,
by and large,
reluctance
separate
and
went under-managed.
of
companies to manage their buildings and land
and independent assets;
information
That study highlighted
on these assets;
the absense of adequate
and the lack
tools for guiding and evaluating real estate
study
estate
concludes
that
effectively
the decision to
of
the
as
data
diagnostic
performance.
The
corporate
real
manage
and efficiently appears to have more to
do
with the attitudes of top management than with the nature, size,
value, or function of the properties themselves.
22
much the
the state of corporate real estate
in 1987,
Today,
The MIT survey --
same.
a wholly
independent study on
a random sample of U.S. firms a full six years later --
the
findings
question:
of
Why
the
previous study and
remains
raises
does corporate America continue to
confirms
the
logical
under-manage
its real estate assets?
Table
surveys
B
is a comparison of selected
which
dimensions
from
illustrate the degree of similarity between
both
the
two.
Table B: Comparison of MIT and HRE Surveys
1987 MIT SURVEY
1981 HRE SURVEY
o
SURVEYS MAILED
1898
1377
o
USABLE RETURNS
284
300
o
RESPONSE RATE
15%
22%
RESPONDENTS BY INDUSTRY TYPE:
HEAVY MANUFACTURING
LIGHT MANUFACTURING
RETAIL/WHOLESALE
FORESTRY/MINING/CONSTRUCTION
BANKING/FINANCIAL/INSURANCE
TRANSPORTATION
UTILITIES
OTHER BUSINESS ACTIVITIES
12%
22%
13%
14%
17%
4%
25%
20%
6%
8%
21%
4%
15%
5%
3%
7%
% WITH REAL ESTATE INVENTORY
64%
66%
% WITH REAL ESTATE MIS
26%
20%
% HAVING A REAL ESTATE UNIT
86%
80%
% REPORTING TO THE PRESIDENT
20%
20%
% "CLEARLY EVALUATING REAL ESTATE
PERFORMANCE INDEPENDENTLY"
39%
40%
% "CLEARLY NOT EVALUATING REAL
ESTATE PERFORMANCE INDEPENDENTLY"
47%
40%
23
% INCONSISTENT IN EVALUATING REAL
ESTATE PERFORMANCE
14%
20%
% CHARGING INTERNAL RENTS
67%
65%
% ACCOUNTING FOR REAL ESTATE ON A
PROPERTY-BY-PROPERTY BASIS
51%
60%
The
charactaristics
of the 1987 respondents
those of the 1981 survey.
to the
match
Several differences may be attributed
influence of the overall economy and business climate
the time elapsed between the two studies.
revenues
the
closely
in
For example, reported
and total assets increased slightly over the period as
answers were not adjusted for
inflation.
The decrease
in
percentage of manufacturing concerns responding may parallel
an
overall
(see
decline in the
Cohen & Zysman
manufacturing sector during the 1980's.
1987.
Sabel,
Herrigel,
Kazis,
&
Deeg
1987.).
Correspondingly,
the
increase in
banking,
insurance,
and
financial service firms is likely to reflect the growth of these
service
sectors
while
the increase in
"other
business"
may
reflect the increase in merger and acquisition activity (i.e.
a
larger portion of "other businesses" are conglomerates or multiservice
corporations
who
were unable to respond
to
the
SIC
classifications provided).
While some improvement can be noted, for example in the areas
of
fair market internal rents or establishing a
charging
estate
unit,
the net improvement is not sufficient
overcome even modest allowances
(i.e 5% to 10%).
surveys
drawn:
1)
enough
real
to
for sample error between the two
Thus the following conclusions
are
there is little to suggest that things have improved
24
significantly
results
3.
since 1981,
and 2) the similarity of the
survey
strengthens the validity of each.
The Nature of Corporate Real Estate
Size of Real Property Portfolios
a.
The
square
size of real property portfolios was evaluated
foot
500,000
sites
square
to
(33%)
within
100
square
feet
both
ranging from less
than
feet to over 25 million and from less
over 5000.
responding
The largest proportion
owns between 1 and 10
to 500 sites
(26%).
(35%),
Roughly
of
million
and leases less
one-half
of
point to a full 15% who
results
survey
25
corporations
square
than
feet,
500,000
corporations
all
are
out
leasing
500,000 and 25 million sqaure feet of their
between
than
lease out at least some portion of their owned space.
reporting
The
area and number of sites,
by
space
own
annually.
1
Figure
the industry group of
charts
respondent
the
by
number of square feet owned and occupied. For the most part, the
larger
area
are found
portfolios
within
manufacturing,
the
transportation and utility sectors while the smaller square foot
portfolios
insurance,
banking,
are found within the retail and wholesale;
and
financial
services;
forestry,
mining,
and
construction; and "other" business sectors.
When
number of sites is the criterion,
portfolios
financial
utility
are
services;
sectors.
found
the
within
retail
however,
banking,
and wholesale;
the larger
insurance,
respondent with number of sites.
25
and
transportation
charts the industry group
Figure 2
and
of
the
SQUARE FEET OWNED
20
-
UINDER
10
fI
Goo,
, Bee
E b1t
ON
ILLI
liao
To
1
16
11 IL!
0]O10
N
TO
ON
25
12--
[OUER
JL;7~L'
CNP1
1H
25
.
ONL
11LLI ON
a--i
i i
mJc
.. I -r rI 1i,- i iCo
4
IEa-ItV
01ANIJ FACT
.
1T RETAI L/W FOR ESTRV B AN CI NG/' TRANHSPOR
TAT 1 ON
I A
F I NA1C
OI 10L. SAl.E /11 I 14 I NG1 1 N.AC
CONS
NlG
i
NG
I
jFt
MA'iF1A11CT
RESPONDENT BY INDUSTRY TYPE
UTI
I
i TI
E
S 11II8
OTH E
( M
S
1
i C
RUBL
AGENCY
NUMBER OF SITES
*
2P-C>JL!v
20
IND)ER2
25---0
-k
-
2((D
--
P--4
ox: isi--
IL G(D
MlAN14IRAVC'T MA-1N
Mt I HG
1F
A CT'1 01 1O S
.-
t
AL-E
'0RES
'~''
N
/I
it
I
IG/-,
NG
IIHIHG,'11
'
F I HNANHCI A
CON;
1I
..k.M T I ON I
L/ N.
RESPONDENT BY INDUSTRY TYPE
""11
1
-
Oi:H:I
.I
1 MES S
ACIll 1
U
LIC
AGCq t--IUCV
general,
In
The
increase in area.
of
increase by number of sites
as portfolios
survey data shows,
however, the
inverse
under
relationship for portfolios over 5000 sites and
this
These two non-conforming tails of the overall distribution
25.
are
populated
housed
in
a
manufacturing
foot spaces.
at one end by mostly banking
high
firms
number
of
small
and
spaces
square-foot
housed in a small number of
firms
retail
Figure 3 illustrates this phenomenom.
SQUARE FEET OWNED
AND OCCUPIED
'90UNCERFT A I
NO AMSWER
-1
e-
cCNP
OVER
76-
OMLVi)
1
MI LL I ON
o
W266-
o
56--
*
40so--
OVER 25
ri I LL I ON
16 TO
MILLION
25
TO 1
i
MI LLION
S 80,00e0
36-
1
*
26..
UNDE
R 25
2556
56£ee
166566
5661666e
MILLION
UNDER
s66 666
UNCE
RTA I
5ee
ANSW
ER
NUMBER
OF
SITES-FAC
L
TIES
NUMBER OF SITES / FACILITES COMPARED TO NUMBER OF SQUARE FEET OWNED
28
and
square-
high
Figure 3
N
they
TO
Value of Real Property Portfolios
b.
While
corporate
real
estate
can be
safely
estimated
at
approximately one-quarter of total corporate assets,
this ratio
varies
and
dramatically.
Disregarding
limits of the survey results
be
both the upper
lower
(where a range or mid-point
cannot
specified) and those cases where the respondents claim to be
uncertain,
approximately
increments
ranging
value
of
current
the
their
of the
survey
fell
from $250,000 to $5,000,000 as
real property.
This value is
the
into
market
on
the
fair market value estimated by the respondents and
not
depreciated
books.
one-third
value
of real estate
based
currently
held
on
the
These respondents report the market value of their real
estate as a percentage of total corporate assets as follows:
45%
25%
20%
13%
Thus,
while
justification
for
less than 20% of total assets
at least 20% of total assets
at least 50% of total assets
greater than total assets
-----
one
quarter
of
total
ongoing and effective
assets
is
management
adequate
of
these
assets, in general, management should not be entirely settled on
that
figure
shown
since we can see that a full third
above) reports their real property at 50%
(of
the
group
of total assets
or greater.
Among
industry
groups the higher
estate portfolios may be found in the
and construction,
mining/
agency
sectors.
financial
service
manufacturing,
utility,
transportaion,
The retail/wholesale
sectors,
as a whole,
29
value
(fair market)
and
real
forestry/
and public
banking/insurance/
report
significantly
lower
real estate value.
reports
the
probable
banks,
and
This
highest total
explanation
real
group,
assets of all
however,
industry
groups.
and insurance companies hold
estate
properties
as
a
part
investment portfolio which may not show up in this
is typical
which
also
may be found in the fact that most
financial groups,
valuable
latter
in the industry,
large
sizable
of
their
survey.
corporate real estate assets
As
(those
from
actually house the business) are managed separately
investment
properties
and typically by a different
group with entirely different performance
the executives responding
A
management
Thus,
expectations.
(on in-house real estate) may not have
included that value of investment properties in the survey.
Figure 4 charts the fair market value of real estate holdings
by
industry
industry
group.
standpoint,
proportion
of
total
from
It is interesting to note that,
a
estate represents
real
in heavy
assets
manufacturing
than
industries
forestry/mining/construction
much
banking/insurance/financial service industries.
an
greater
and
for
the
the
According to K.
Philbrick, director of real estate for a large consumer products
firm,
manufacturers
appreciation
they're
as
are
not
interested
much as cost control.
"For
in
ownership
the
most
only interested in putting a roof over their heads
controlling
expenses,
not making money on their real
(Lelen 1987).
30
or
part,
and
estate."
MARKET VALUE OF
REAL ESTATE (THOUSANDS)
1--
14-
0'~
uo.
IEcm111
12-
14 0
N11DE0
--
INT CIET
0]oi
13
S6
-
-'l
-
~AIH
i-I-
(D
AI
SW- E R
-
. i:.
iii::
H EAUV
.
I GlT 1RETA
miIig -lI
MlANIJFACT IMANIJFACT 11011ES
toit 1 N4G
IJR I NG(
FORESTRY BAN I NG/ TRl1ANSPOR UT I L I T
I ON
Tr1
I NCI NG-' F I NIANC I A
/M
L/IN
CONPS
RESPONDENT BY INDUSTRY TYPE
)T HEiE
E
S BUS i NVSI
CT I U
PU
AE
I.
INC
C
4. Organizational Structures for Corporate Real Estate
a.
Form of Real Estate Unit
Approximately
86% of those responding to the survey reported
having a formal real estate unit in place.
up
from
slightly
the
This percentage
level reported
80%
HRE
by
in
is
1981.
were
formed
estate units take the form of a department
within
one half of these real estate units
Approximately
within the last ten years.
Most
the
real
corporation.
taken
the
Approximately
respondents
15% of the
estate
step of forming a separate real
have
subsidiary,
consistent with the 1981 survey and previous studies:
Department
Subsidiary
1981 HRE
80%
14%
6%
1983 GTE
76%
19%
8%
1986 CDR
88%
12%
1987 MIT
82%
13%
Both
5%
The survey data shows, however, the decreasing likelihood for
these subsidiaries to be found in firms with large portfolios:
Area
(in
DEPT/SUBS
RATIO (%)
Number of
Sites
DEPT/SUBS
RATIO (%)
over
under
million )
.5
.5-1
1-10
10-25
19
15
13
5
under
25
25-50
30
32
50-100
15
32
100-500
14
500-1000
15
25
0
1000-
over
5000
5000
11
16
This
much
phenomenon may be the result of sampling error,
as the original surveys were sent directly to the
corporations
in
(parent)
themselves and thus may not have actually
the subsidiaries.
The overall drop may,
however,
as
reached
reflect the
fact that non-consolidated subsidiaries may find it increasingly
difficult to meet the criteria for non-consolidation with
portfolios;
specifically,
large
that the subsidiary be non-essential
to
the parent corporation and its business be largely unrelated
to
the parent.
Thus,
the non-consolidated subsidiary with
increasingly
large
maintain
increasingly large segment of unrelated
an
(see Bunyan,
Czerwinski,
subsidiaries,
on
restrictions.
posed
is:
the
other
hand,
are
not
continue
not
questions did not go into sufficient detail
question
by
these
organized
to maintain and manage
survey
this
business.
bound
on the books of their
answer,
to
Consolidated
estate
any
obligated
the more important question to be
many of those firms who have
(85%)
is
Kitts, & Rossi 1986).
In any event,
how
subsidiary
business from the parent
an
their
operating divisions?
remains
as an
area
Since
a
real
the
to
provide
for
further
research.
b. Reporting Structure
The job title of the senior real estate executive within
the
organization varys considerably, as does the level of importance
attached
to
corporation.
the
Of
position
within
the
hierarchy
those responding to the survey,
16% directors;
of
the
37% were vice
10% presidents; and the
presidents;
22% managers;
remainder,
a variety of specialists, associates and assistants.
33
Organizational
structure and responsibility vary widely
industries and individual companies.
real
or
vice
in
functions
Where
their
for
given
priority
throughout
reported
function.
development,
to
etc.)
facility
its
than
inadequate
to
whose
For those
and
manage
to
grows
concerns
and
activities
was
(which
57%.
may
It may be argued that
development
operational
occur,
did
communication
for profit this percentage
given
be
the
lower
evident
the survey for profit centers) may have put the real
function
estate
estate
the high percentage among profit centers
priority
higher
real
structures
reporting
in two possible explanations:
found
the
estate
real
Evidence
president
between the two groups.
coordination
corporate
This may be seen as a potential source of
separate
31%
approximately
formal
divestiture,
vice
separate
management functions.
conflict.
CFO or
of tax, and others.
acquisition,
a
to
reporting
of
director
or
administration
firms responding has its
four
(i.e.
of
president
services, vice president
One
general counsel,
vice president of purchasing,
of corporate engineering,
controller,
president
the rest report to any number
individuals within the organization:
that
While roughly half of the
estate units in the sample report to either the
executive vice president,
across
at greater odds with the
Alternatively,
real
management
it may be argued that profit centers
are demanding greater effeciency and
corporation's
facility
estate are more
accountability
likely
to
from
encounter
resistance and difficulties along the way than those who do not.
That is,
it is only during the process of increasing management
34
effectiveness that the true impediments become known.
c.
Activities Reported
Leasing
estate
continues to be the predominant activity among
groups,
divestiture,
HRE
followed by property
and development.
management,
real
acquistions,
This is consistent with the 1981
findings wth the exception of property management which was
reported in 1981 as the third most predominant
is
activity.
This
also consistent with the 1986 CDR survey which ranked
major
responsibilities,
in descending order of significance, as space
leasing, asset deployment, and facility management.
the
overall
thrust
acquisitive,
of
real
emphasizing
following percentages
estate
addition
activities
over
real
selection,
identification
decisions,
and
time or more.
approval,
HRE
75%
64%
61%
52%
45%
96%
75%
80%
64%
56%
The
of
Line
capital
new real
engaging
estate
in
units
were
budgeting,
site
needs,
identification of surplus property 25%
design
of
the
They were reported to be less involved with real
estate record keeping,
properties,
MIT
the survey reported line units
engage in activities of
to
normally
subtraction.
activities in varying degrees.
estate
reported
to
is
apply:
Leasing
. . . . . . .
Property Management
. . . .
Acquisitions.
. . . . ..
.......
Divestiture
.......
Development
Respondents
In general,
property mangement,
acquisition,
financial
construction
analysis of projects,
(less than 25% of the time).
35
disposal of surplus
supervision,
and tax
lease
evaluation
5. Real Estate Performance and Evaluation
a. Evaluation Method
The
survey
responding
reveals
less
than
half
of
all
firms
clearly and consistently evaluate their real
as an independent asset.
likely
that
For those who do,
to operate as a cost center.
estate
they are twice
as
The following percentages
apply:
Profit center (only)
. . . .
Cost center (only)
. . . . .
Both cost and profit center
Mixed response / no separate
evaluation
-----
.
.
.
.
.
.
.
.
.
.
.
.
12%
26%
5%
61%
Tables C lists the motivations or rationale for operating
as
a cost center.
Table C: Rationale for Cost Center
Not
in the real estate business
.
.
.
..
..
..
57%
.
.
28%
Facilitate cost recovery through cost of goods sold
Equal allocation of real estate expenses thru overheads . 27%
. . . . . . . . . . . . . . . 21%
Top management resistance
. . . . . . . . . . . . . . . . . . . . . . 20%
Ease of use
15%
Real estate unit not sufficiently profitable by nature
13%
Unavailable mgmt expertise/manpower to manage for profit
*
"other"
*
=
.
.
.
.
.
.
.
.
.
.
.
13%
cost of doing business; reduce
other rationales include:
strategic plan;
geographic
cost of rent & occupancy;
location to materials & customers; better utilization of
real estate portfolio; central management; sale of product
For
claim
. . . . . . . . . . . ..
those who manage their real estate as a cost center
the
that "we're not in the real estate business" was cited as
the single most important rationale for the cost approach.
36
Also
cited,
but not as frequently,
recovery
of
were reasons of facilitating the
real property expenses through the cost
of
sold of the company's main products and a more equal
of real
goods
allocation
estate expense across line operations through overheads.
(It should be noted that the claim "we're not in the real estate
business" was usually accompanied by other reasons,
such as the
ones
just mentioned).
bias
in their view of the corporate real estate mission,
be
Thus, while cost centers display a clear
it can
seen that these firms do provide some rational and pragmatic
foundations for their choice to operate from a cost basis.
(For
more on the role of corporate real estate in development and the
real estate industry see Thompson 1986,
1982,
Brown
interesting
1979,
to
note
Bogorad
and Sigafoos 1976).
that very few firms
1984,
Behrens
it
Nevertheless,
reported
(15%)
is
that
profitable
by
Table B lists the motivations or rationales for operating
as
real
their
estate units were not "sufficiently
nature" as a rationale for the cost approach.
a profit
center.
Table D: Rationale for Profit Center
.
.
Generate revenue for overall corporate needs
Increased efficiency of real estate resources . .
More effective evaluation of property performance
. .
Generate revenue for other real estate needs
. . . . . . . . . . . . . . . . . .
Tax purposes
. . . . . . . . . .
Invest idle corporate funds
. . . .
place
market
the
Induce competition with
*
"other"
=
.
.
. .
. .
. .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
66%
43%
37%
26%
20%
17%
9%
. . . . . . . . . . . . . . . . . . . . . . . . 9%
Induce competition with other properties
*
.
.
other rationales include:
.
.
.
.
.
.
. 3%
to attract qualified workforce;
creation of value; enhance community relations;
diversification of resources; residuals and shelter;
reduce occupancy cost for line units; etc
37
.
For
real
those who manage real estate as a profit
estate
purposes
assets to generate revenue for
appears
motivation.
increased
of
real
The
the
be
the
most
center,
overall
popular
second most frequently cited
using
corporate
rationale
or
motivations
--
efficiency of resources and more effective evaluation
performance --
property
estate
seem a far cry from "being
in
business."
Profit
centers in the sample displayed noticeably
management
priorties
from
the cost
center
different
firms.
Table
presents the primary activities reported by both groups.
Table E:
Primary Activities of Profit and Cost Centers
PROIT CEOT=S
So.
Primary Activities of the Real Estate Unit
COSTCETRS
Primary Activities of the Real Estate Unit
o0
L]CASI NO
the
CQUIS
10942
DI'jKII
TURM
0-.
DE'JU LOP VROPEmr
MMEIr
V -GT
L.LAZLZIGAiCLUZT'ILUKJSTI
I on*
38
TUIRE
DgLIELOV
MIE,5
PnOPERor
V~ MGC
E
For the most part,
profit
centers report higher
involvement
with development activities and less with leasing, acquisitions,
and
also
divestiture than cost centers.
be
These differences may be
seen in Table F which lists the
responsibilities
cited
various
real
for both the real estate unit
estate
and
line units with the organization.
Table F: Real Estate Responsibility of Real Estate Unit
and Line Unit
Responsibilities of the "Real Estate Unit"
Responsibility
Profit
Cost
for Activity
Center
Center
Real Estate Recordkeeping
Property tax evaluation
Capital budgeting for R.E.
Financial analysis of R.E. projects
Identification of new R.E. needs
Site selection
Lease approval
Design decisions
Construction supervision
Acquisition of new property
Identification of surplus property
Disposal of surplus property
Property or facility management
Average Real Estate
Unit Responsibility
39
60%
37%
77%
80%
86%
89%
80%
71%
54%
89%
80%
89%
83%
77%
31%
69%
71%
64%
92%
93%
76%
63%
91%
71%
89%
71%
75%
73.7%
the
Table F Continued ...
Responsibilities of the "Line Unit"
Responsibility
Profit
Cost
for Activity
Center
Center
Real Estate Recordkeeping
14%
11%
Property tax evaluation
11%
7%
Capital budgeting for R.E.
Financial analysis of R.E. projects
Identification of new R.E. needs
Site selection
Lease approval
Design decisions
20%
11%
26%
20%
23%
26%
29%
20%
36%
33%
29%
36%
Construction supervision
Acquisition of new property
17%
14%
25%
25%
Identification of surplus property
29%
41%
Disposal of surplus property
14%
5%
Property or facility management
17%
24%
18.6%
24.7%
Average "other staff"
Dept. Responsibility
24.6%
22.6%
Average Outside Consultant Responsibility
5.8%
4.6%
Average Operating Line
Unit Responsibility
The
differences
in management practices between profit
and
cost centers will be discussed in detail in Chapter II.
b.
Inventory and MIS
Uncertainty
leased,
over
remains
amount of buildings
significant
and
land,
among the corporations
owned
and
surveyed.
Approximately 19% of the respondents were unable to specify area
owned while 24% were unable to specify area leased.
consistent
with
the findings that one in four firms
maintain a real estate inventory.
likely
does
not
Additionally, firms seem more
to know the market value of their real estate
40
This seems
(24%
were
than
uncertain)
the
were
(41%
value
acquisition
original
uncertain).
Beyond
maintaining
management
separate
of
of
data
vary.
maintain
reasons
The
ongoing
the
for
information system
Table G
assets,
estate
real
surveyed do not
and control of these assets.
management
lack
inventory
two-thirds of the firms
approximately
any
an
for
frequently
lists the most
this
cited
barriers for the survey sample.
Table G: Barriers for Developing Real Estate Inventory / MIS
Not cost justifiable . . . . . . . . . . . . . .. .
.. .. ..
. o...
Insufficient funding or manpower
Unfamiliar with available inventory/MIS systems
. .
..
21%
21%
13%
13%
9%
7%
Insufficient power vested in real estate group
o.. . . .....
Real estate function too decentralized
.
Difficult to effect change in the organization
*
*
. . . . . . . . . . .
"other"
Cannot convince top management
. .
.
. .
..
.
..
.
7%
4%
.....
Resistance to new procedures by real estate staff
2%
Resistance to new information technologies by staff
1%
other barriers include: other corporate MIS priorities
supercede real estate; resistance to use by division staff;
too small to need -- only 90 properties; etc.
=
While
and
firms of all sizes reported insufficient funding
manpower as a primary barrier for developing and operating these
information systems,
cost;
unfamiliarity
smaller firms cited problems of justifying
with available systems;
power vested in the real estate
other hand,
too
function.
and
insufficient
Larger firms, on the
cited problems with the real estate function
decentralized
being
and difficulties with effecting change in
a
large organization.
c. Real Estate Accounting
Approximately two-thirds of all corporations report
41
charging
some
form of internal rent to their departments,
line
units.
(65%).
This
Where
ratio
divisions
(67%) has changed little
internal rent is charged,
since
or
1981
the following methods
are likely to be employed:
.
Cost recovery
.
Fair market rent
.
.
.
.
.
.
.
.
.
.
.
.
.
.
42%
34%
.
.
.
11%
Differential pricing by
occupant type
. . . .
.
Other
.
.
.
.
.
.
.
.
6%
Over all, only 23% of the corporations responding charge fair
market
- vary
cost
Other bases for imputing rent
rent to their departments.
widely
of
including averaged rents within
equivalent,
capital
overhead,
mangement
all properties.
actual
NO
plus
facilities
Figure 5 displays the survey response.
RENTS
5
CHARGED
NO
area,
and averaged rental and operating cost for
Figure
I MTERMAL
cost
geographic
ANSWER
OTHER
DIFFERENTIAL
PRICING
FAIR MARHET
nrENT
COST
RECOVERY
42
Property-by-property
(51%),
by
yet
a full 28%
category
of
is the most popular
accounting
account for their real estate operations
property or in a pool.
Another
23%
separately account for real estate operations at all.
the
accounting
corporate
organizations
expenses
recorded.
least
level,
these
expenses
However,
in
only
do
of
real
the
estate
Obviously at some level in the
are
budgeted,
allocated,
and
the survey data seems to suggest that,
the aggregate,
not
Thus, at
one-half
surveyed bother to match individual
to actual properties.
organization
method
these expenses are
accounted for on an individual basis.
not
at
consistently
Some latitude should also
be given to the respondent's interpretation of the question "How
does
your company account for its real estate operations?"
various forms of accounting that may be employed.
where
cases
real
for
For example,
involve
pooled accounting was cited might
estate funds or budgets and common procurement
several properties,
full
23
percent
of the
respondents
report
pooled
procedures
yet the actual record-keeping
may be conducted on a property-by-property basis.
a
and
process
In any event,
"no
separate
accounting for real estate" and presumably are unable to account
for
real
expenses
estate
in
any
kind
of
consolidated
or
method
of
organized fashion.
d. Real Estate Investment Analysis and Return
Rate
analyzing
of return on investment is the most popular
real
estate
investments among
survey
This method and net present value calculations
43
respondents.
(both before
and
after tax) appear to have grown in use since 1981.
the
HRE study,
the popularity of these methods
As noted in
is likely to be
due to the increasing use of the hand-held calculator and
desk-
top computer.
When
asked
income
plus
how
the after-tax return on
real
estate
appreciation) compared with the company's
(net
overall
return, the following was reported:
Real estate returns are generally higher
Real estate returns are generally the same
.
.
Real estate returns are genreally lower
.
Real estate returns are not calculated
.
it
comparison of returns is rarely conducted,
that
.
.
.
.
21%
7%
.
. .
12%
.
.
60%
.
while the kinds of financial analysis that would allow
Thus,
a
.
.
--
the information is available --
where
generally
equal
would
real
appear
estate
to or greater than overall corporate
is
returns.
It may be argued, however, that only those managers who are in a
to realize a significant returns on their real
position
--
by
of
way
market
position,
decision-making authority -Still,
returns.
past
decade
and
resources
available,
estate
and
will have an incentive to calculate
given the overall economic climate during the
the well-documented
of
record
real
estate
investments relative to other capital investments, it seems that
corporate
estate
real
competitive with,
operations.
1984.
Sachs
operations are,
nature,
at
least
if not more lucrative than, overall corporate
(see Conroy,
Miles,
Zerbst & Cambon 1984.).
study,
by
during
& Wurtzebach
1986.
Fogler
As indicated in a 1983 Goldman
the period of 1974 to 1983
institutional
real estate outperformed common stocks, long-term bonds, and the
44
consumer
price index,
increasing some 3.6 times in value
(Yee
1986).
6. Decision Making in Corporate Real Estate Asset Management
a. The Corporate Real Estate Executive Profile
Much
has
been
researched
and
written
on
the
mechanics
associated with individual corporate real estate activities. For
it
example,
field
today
Management,
Property
is possible to learn from various
--
Industrial
Construction etc. -estate
real
Real
Management,
Building
&
of
Journal
Buildings,
Estate Review,
the
Design
Facilities
Development,
Corporate Design & Realty,
journals in
Design
&
about various lease negotiation techniques,
methods.
financing alternatives and space planning
To date, however, little work has been done which focuses on the
real estate executive himself and not just his responsibilities.
A
his
better understanding of his world --
priorities,
improve
ultimately
his
and
horizons,
his habits,
his
his
attitudes
upon the design of systems
and
needs,
--
can
techniques
which support him and his decision making process.
Table
estate
H
lists the mean weekly hours that the
executive
spends
on
various
normalized 40-hour week equivalents.
45
activities
senior
and
real
their
Table H: Mean Hours Spent Weekly by Senior Real Estate Executive
(normalized percent of 40 hr week in parenthesis)
PORTFOLIO TRANSACTIONS
-
*
(ACQUISITION, DIVESTITURE, LEASING,ETC)
LEASE NEGOTIATION
PROJECT REVIEW OF
NEW CONST./DEVMT
ANALYSIS OF REAL
ESTATE INVESTMENTS
SITE SELECTION &
ACQUISITION
DISPOSITION OF
SURPLUS PROPERTES
OTHER ACTIVITIES (20%)
TOTAL:
5.1
4.1
(9%)
(7%)
3.6
(6%)
5.2
(9%)
4.4
(7%)
1.5
(2%)
23.9
(40%)
ONGOING CUSTODIANSHIP OF EXISTING PORTFOLIO
-
*
FACILITY MANAGEMENT
SPACE PLANNING
OTHER ACTIVITIES (10%)
TOTAL:
4.4
2.7
0.7
(7%)
(5%)
(1%)
7.8
(13%)
FINANCIAL, LEGAL, ENVIRONMENTAL, ETC.
-
*
-
REVIEW & PREPARE
CAPITAL/OPS BUDGETS
LEGAL ISSUES
OTHER ACTIVITIES (20%)
TOTAL:
2.4
(4%)
2.9
1.5
(5%)
(2%)
6.8
(11%)
8.4
(14%)
5.0
(8%)
3.6
(6%)
3.7
(6%)
20.7
(35%)
GENERAL MANAGEMENT
*
-
ADMINISTRATION OF
REAL ESTATE DEPT.
LIAISON WITH OTHER
DEPTS (TENANTS)
REPORTING TO
SENIOR MANAGEMENT
OTHER ACTIVITIES (50%)
TOTAL:
*
=
OTHER ACTIVITIES REPORTED TYPICALLY BROKE DOWN INTO
THE FOLLOWING AREAS PROPORTIONALLY:
............... 20%
PORTFOLIO TRANSACTIONS
.............. 10%
PORTFOLIO CUSTODIANSHIP
FINANCIAL/LEGAL/ENVIRONMENTAL ..........20%
................... 50%
GENERAL MANAGEMENT
46
As
the
survey responses indicate,
executive
is
activities,
of
likely
the
departments
senior
a
project
negotiating
etc.
activities
A
third
is
review
leases,
of
management,
liaison
spent
new
of
full one-third
and
i.e.
estate
variety
general
to the building portfolios,
development,
among
on
corporation,
Another
acquisition,
properties,
week
real
real estate department;
within the
management.
transactions
and
his
time is reportedly spent on
administering
other
spend
not all of which are real estate.
executive
i.e.
to
the senior
with
reporting
to
entirely
on
site
selection
construction
disposition
of
and
surplus
The remainder of time is likely to be spread
of
facility
management,
space
planning,
financial, legal, environmental, etc.
The
majority of corporate real estate decision-making
takes
place
in
those
surveyed reported "seldom" or "never" looking beyond
ten
year
the two to ten year planning horizon.
mark.
Interestingly,
Over half
two groups emerged
of
the
from
the
beyond
the
five-year range and 16% who "seldom" or "never" plan before
the
survey
results:
22%
who "seldom" or "never" plan
five-year range.
A
closer look at these two groups reveals that there are very
few
differences
between
the
organizational
structures
The main differences noted were primarily
industry
types.
attitude
and seniority.
planning
horizon
Specifically,
or
in
longer
those with the
report
less
discomfort with uncertainty and unpredictability of future
real
estate
markets
corporate
tend
to be more senior.
and space needs,
strategy
and
greater exposure
planning,
47
They
and
greater
to
overall
access
to
information
and
for
evaluating
the
physical
and use effectiveness of their buildings.
performance
also
methodology
longer range
the
that
noted
It
was
a
report
decision-makers
consistently greater number of real property information systems
in
and
place
a
corporate real estate will be discussed in
in
and
(Attitudes of managers
applications for maintaining them.
computers
computer
of
number
greater
consistently
later
sections).
At
decision
executive,
level of the senior real estate
the
for real estate is likely to be based upon or driven
by
operational factors deriving from the mission of the company
as
making
decisions,
relocation
lists
program requirements,
These include new space needs,
a whole.
the
etc.
Table
for
real
property
and
primary
I
new office technologies,
secondary
basis
decision-making reported in the survey.
Table I: Primary and Secondary Decision Basis
Secondary Decision Basis
Primary Decision Basis
The
36%
28%
22%
19%
18%
Situational factors
Occupancy costs
Other
Operational factors
Profit potential
58%
35%
32%
12%
7%
Operational factors
Occupancy costs
Profit potential
Situational factors
Other
next most frequently cited basis for decision making
occupancy
cost
(e.g.
operating expenses,
corporate
occupancy
investment
or
or
reducing
debt service,
profit
limiting
lease payments,
Ranked
cost).
potential
48
space
(e.g.
third
in
increasing
is
overhead,
and overall
priority
is
return
on
investment, enhancing value of fixed assets, improving financial
position of overall portfolio,
situational
factors
(e.g.
etc.).
Fourth in priority
unforeseen or unplanned
are
events
or
occurrences which demand immediate management attention, such as
emergency
roof
repairs,
behind-schedule
construction,
lease
expirations, labor strikes, etc.).
Although
Thus
decision-making.
it
basis
real
corporate
that
appears
decision-
for
"secondary"
in any other field of management,
as
estate,
as a "primary" basis
factors rank first as a
situational
making,
for
fourth
rated
is likely to
be
involved in putting out many small fires.
These findings are supported by the 1986 Cushman &
study
Wakefield
reported that "large majorities of both the
which
and
the real estate executives say their real estate
are
usually based on operational factors rather than a
with
investment
the
potential of the
concern
From
property."
Clearly,
are not in the real estate business.
this
the mission
the
estate unit is driven by the mission of
real
decisions
it is not hard to see why many managers claim they
perspective,
the
CEO's
of
overall
corporation.
As
one
might
investment-driven
centers
than
for
expect,
a
higher occurrence
decision-making
cost
centers.
was
reported
of
profit
or
among
profit
a
higher
Correspondingly,
occurrence of operationally-driven decision-making was
reported
among cost centers than for profit centers.
b. Decision Support
The
impact
of computers in American business has
49
not
left
corporate
real
estate unaffected.
Computers were present
decision-making for buildings and land, at
most
in
of
the organizations
in
least to some degree,
The
surveyed.
most
frequent
applications were found in real estate inventory and
investment
analysis.
to
The
computers
respondents
were
as likely as not
employ
in project management, maintenance management, and CAD
drafting and design.
The least frequent application was
found
in CAD-based facility management.
The
may
use of CAD-based facility management systems
low
the relative youth of such systems on
reflect
today.
result
(see
from
Kimmel 1987).
Alternatively,
this
management group and thus may not be
use in that area.
market
figure
the fact that many of the real estate
to the survey operate separately from
responding
the
(39%)
may
departments
facility
the
fully cognizant of computer
(As mentioned earlier, approximately one out
of four firms has these two functions reporting to separate vice
presidents).
Regardless
systems
in
of
computer
place,
use,
manual
or
corporations
otherwise,
report
for
having
maintaining
information on the following functions:
. . . . . . .
Lease Commitments and action dates
Identification of surplus or under-utilized properties
Utilization and current capacity of existing properties
. . . . . . . .
Tracking square foot costs by facility
. . . .
Physical condition and performance of buildings
Identification of changes in market value of real estate
Identification of opportunities for improved financing .
Most
report
systems
significantly,
however,
only
29%
of
the
88%
69%
69%
57%
55%
30%
25%
respondents
the
above
for top management review on any scheduled basis
(i.e.
analyzing and preparing the information from
50
quarterly,
semi-annually,
or
annually).
prepare reports only ad hoc. Another 23%
Duties,
responsibilities
or
Approximately
47%
do not report at all.
performance
criteria
for
corporate real estate were reported to be defined through:
Standards
/Formulas
/Threshods
General
Policy
& procedures
as
necessary
discretion
of line
unit
Capital Budgeting
Lease Commitments
Property Acquisition
Property Disposition
Overhead Accounting
Preventive Maintenace
54%
47%
41%
40%
36%
35%
14%
13%
13%
6%
11%
12%
14%
21%
33%
39%
23%
21%
6%
8%
5%
6%
11%
18%
Space Allocation
Energy Use
34%
25%
17%
12%
26%
24%
11%
22%
Development Projects
25%
13%
36%
6%
The
president
decision- making
--
was found
to
be
involved
the
The final decisions
on real
about as frequently as by the treasurer or
never
or
(and seldom
made by the president approximately 32%
are
in
process for real estate "sometimes" or "often"
of the time).
one-quarter
time
CEO
three-quarters of the time
approximately
financing
or
estate
of
the
controller.
real estate unit itself cited decision- making authority on
The
financing only 15%
c.
of the time and the line unit
Management Attitudes
Effective
management of corporate real estate is
depend on the attitudes of the decision maker.
gauge
less than 6%.
these
attitudes
the survey respondents
likely
to
In an effort to
were
asked
to
evaluate several statements, indicating their level of agreement
or disagreement.
Table J lists the responses.
51
Table J: Corporate Real Estate Executive Attitudes
"Uncertainty and unpredictablility of future real estate markets
greatly
needs
and organizational space
conditions,
economic
reduces my capacity to effect optimal real estate solutions"
-------------------------------------------------------------Strongly
Agree
9%
Mostly
Agree
25%
Mostly
Disagree
36%
Strongly
Disagree
21%
No
Comment
6%
"Diversifying real property portfolios -- by lease/own ratios,
lease term and maturation, captial financing vehicle, etc. -can
significantly
risk"
reduce finacial
-------------------------------------------------------------Strongly
Agree
18%
Mostly
Agree
46%
Mostly
Disagree
12%
Strongly
Disagree
2%
No
Comment
18%
of,
understanding
firm
and a
exposure to,
regular
have
"I
corporate strategic plans and objectives from which to
overall
base real property decisions"
-------------------------------------------------------------Strongly
"Future
Mostly
Agree
Agree
34%
40%
flexibility
--
in
terms
Mostly
Strongly
Disagree
Disagree
13%
of
6%
commitments,
No
Comment
3%
location,
building design and use, etc. -- is a top priority in evaluating
real estate alternatives"
-------------------------------------------------------------Strongly
Agree
36%
Mostly
Agree
38%
Mostly
Strongly
Disagree
Disagree
14%
4%
No
Comment
5%
"I do not have sufficient information or methodology available
use
or
performance
the physical
evaluate
clearly
to
effectiveness of my buildings"
-------------------------------------------------------------No
Strongly
Mostly
Strongly Mostly
Comment
Disagree Disagree
Agree
Agree
6%
31%
30%
24%
7%
"Real property decision making, on average, plays a critical
part in the overall performance of my organization"
-------------------------------------------------------------No
Strongly
Mostly
Strongly Mostly
Comment
Disagree Disagree
Agree
Agree
5%
10%
20%
33%
30%
"Responsibility
for
real estate assets are delegated
too
far
down in my organization"
-------------------------------------------------------------No
Strongly
Mostly
Mostly
Strongly
Comment
Disagree Disagree
Agree
Agree
3%
55%
27%
9%
3%
52
The
survey
executives
data reveals that while most of the real
estate
(57%) feel that uncertainty and unpredictability
future real estate markets,
economic conditions,
(of
and corporate
space needs) does not inhibit their decision making, another 34%
feel that it does.
need for
However, a greater number are agreed on the
future flexibility in real estate decisions
(74%).
As
one real estate manager for a large manufacturing firm comments,
"1with
environmental concerns and regulatory approval,
the real
estate planning cycle can be as long as two or three years.
But
product life cycle has shrunk in some cases to less than
our
Adaptability is a must."
year.
Waterman
suggests
that
the
Accordingly, Bob
(Gage 1987).
best
a
strategy
is
to
"build
flexibility into facilities so that planners can be prepared for
sudden
changes
in
business plans
and
missions."
(Facility
Planning News 1987).
While
majority of respondents agreed that
the
real property portfolios --
by lease/own ratios,
maturation, capital financing vehicle, etc. -risk
(64%),
comment."
diversifying
lease term and
reduces financial
nearly one-fifth of the survey responded with
"no
displayed
the
In
general,
the survey respondents
It is
also
likely that while many of the respondents may agree
with
greatest uncertainty over this attitude statement.
quite
the
statement,
considerably
few
actually employ
methods
of
diversification.
It
is
responding
not
interesting to note that nearly all
of the
executives
felt that responsibility for real estate assets
delegated
too
far
down
53
in
their
organizations.
was
Van
Merkensteijn
real
maintains that the narrow view of
estate,
taken
under-valued
assets
change and growth.
the
physical
corporation,
neither
and a precluded
where
is
might
question
as
of
be
delegated too far
in
creative
down
necessary
to
make
The
the
strong
result
negative
of
in
the
an indictment of their own
have
(Van
them"
response
executives
for
well-informed
the authority to implement
nor
1986).
question
result
middle managers and operational staff
information
Merkensteijn
possibility
and
"Both effects follow when responsibility
choices
strategic
by the corporation as a whole,
environment
the
facilities
to
this
regarding
the
within
the
positions
organization as being "too far down."
Whether
managers
have
the "necessary information
respondents
make
One-third
of
do not feel they have adequate information
to
well-informed strategic choices" is less clear.
the
to
evaluate the physical performance or use effectiveness of
their
facilities. One-quarter of the respondents maintain that they do
not
have
planning.
estate
exposure to overall corporate
regular
Adequate representation and involvement of the
real
function in senior corporate-level decision-making is
critical connection.
corporate
costly
and
strategy
and
real
a
Without adequate exposure strategic plans,
estate must assume a reactive posture which
(see Levy
time-consuming.
&
Matz
1987.
is
Veale
1987.).
Approximately
estate
played
two-thirds
of the respondents felt that
a critical role in the
their organization.
overall
performance
real
of
Here again the subjectivity associated with
54
the
respondents view of their own role in the organization
skewed the results.
bave
the
perceived
solely
the
The larger question is:
value of real estate in the
may
how much of
organization
stems
from the managers own attitudes and how much stems
from
in
the
role
which
organization?
real
estate
actually
does
play
This question will be addressed later
II.
55
in Chapter
II. Selected Research Hypotheses
This chapter will begin with an introduction to the
hypotheses
that were selected followed by an explanation of the
testing methodology which was used to evaluate them.
of
the hypotheses is discussed in separate
each hypothesis,
of
research
sub-sections.
a general background is provided,
the tests are presented,
Next, each
For
the results
and an interpretation of the
test
results is offered.
1. Introduction to the Hypotheses
The
information
provides
today
a
gathered by the
basic
1987 MIT
picture of real estate
survey
not
management
but also constitutes a rich database from
only
practice
which
further
Accordingly, three focused research
research can be conducted.
were formed and subsequent analysis and manipulation
hypotheses
of the data was applied in an attempt to support or reject them.
As previously noted,
the full range which could be conducted
of
inclusive
the most critical isses in the
nor
necessarily
They
were selected subjectively according to 1) research
the sufficiency of
the author and 2)
to
interest
are
today.
field
they
of
all-
these hypotheses are not meant to be
areas
data
to
fully test them.
The
first
center
Intuitively,
bottom-line
one
comparison
the
between
as
conduct their real estate activities
that
organizations
profit
concerns
hypothesis
and
those
might
who
suspect
responsibility
that the
associated
56
as
operate
with
a
cost
center.
accountability
operating
a
as
and
a
profit-loss
center would result in a more effective real estate
operation.
(The term "effective" will be discussed and defined
for testing purposes the section that follows).
will attempt
The
This hypothesis
to substantiate that suspicion.
second hypothesis again concerns effectiveness
of
real
this time from the perspective of portfolio
estate
operations;
size.
The 1981 HRE study reported little relation between
the
size of the portfolio and management effectiveness and concluded
the
that
of
attitudes
management
were
likely
more
the
This hypothesis will attempt to support the claim
determinants.
are
that organizations who effectively manage their real estate
not structurally different --
in terms
of size --
from those who
do not.
The last hypothesis concerns the use of computers in the real
estate
and facilities decision making
Intuitively,
process.
one might suspect that greater numbers of computer systems would
be
found
Thus,
estate.
the
presense
of
computers
operations might be indicative of effectiveness.
in
real
their
organizations who effectively manage
in
real
estate
The hypothesis
will attempt to support that claim.
The
data was applied to each of the
survey
research
three
it,
the
Where the data was insufficient,
the
Where the data was sufficient to support
hypotheses.
hypothesis was accepted.
rejected.
It
should
be noted
where
that
hypothesis
was
hypothesis
was rejected it should not be construed
that the opposite is true, merely that the hypothesis
as
a
meaning
itself can
not be supported by the research data with any reasonable degree
of certainty.
57
2. Hypothesis Testing Methodology
a. Dimensions of Effectiveness
All
three
hypotheses
"effectiveness".
to quantify --
easier
--
etc.
Unlike
measures
degree
of
are
concerned
measures
with
the
of "efficiency"
such as how many,
Webster's
which
how much,
of effectiveness are likely to
subjectivity.
notion
Ninth
how
decisive,
The terms "decided" and "decisive" are both
or desired effect".
from the act of deciding which Webster's defines as "to
arrive
at
a
solution that ends
purposes of this thesis,
uncertainty
...
For
".
the
then, the term effective shall be used
to mean incorporating decided,
or
some
Collegiate
Dictionary defines effective as "producing a decided,
derived
are
often,
involve
New
of
decisive and deliberate
methods
arriving
management structures for reducing uncertainty and
at desired real estate solutions.
desired
to determine from the survey
whether
the
effect was achieved since the survey identifies 1)
the
is
It
difficult
methods employed by the respondents and not the actual
and
the perceptions of the respondents and not
2)
behavior or practice.
emphasis
greater
management
actual
systems
was placed on those information
and
processes which support the real estate decision and
To this
end,
dimensions of the survey were identified as indicative of
effective
management
testing.
These
the
the
Thus, for the purposes of the research, a
not necessarily the real estate decision itself.
eight
results,
most
and selected for use
in
the
hypothesis
eight dimensions are not intended to represent
critical
dimensions
58
available
(in
general)
for
evaluating real estate asset management but rather represent the
best dimensions that were available given the survey
They are as
structure.
follows:
o
The use of property-by-property accounting methods
o
The presense of a formal,
o
The use of management information systems
o
The use of internal rents charged to departments
o
The comparison of real estate returns to overall
organized real estate unit
for real
corporate returns
o
The frequencies of reporting real estate information
to senior management
o
The exposure of real estate executives to overall
corporate strategy and planning
o
The reported availability of information and methods
for evaluating real estate performance and use
Admittedly,
judgement
of
the
author.
the
which
dimensions
selection process
would
For
facilities.
subjective
to
Consideration was given
not
be
greatly
affected
those
"non-
by
such as size of the organization or number
management" factors,
of
reflects the
example,
president
estate
the probability of real
or CEO
was
not
as
selected
reporting
to
the
dimension
as
this is likely correlate highly with the size
a
of
the organization and the relative accessibility of the president
or CEO.
a
In the case of evaluating real estate returns, however,
basic assumption is made that the performance of real
assets
is a function of management effectiveness.
argued
that
events
outside of the control of
It
estate
may
management
be
may
influence or impact the rate of return, however, for purposes of
59
the reported rate of return is considered as
research,
this
factor and included in
"management"
those
addition,
In
the testing.
dimensions
or profit center approach were not included.
c ost
For example,
the
however,
the
use of internal rents was one dimension selected;
method employed
be
to
likely
were
which
dependent or structurally linked to the choice of either a
actual
fair market or cost recovery)
(i.e.
a
was
not observed.
to note that the
important
is
It
th ese
for
data
survey
dimensions
reflect only the answers reported by the real est ate
executives
themselves
state
true
and not necessarily the
of
the answers provi ded
reality.
As with much of the survey data,
indicate
management attitudes and do not necessarily corresp ond
to actual management behavior.
b. Statistical Tests
A basic review the frequencies and descriptive statistics
the
responses
survey
hypotheses
research
is
relationships
entire
one
were
willing
the statistical testing
of
purpose
however,
if
to the 284 corporations surveyed.
conclusions
The
provide answers
could
to
in
ascertain
the
the
for
degree
to
survey sample can be
population of corporations in America.
to
to
of
the
restrict
the
all
1986).
(Norusis
the
hypotheses,
certain
which
inferred
the
for
The testing for
from
inferences about the larger population in general proceeds
the
premise that the survey sample is indeed representative
the
total
defines
the
population.
This premise seems reasonable
population as those organizations which are
60
of
if
of
one
large
effort
for
and
land.
The
of industry
type,
size
enough to merit a distinct and recognized management
and
providing
maintaining space,
buildings,
sample is well-rounded in terms
survey
In fact,
the respondents was observed.
for
sample characteristics of the 1987
to the earlier HRE survey --
--
earlier
years
volume
A wide range of company assets and sales
and location.
since most of the
survey bear close resemblence
is
may be argued that the sample
it
six
an independent sample gathered
previously,
As noted
representative of the target population.
highly
a certain degree of self-selection with respect to the
however,
respondent's
and
ability to complete the questions is probable
thus the complete random nature of the sample cannot be assured.
Testing
statistical
the
thee
research
main
evaluation
dimensions.
of the eight effectiveness
These eight dimensions were structured into separate
sub-hypotheses)
(or
corporations.
in
applied
hypothesis.
indicates
up
to
to
hypotheses
determine
probability of holding true for the entire population
their
U.S.
individually evaluated
and
the
involved
hypotheses
the
the
A
then
results of the eight tests were
The
evaluation
of
the
research
main
larger,
simply
basic "success rate" is presented which
the combined percentage of sub-hypotheses which
statistical
tests.
This
rate
is
by
of
no
held
means
statistically significant in itself but, as will be shown later,
is useful in comparing the results of the tests.
this
in
with
Additionally,
rate does not attempt to weight the eight individual tests
any meaningful fashion.
the
selection
Given the
subjectivity
of the effectiveness
61
dimensions
associated
and
the
variance
associated
question
by the respondents,
test
results
useful
by
with
the
interpretation
attempts to
author.
Rather the
the
survey
further quantify the
by weighting schemes were not
the
of
considered
eight
tests,
to
be
considered
broadly and collectively, provide an reasonable approximation of
the relationship holding for the population.
The
testing was carried out
hypothesis
the
SPSSPC+
General testing techniques were
computer package.
statistical
using
conducted in accordance with procedures contained in Statistical
Thinking
for Managers,
by Ott and Hildebrand
The basic
(1983).
strategy
embodied in the hypothesis testing is to
research
hypothesis by contradicting the null hypothesis
1983).
Hildebrand
Since
support
survey
the majority of the
the
(Ott &
is
data
nominal and non-parametric, or distribution free, the chi-square
test
goodness-of-fit
was
employed
evaluate
to
null
the
hypothesis and its probability of holding true for the estimated
A rejection region was specified using a 10%
population.
of significance,
level
which is the probability of observing a type I
Such an error may be considered as the risk of rejecting
error.
the null hypothesis when,
in fact, it is true
(Ott & Hildebrand
Table K illustrates the process.
1983).
the
After
Chi-square statistic has been
computed
and
the
appropriate rejection region determined, the null hypothesis was
accepted
either
evidence
value
may
for
or
rejected.
To measure the weight
rejecting H:0 the p-value
was
of
evaluated.
be defined as the probability that a
the
This
difference
at
least as large as the one observed between the two samples under
consideration would have arisen if the means were really equal
62
Table K: Chi-square Testina Method
H:1 = Research hypothesis: Profit centers use property-byproperty accounting methods more (or
less) frequently than cost centers.
H:0 = Null hypothesis:
Profit centers do not use property-by
property accounting methods more
less)
(or
frequently than cost centers.
To test hypothesis estimate p using:
Profit group =
Cost group =
(22) out of 35 using
method
(43) out of 75 using method
where p = probability that a firm uses the method then
67
22 + 45
=
=--------
p
35 + 75
Separate
possible
categories
Profit/Use
Method
Profit/No
Compute expected
number for each
category e (i)
---
=
.591
110
Observed number
for each
category a (i)
*
compute contribution to
Chi-square
22
.083
14.31
13
.121
(75) (.591) = 44.32
43
.039
32
.057
(35) (.591)
= 20.68
(35) (1-.591) =
Use Method
Cost/Use
Method
Cost/No
Use Method
(75) (1-.591) =
30.67
Chi-square = .301
(e
-
(
a
(i))
2
*=-----------------
e (i)
For 1 degree of freedom at 90% level of confidence, go to Chisquare distribution table and observe critical value or reject
So accept null hypothesis if Chi-square is
region = 2.7055.
Calculated Chi-square is .301 so
less than or equal to 2.7055.
accept (H:0) null hypothesis and conclude that profit group does
not use method more frequently than cost centers.
(from Leake
1984).
63
(Norusis 1986).
The smaller the p-value, the greater the weight
of evidence for rejecting H:0 and the lower the risk of a type I
error.
To
measure the strength of association between variables
degree
of predictability,
lambda
calculations.
modal prediction was evaluated using
The
lambda
measure
the
states
reduction as a proporation of the error rate when the
by
definition,
no
no
(a 100%
there
holds,
When statistical independence
error reduction).
is,
predictor
to 1.00 indicating perfect prediction
predictive value,
error
indicating
Lambda can range from 0,
is unknown.
variable
or
predictability and lambda = 0
(Ott
&
Hildebrand 1983.)
the
Where
the
condition
relaxed
and
one-tailed measures were employed as
in the test shown in Table K,
For example,
a
by
small
testing
for two-tailed hypothesis
margin,
were
test
results of the hypothesis
be greater than the rejection region
to
observed
chi-square
was
appropriate.
the two-tailed null
hypothesis is that there is no difference between the profit and
cost
(in the property-by-property accounting method)
groups
either
direction.
profit
centers
do
This may be stated as the
not
use the method more
hypothesis
that
than
cost
often
often
centers or that profit centers do not use the method less
than cost centers.
that
(i.e.
is
there
only
in
Alternatively, the one-sided hypothesis is
no difference in the one direction
of
concern
that profit groups do not use the method more
than
collapse
the
cost groups).
To
run
these
tests
it
was
64
necessary
to
categories
testing
of
several
for Proportional
variables
Reduction
into
in
Error
two-by-two matrices were structured.
statements
(dimension
agree",
on
8)
attitudes
the
"mostly disagree",
of
(PRE)
values.
for
In
example,
For example, in evaluating
information
towards
categories
discrete
"mostly
and
agree",
"strongly disagree",
methods
"strongly
"no comment",
and "no answer" were recombined into "agree" and "disagree".
As previously noted, the SPSS/PC+ program was employed in all
statistical testing as well as the computation and comparison of
basic
results
The
Figure 6 shows the
percentage statistics.
SPSSPC
test
for the same example used in Table K.
actual
testing
of
the three
research
hypotheses
presented in the remaining three sections of this chapter.
65
is
Figure
6
Page 2 1987 MIT Survey -- Hypothesis H:1
PROFIT CENTER
VS.COST CENTER
BYACCOUNTING
METHOD
Crosstabulation:
1/2/80
PROFIT MCENERS
PROF
By REACCTG3
ACCOUNTING:
PROPERTY
BYPROPERTY
Count
Exp Val
Row Pct
TotPct
Residual:NO
YES
REAC7C22-td ices
Adj Res
PROF-- --------------0.0
32
43
COST
CENTER
a
:
wwO~~
i
30.
O.7-7
4r
a t1
ROW
Ttal
+75
4
.3
.7.0 -
i
:
6.21
..
J
us1.
71.1% | 66.2% 1
29.1% : 39.1%
I
I
UT
.
.
5
-.5|
+-------1---------"
A
I
0.
| 14.3
20.7 | 31.8%
37.1%
62.9%
28.9% |33.8%
11.8%| 20.0%
1.00
PROFIT CENTER
-1.3
M.
-.3
-.5
.3
.5
+----+--+---
Column
Total
45
40.9%
110
100.0%
65
59.1%
Chi-Square
D.F.
Significance
.11604
.30121
i
1
.7334
.5831
Statistic
14.318
None
C Before Yates Correction
Sysmetric
L da.30000
'22certaint. moe'wiient
.302:"
Eta
Statistic
Contingency Coef f:c:rt
La
Kendas
Kendall's Tau C
Pearson's
Gari
Value
11421
0
66
Dependent
Dependent
.00300
.00000
.00220
.00204
.0523
.5^c
Significance
02
.0473
.0:232
Nuaber of Missing Observations
Cells with E.F.K 5
Min E.F.
22
.2324
.222:
3.
Hypothesis I:
Profit Centers are More Effective
Management of Buildings and Land than Cost Centers
in
the
a. General Backround
The
total survey sample may be broken out by "method of real
estate
evaluation" in the following groups:
o
o
o
o
o
With
PROFIT CENTER (ONLY)
COST CENTER (ONLY)
BOTH PROFIT & COST CENTER
OR "DEPENDS ON PROPERTY"
NO SEPARATE EVALUATION
NO ANSWER
interpretation
number
For
some
of
19%
27%
(55)
(78)
TOTAL RESPONSES
284
lattitude
these
should
be
center"
given
terms by the respondent
example,
some
properties,
profit
finance,
to
and
of accounting structures which are identified
actually develop,
only
(35)
(75)
(41)
to the classifications of "profit
regard
center",
"cost
12%
26%
14%
centers reported in the
as
such.
survey
may
and hold title to the corporation's
such as non-consolidated subsidiaries.
(1983),
the
various
Others may
operate a profit center only relative to operating
The GTE study
and
for example,
costs.
found that nearly one-third
of
the profit centers responding did not generate enough profit
to
support the overhead for all real estate services
That
study
also
reported the sources of
financing
provided.
for
estate/construction projects of the respondents as follows:
76%
Parent
38%
38%
30%
Operations
Externally
Sale/Leaseback
19%
Joint Ventures
11%
8%
Real Estate
No Response
67
real
While the GTE sample was not large enough to be statistically
significant,
it nevertheless illustrates the many variations in
use by corporations.
Since the
clear
format of the survey questions does not allow for a
definition of real estate costs and revenues,
helpful to refer to basic accounting notions.
it may
Garrison
be
(1982)
provides the following definitions:
o
A COST CENTER is any responsibility center that has control
A cost center has no control
over the incurrence of costs.
over the generating of revenue.
o
PROFIT
CENTER
is any responsibility
A
control over both cost and revenue.
o
A INVESTMENT CENTER is any responsibility center that has
control over cost and revenue and also has control over
investment funds.
It
profit
is
that the group who identified
likely
centers
center
that
themselves
in the sample may also contain some
number
has
as
of
investment centers, as defined above.
To investigate the research hypothesis survey respondents who
claim
to
extracted
solely as a profit center
operate
from
the
main sample as were
operate solely as cost center (75).
groups were first
(35
those
total)
claim
who
were
to
The responses of these two
compared across all survey- dimensions and the
significant variances noted.
The
comparisons
slightly higher in some areas,
higher on others.
tended
to
dominant.
balance
performed
showed that while profit centers
cost centers performed
In the final analysis,
out.
Neither
group
slightly
the combined ratings
emerged
as
clearly
Although the smaller sample size of the profit group
68
is
likely to exhibit greater variance,
it can be safely stated
as
profit centers did not clearly and consistently appear
that
more effective in the management of their real estate than
cost
centers.
It was noted,
performed
was
to
account for the disparity:
in the survey that they did not
estate
assets
total).
This
either
that both groups,
for the most part,
higher than the overall sample mean.
examined
specified
however,
those
evaluate
group clearly and consistently rated
who
firms
their
separately from overall corporate assets
the profit or cost groups.
group
A third
real
(55
lower
in
than
Table L highlights some
the more significant comparisions between these three groups.
69
of
Table L: Comparison Between Method of Real Estate Evaluation
PROFIT
CENTER
COST
CENTER
(% OUT OF 35)
% OF RESPONDENTS IN
MANUFACTURING (HEAVY & LIGHT)
% OF RESPONDENTS IN
BANKING/INSURANCE/FIN. SVCS
% OF RESPONDENTS UNDER
500,000 SQ/FT OWNED
% OF RESPONDENTS OVER
10 MILLION SQ/FT OWNED
% OF RESPONDENTS OVER
1 MILLION SQ/FT LEASED
NO SEPARATE
EVALUATION
(% OUT OF 75)
(% OUT OF 55)
17%
25%
39%
26%
24%
12%
37%
21%
19%
0%
19%
19%
29%
48%
34%
14%
37%
34%
16%
20%
39%
25%
21%
44%
26%
20%
28%
46%
35%
53%
31%
26%
34%
91%
92%
72%
31%
% WITH REAL ESTATE FUNCTIONS
REPORTING TO DIFFERENT VP
THAN FAC. MGMT FUNCTIONS
% INDICATING INSUFFICIENT COMM- 57%
UNICATIONS & COORDINATION BTWN
THESE TWO FUNCTIONS
27%
39%
22%
15%
% CHARGING FAIR MARKET RENT
TO ITS INTERNAL DEPT.S
% ACCOUNTING FOR REAL ESTATE
ON PROPERTY-BY-PROPERTY BASIS
% WITH NO SEPARATE ACCOUNTING
METHOD FOR REAL ESTATE
37%
19%
16%
63%
57%
35%
14%
19%
39%
% WITH REAL ESTATE MIS INPLACE
% WITH REAL ESTATE INVENTORIES
48%
74%
39%
73%
23%
79%
% UNCERTAIN OF SQ/FT OWNED
% UNCERTAIN OF SQ/FT LEASED
% UNCERTAIN OF ACQUISITION
COST OF REAL ESTATE
% UNCERTAIN OF MARKET VALUE
OF REAL ESTATE
% UNCERTAIN OF MARKET VALUE
OF LEASEHOLDS
COMBINED UNCERTAINTY:
% WITH FORMAL REAL ESTATE
UNIT INPLACE
70
PROFIT
CENTER
COST
CENTER
% WITH REAL ESTATE RETURNS
26%
LESS THAN TOTAL CORP RETURNS
% WHO DO NOT CALCULATE
14%
REAL ESTATE RETURNS
% WHO DO NOT CALCULATE
4%
REAL ESTATE RETURNS
**
(% OF TOTAL SURVEY)
29%
40%
45%
65%
28%
68%
57%
23%
14%
31%
31%
11%
45%
67%
13%
40%
70%
16%
NO SEPARATE
EVALUATION
% WHOSE DECISIONS ARE DRIVEN BY:
-
INVESTMENT OR PROFIT
POTENTIAL
OCCUPANCY COSTS
OPERATIONAL FACTORS
SITUATIONAL FACTORS
% WITH SYSTEMS INPLACE
-
(MANUAL OR OTHERWISE) FOR:
UTILIZATION ANALYSIS
LEASE DATES/COMMITMENTS
IDENTIFYING SURPLUS
PROPERTIES
TRACKING SQ/FT COSTS
IDENTIFYING CHANGES IN
MARKET VALUE
IDENTIFYING IMPROVED
REAL ESTATE FINANCING
MONITORING PHYSICAL
CONDITION
TOTAL:
% PREPARING INFORMATION
FM ABOVE SYSTEMS TO TOP
MGMT ON ANY SCHEDULED BASIS
77%
80%
69%
65%
88%
65%
63%
88%
74%
60%
51%
55%
24%
56%
26%
37%
24%
25%
63%
51%
60%
62%
53%
56%
32%
32%
16%
% WHO CLAIM TO "HAVE EXPOSURE
TO OVERALL STRATEGIC PLANS"
% WHO CLAIM NOT TO HAVE
"SUFFICIENT INFO OR METHODS TO
EVALUATE BUILDING PERFORMANCE"
% WHO CLAIM THAT "REAL ESTATE
PLAYS A CRITICAL ROLE IN MY
ORGANIZATION"
71
66%
80%
61%
14%
35%
42%
74%
67%
49%
Table
L suggests that those who do separately evaluate their
real estate assets,
likely
to
have
on either a cost or profit basis,
1) a formal real
property-by-property
their properties,
3)
(vs.
pooled
estate
unit
in
are more
place,
or category) accounting
over
for
a
fair market rents charged internally, 4)
separate management information system for real estate,
uncertainty
2)
amount
and
of space owned
greater estimated returns on real estate assets
5) less
and
leased,
6)
who
(over those
do not separately evaluate their real estate holdings).
Statistical Test of the Hypothesis
b.
The sample data shows that,
survey,
the
cost
profit centers are no more "effective" than
and that those who do not separately account for
centers
estate
real
among the organizations polled in
are
less effective than
either
profit
their
cost
or
centers.
The question can be raised, however, as to whether or
not
this
observation in the sample survey can be inferred
the
entire
.degree
of
probability
noted
were
population of corporations in America with
confidence.
that
Alternatively
the differences
test this,
hypotheses
between these
in the survey sample) would be found
entirely new and random sample?
To
stated,
what
groups
again
for
high
a
is
the
(that
in
an
(Norusis 1986).
individual research hypotheses
(H:1) and null
(H:O) were formed across each effectiveness dimension
for 1) the profit center group vs. the cost center group, and 2)
the profit center group vs. the "no separate evaluation" group.
The eight effectiveness dimensions may be stated in the form
of the following research (H:1) hypothesis:
72
1.
Profit
centers use property-by-property accounting
methods
for their real estate more frequently than cost centers.
2.
Profit
centers
are more likely to have an
estate unit than cost centers.
organized
real
3.
Profit
centers
are more
likely
to
have
a
management
information system for their real estate than cost centers.
4.
Profit
centers charge internal rents to their
more often than cost centers.
departments
5.
Profit
centers are less likely to report lower
returns
on
real
estate
(relative to overall corporate returns) than
cost
centers.
6.
Profit
centers report to senior management on
real
estate
information (on a scheduled basis) more often than cost centers.
7.
Profit
centers
have greater exposure to overall
strategy and planning than do cost centers.
centers
have
greater
information
to
evaluate the performance of their
8.
Profit
methodology
corporate
and
real
better
estate
than do cost centers.
Table M
lists the results of the individual tests as well
the overall
as
success rate for all eight hypotheses considered.
Table M:
Profit Center vs. Cost Center
P-value
Chi-square
Test run
1. Property-by-property
one-tail
test Conclusion
.30121
.5831
-
Accept H:0
.01037
.9109
-
Accept H:0
.96222
.3266
-
Accept H:0
.88160
.3478
-
Accept H:0
.05567
.8135
-
Accept H: 0
.00359
.9522
-
Accept H:0
1.42972
.2318
-
Accept H:0
4.28266
.0385
-
Reject H:0
accounting method
2.
Real
Estate
unit
in place
3. Management
Information
system for Real Estate
4.
Internal rents
charged to depts.
5. Real Estate returns
less than corp. returns
6. Scheduled mgmt review
of system reports
7. No exposure to corp.
strategy and plans
8. Insufficient info or
methods to evaluate
Success Rate
73
=
1/8
=
12.5%
In only one out of eight tests did the profit centers
differently that cost centers.
more
and
likely
Specifically,
cost centers are
to report that they have insufficient
methodology
behave
to evaluate their facilities.
information
In
all
other
cases, cost centers displayed no difference in behavior.
The
same
comparison
evaluation
eight hypotheses were formulated
between
profit
centers
for real estate" group.
and
and
the
tested
"no
for
separate
The results of these
tests
are listed in Table N as well as the overall success rate.
Table N: Profit Center vs. No Separate Evaluation
Test run
Chi-square P-value
1. Property-by-property
6.38503
one-tail
test
.0115
Conclusion
Reject H:0
-
accounting method
2.
-
.0224
5.21521
Real Estate unit
Reject H:0
in place
7.30834
.0069
-
Reject H:0
1.76618
charged to depts.
.63879
Real Estate returns
less than corp. returns
Scheduled mgmt review
2.96231
of system reports
.19335
No exposure to corp.
strategy and plans
7.70215
Insufficient info or
methods to evaluate
.1839
.0919
Reject H:O
.4241
-
Accept H:0
.0852
-
Reject H:O
.6601
-
Accept H:0
.0055
-
Reject H:O
3. Management Information
sytsem for Real Estate
4.
5.
6.
7.
8.
Internal rents
Success Rate
Six
out of eight tests
=
6/8
=
75%
showed that profit centers did behave
differently than those who do not separately evaluate their real
estate.
In
all
six
cases,
74
the
differences
reflect
more
effective behavior on the part of the profit centers.
These
tests
overall
research
estate
provide strong
--
hypothesis
evidence
to
reject
the
that profit centers
are
more
and conclude that both profit
and
cost
are more effective in the management of corporate
real
by nature --
effective
centers
both
than
those
who do not separately evaluate
their
real
estate
cost
estate at all.
c. Interpretation of the Results
The
against
practice
its
accounting
Profit
of matching every dollar of real
dollar of real estate
associated
choice
centers
profitable.
It
--
not
necessarily a
money
and
revenue
mark
cost
of
is
an
efficiency.
can
can
lose
centers
may
be that the choice to operate as
a
be
cost
center reflects less a resignation to under-utilize the value of
the asset so much as a deliberate choice to channel and
account
for
in
that value in ways the corporation sees fit;
subsidy
For
or
example,
closely
with
e.g.
the
reduction of occupancy cost to certain line
units.
the author and the LAP research team have
worked
one
organization
(the
U.S.
Army)
which
has
aggressively pursued a policy of providing space to its
tenants
Dluhosch,
Joroff,
at
(See Bon,
rates well below market rent.
Brana, & Veale 1986).
Where
profits
organization,
position
are
clearly
sought
from
tenants
outside
not all corporations may be in an
to realize appreciable profits from their real
(especially industrial properties).
the property holdings,
the
equal
estate
That is likely to depend on
market opportunities,
75
of
risk profile, and
capital base of the organization in question.
Where
profits
organization,
appearing
show
it
as
However,
may be argued that,
reduced
in some
operating margins
as Wilbur points out,
market
isn't
from corporate tenants
for
cases,
accurately
the
argues
that
indication
calculated
because
the
units.
real
estate
fair
of
market
space.
Bon
"the
best
the market price for space can provide
how
fact,
(Wilbur 1987).
in a more efficient allocation
of
in
manufactured
may be argued that the practice of charging
results
profits
line
being
department is subsidizing the manufacturing."
rents
the
if the line units are not paying
rent then "the cost of what's
being
It
inside
on the books of the real estate group may,
up
fair
are sought
scarce space is in a particular area
at
particluar time" and may also be used as a standard since it
difficult to come up with other reasonable standards.
maintains
that
if
these
While
Bon also
units
not
are
(Bon
organization.
for
a
large
1988).
number
of
it is also true that for other corporations their
clients
alternatives.
the
may hold true
arguments
corporations,
interal
go outside of
to
option
estate
is
their internal clients should have
competitive with the market,
the
real
corporate
a
"captive
are
customers"
with
market
no
many assets are so unique
As Granoff maintains,
that market prices are not readily available.
Granoff provides
the following illustration:
"Consider the problem,
land
on
located.
which
The
Ford
tract
however,
Motor
of estimating the value
Company's
River
of land comprises several
76
Rouge
plant
square
of
is
miles,
and the industrial influence of the plant is
around
the
plant.
surrounding
Ford.
land
It
would
Whatever
has
value
is attributable
felt for many miles
(or
to
lack
the
either by looking at other recent offers
such
enormous
have
been
serious
of
(the plant
of
the
is
of
that
there
the
sales
(the Ford land determines the
value
offers) or by
of surrounding land
the
activities
value that it is reasonably certain
few
it)
be impossible to determine the value
land
prices
of
looking
at
of the surrounding land, not the other way around)."
These considerations by no means refute the value of charging
fair
market rents to corporate tenants where
emphasize
rather
the nature
of
appropriate,
but
choice,
and
deliberateness,
More at
in the decision to account for real estate.
intention
issue here is the clear presence of a well defined strategy
for
productive use and control of the asset.
To
are
and
founded
the benefits of a profit orientation are
sure,
be
gaining
industry literature.
corporation
stem,
--
Bogorad 1984.
that
these
new
recent
Behrens
profit
within
the
from the necessary organizational restructuring
centralized management and reporting,
promulgation,
performance,
service,
in
and thus many of the benefits which are praised may
in part,
i.e.
however,
popularity
most likely to be centrally organized
are
centers
(see Brown 1987.
is worth noting,
It
1982.)
considerable
well
etc.
effective policy
consolidated accounting, organized evaluation of
central
--
and
repository of real estate
not
expertise
necessarily the profit
itself.
77
and
orientation
It
would seem hard to argue with existence
where they are feasible
the
survey
results
(and are,
point
out,
in
fact,
of profit
profitable)
the motivation
generate revenues for the overall corporation.
Director
points
is
understood
"no
mission
of the corporate
or more critically judged than
since as
usually
to
As Robert Brown,
of Real Estate for Rockwell International
out,
centers
Corporation
entity
profit
is
better
performance.
Hence the real estate unit should also be judged on the basis of
its
profit
to
contribution
other operating units."
and
it
top management on the same
to
accountable
directly
performance,
should
be
basis
as
(Thompson 1986).
Certainly where reasonable and appropriate opportunities
exist
profit
they
should
be pursued
but
where
the
for
profit
orientation poses a rigid or inflexible criterion and the larger
mission
the
of
stands
organization
to
be
lost,
be viewed as the difference between Profit --
might
exists
and Profitable --
generate profit --
to
seems
approach.
that firms should choose a different
reasonable
it
that
that
It
which
which
is
though,
is
capable of generating profit.
Perhaps lost in the profit vs.
cost comparison,
the
actual delivery of service by the real estate
the
survey
measure,
results
yet
more
estate organization,
corporate clients?
they
provide
corporate
do
not gauge are the
more
unit.
difficult
important issues associated with
i.e.:
How responsive
any
is the unit to
What
to
real
the
How well do they perform their service?
Do
solutions
to
quality and innovative real estate
space needs?
Do the corporate facilities enhance or
78
improve
Are the
corporate productivity?
corporate
occupants
satisfied with the real estate solutions?
*
CONCLUSION:
*
*
DATA DOES NOT
REJECT RESEARCH HYPOTHESIS.
PROVIDE ENOUGH EVIDENCE TO SUPPORT THE CLAIM
THAT PROFIT CENTERS ARE INHERENTLY MORE
EFFECTIVE.
SURVEY DATA SUPPORTS, HOWEVER, THE GENERAL
THOSE
CLAIM THAT -- PROFIT OR COST CENTER -WHO SEPARATELY EVALUATE THEIR REAL ESTATE ARE
MORE EFFECTIVE THAN THOSE WHO DO NOT.
79
4.
Hypothesis 2:
Effective Management of Corporate Real Estate
is Unrelated to the Size of the Real Estate Portfolio
a. Background
The
1981
HRE research examined the relationship
between
a
corporation's decision to manage its real estate effectively and
company size or the size of real estate held.
That
study found
no correlation between these variables and how a company handles
its
real estate.
specifically,
This relationship was studied again in 1987,
how
on
the size of the
real
portfolio
estate
relates to real estate management and performance.
analysis involved evaluating both tails of the
Early
both
distribution,
The
companies under 500,000 sqaure feet
four groups
over 1000
companies
sites
(13% of the
of the survey).
(16%
four groups were compared across every
these
and significant variances noted.
all
2) all
survey),
and 4)
(13% of the survey),
under 25 sites
companies
1)
were:
(21% of the survey),
over 10 million square feet
companies
all
for all companies by area
large and small,
again by number of sites.
and
sample
3)
all
The responses of
dimension
survey
Table 0 highlights some of the
more significant camparisions.
The
data
in
Table
show,
if
are
portfolios
appear
that
smaller
portfolios.
Smaller
anything,
better managed than large
portfolios
more apt to know how much real
estate
they
how much it is worth, to calculate real estate returns, to
own,
report
on
0
a
overall
on the status of their real estate to senior
more
frequent basis,
and to have
corporate strategy and
generally held true
80
planning.
greater
These
management
exposure
to
observations
Table 0: Comparison by Portfolio Size
o
o
o
o
UNDER 500,000 SQ/FT
OVER 10 MILLION SQ/FT
UNDER 25 SITES
OVER 1000 SITES
UNDER
500,000
% OF RESPONDENTS IN
MANUFACTURING (HVY & LT)
% OF RESPONDENTS IN
RETAIL/WHOLESALE
% OF RESPONDENTS IN
BANKING/INSUR./FIN. SVCS
% OF RESPONDENTS IN
UTILITIES
% OF RESPONDENTS IN
TRANSPORTATION
% OF RESPONDENTS IN
"OTHER" BUSINESS
21%
13%
13%
16%
OVER
10,000,000
(61)
(37)
(37)
(46)
UNDER
25 SITES
OVER
1000 SITES
11%
54%
19%
15%
21%
8%
19%
22%
28%
0%
16%
9%
7%
14%
5%
22%
2%
5%
5%
17%
21%
13%
30%
15%
% UNCERTAIN OF SQ/FT OWNED
% UNCERTAIN OF # OF SITES
% UNCERTAIN OF ACQUISITION
COST OF REAL ESTATE
% UNCERTAIN OF MARKET
VALUE OF REAL ESTATE
% UNCERTAIN OF MARKET
VALUE OF LEASEHOLDS
2%
33%
0%
49%
22%
30%
13%
48%
21%
27%
16%
17%
13%
27%
19%
22%
COMBINED
UNCERTAINTY:
(ACQ. & MKT VALUE ONLY)
22%
34%
22%
29%
82%
84%
73%
94%
15%
3%
16%
4%
31%
3%
27%
15%
20%
% W/ REAL ESTATE FUNCTIONS
REPORTING TO DIFFERENT VP
THAN FAC. MGMT FUNCTIONS
27%
% INDICATING INSUFFICIENT
COMMUNICATIONS & COORDINATION BTWN TWO FUNCTIONS
30%
16%
15%
10%
20%
22%
% WITH FORMAL REAL
ESTATE UNIT INPLACE
% REAL ESTATE AS A
SUBSIDIARY
% WITH REAL ESTATE
REPORTING TO PRESIDENT
81
UNDER
500,000
OVER
10,000,000
UNDER
25 SITES
OVER
1000 SITES
% W/ NO SEPARATE EVALUATION OF ITS REAL ESTATE
% CHARGING FAIR MARKET
RENT TO ITS DEPARTMENTS
% COST ACCOUNTING ON
PROPERTY-BY-PROPERTY BASIS
% WITH NO SEPARATE (COST)
ACCOUNTING FOR REAL ESTATE
11%
30%
16%
11%
36%
13%
35%
22%
54%
49%
54%
63%
21%
22%
30%
4%
% W/
% W/
33%
74%
73%
73%
16%
81%
54%
83%
20%
% W/ REAL ESTATE RETURNS
LESS THAN OVERALL RETURNS
% WHO DO NOT CALCULATE
34%
REAL ESTATE RETURNS
50%
28%
21%
65%
39%
35%
46%
13%
51%
33%
33%
41%
31%
54%
62%
43%
27%
40%
22%
46%
61%
46%
REAL ESTATE MIS
REAL ESTATE INVENTORY
% WHOSE DECISIONS ARE DRIVEN BY:
-
INVESTMENT OR PROFIT
POTENTIAL
- OCCUPANCY COSTS
- OPERATIONAL FACTORS
- SITUATIONAL FACTORS
(SECONDARY)
% WITH SYSTEMS INPLACE
-
(MANUAL OR OTHERWISE) FOR:
61%
79%
73%
92%
76%
68%
76%
98%
52%
73%
40%
91%
54%
38%
60%
24%
59%
27%
61%
33%
28%
24%
24%
28%
51%
46%
57%
61%
52%
56%
50%
64%
20%
% PREPARING INFORMATION
FM ABOVE SYSTEMS TO TOP
MGMT ON ANY SCHEDULED BASIS
27%
19%
33%
-
UTILIZATION ANALYSIS
LEASE DATES/
COMMITMENTS
IDENTIFYING SURPLUS
PROPERTIES
TRACKING SQFT COSTS
IDENTIFYING CHANGES
IN MARKET VALUE
IDENTIFYING IMPROVED
REAL ESTATE FINANCING
MONITORING PHYSICAL
CONDITION
TOTAL:
82
UNDER
500,000
OVER
10,000,000
UNDER
25 SITES
OVER
1000 SITES
MEAN HOURS SPENT WEEKLY ON:
-
LEASE NEGOTIATION
SITE SELECTION &
ACQUISITION
DISPOSITION OF
SURPLUS PROPERTES
ADMINISTRATION OF
REAL ESTATE DEPT.
REPORTING TO
SENIOR MANAGEMENT
6.0
6.0
3.9
3.7
4.0
8.2
3.5
5.1
2.0
6.0
4.8
4.7
6.2
13.2
6.3
11.0
3.0
4.5
3.2
5.4
8%
27%
16%
22%
% WHO CLAIM NOT TO HAVE
"SUFFICIENT INFO OR
METHODS TO EVALUATE
BUILDING PERFORMANCE"
25%
41%
19%
28%
% WHO CLAIM THAT "REAL
ESTATE PLAYS A CRITICAL
ROLE IN MY ORGANIZATION"
61%
54%
51%
78%
-
% WHO CLAIM TO NOT TO
HAVE "EXPOSURE TO
OVERALL STRATEGIC PLANS"
83
for both area and number of sites.
that
the
It should be noted, however,
differences observed were not
that in some management areas
(e.g.
consistently large
and
MIS) large portfolios rated
higher.
Based
on
underlying
the
observations
issue
--
portfolios
in
due
the
to
--
in
Table
0,
then,
analysis is
whether
or
not
greater
workload,
the
etc.
decentralization,
found
15
agreed
management
properties.
it
operating
maintain coherent,
Decentralized
may
Bell points to the
corporations
decentralization in U.S.
conflict
decentralize
poses.
authority
growing
and
the
need
to
conflicts with the
need
to
professional management of
systematic,
also
"the
He states that
the
(Bell 1987).
fixed asset side of a business".
Statistical Test of the Hypothesis
b.
The
sample
data
suggests
that there
may
be
surveyed.
Again,
the larger question is:
can this
inferred for the entire population of American
with a high degree of confidence?
differences
survey
differences
large and small portfolios among those firms that
between
the
1984
with some large organizations
associated
towards
potential
be
in
surveyed
1984).
(Farragher
inhibit real estate effectiveness.
trend
that
that large real estate properties produce better returns
small
than
bureaucracy,
Farragher found
of the 129 NACORE members
percent
large
are less effective in managing their
buildings and land than small portfolios.
only
the
sample)
What
between these groups
would
observation
corporations
is the probability
that
(that were noted in
the
new
and
be found again in an
84
were
entirely
(Norusis 1986).
random sample?
As before,
for
the same eight critical dimensions were
comparison
hypotheses
each
between
(H:1)
dimension
the
groups.
and null hypotheses
selected
Individual
(H:O) were
and the same statistical tests
research
formed
were
across
employed.
Again, the basic strategy was to support the research hypothesis
by contradicting the null hypothesis.
In this case,
square
the full range of values was observed for
feet owned and number of sites variables --
the high and low tails.
the
variables
size and not
The
and not just
Collapsing the categories of values for
was not necessary.
can
therefore,
the
The results of
the
be considered for the whole range of
just the very large
tests,
portfolio
and very small.
eight dimensions used in the test can be stated
in
the
form of the following research (H:1) hypothesis:
Small
1.
accounting
property-by-property
use
estate
portfolios
real
frequently
than
methods for their real estate more
large portfolios.
2.
Small
real
estate
portfolios
are more likely to
have
an
organized real estate unit than large portfolios.
real estate portfolios are more likely to have a
3. Small
large
management information system for their real estate than
portfolios.
4.
Small real estate portfolios charge internal rents to their
departments more often than large portfolios.
5.
Small real estate portfolios are less likely to report lower
returns
on real estate
(relative to overall corporate
returns)
than large portfolios.
6.
Small real estate portfolios report to senior management
real estate information
large portfolios.
(on a scheduled basis) more often
85
on
than
7. Small real estate portfolios have greater exposure to overall
corporate strategy and planning than do large portfolios.
8.
Small
real
estate portfolios have greater information
and
better
methodology
to evaluate the performance of
their
real
estate
than do large portfolios.
Table
P
categories
lists the results of the hypothesis testing for
of
"square
feet
owned".
Table P:
By Square Feet Owned
Degrees
of
Freedom
Test run:
1. Prop-by-prop
accounting
2. Real Estate
Unit
3. MIS for
Real Estate
4. Internal
Rents
5. Real Estate
low
returns
6. Scheduled mgt
Reject
Chi-
Region
square
7.779
5.9036
.2065
-
Accept H:0
4
7.779
.5966
.9634
-
Accept H:0
4
7.779
1.7662
.7787
-
Accept H:0
4
7.779
.7342
.9470
-
Accept H:0
4
7.779
5.0250
.2847
-
Accept H:0
4
7.779
5.5963
.2314
-
Accept H:0
7.779
8.0132
.0911
-
Reject H:O
7.779
4.0302
.4019
-
Accept H:0
Success Rate
area
=
1/8
=
12.5%
tests show that in only one out
portfolios
Specifically,
having
P-value
less
OneTailed
Test
Conclusion
4
reporting
7. No exposure
4
corp strategy
4
8. Insufficient
info/methods
The
all
the
of eight tests did small
than
large.
larger area portfolios are likely to
report
indicate
greater
effectiveness
exposure to corporate strategy and
planning
than
small.
Identical
categories
hypotheses
were
of "number of sites".
formulated and
The test
for
all
results as well as the
overall success rate, are listed in table Q.
86
tested
Table Q:
By Number of Sites
Degrees
of
Freedom
Test run:
1.
Prop-by-prop
accounting
2. Real Estate
Unit
3. MIS for
Real Estate
4. Internal
Rents
5. Real Estate
returns low
6. Scheduled mgt
reporting
7. No exposure
Reject
Chi-
Region
square
oneTailed
Test Conclusion
P-value
6
10.644
7.7191
.2594
-
Accept H:0
6
10.644
17.4872
.0076
-
Reject H:O
6
10.644
25.7048
.0003
-
Reject H:O
6
10.644
4.1139
.6613
-
Accept H:0
6
10.664
1.9235
.9266
-
Accept H:0
6
10.664
8.1956
.2241
-
Accept H:0
6
10.664
6.8285
.3370
-
Accept H:0
6
10.664
3.7584
.7093
-
Accept H:0
corp strategy
8.
Insufficient
info/methods
=
Success Rate
In
only
two
sites)
display
large
portfolios
estate
2/8
=
out of eight tests did
different
behavior
are
more
likely
than
25%
small
portfolios
large.
to have
an
(by
Specifically,
organized
real
department and a management information system for
real
estate.
d.
Interpretation of the Results
The tests
on
sample
management
show that,
from a
standpoint
one cannot conclude that
observations,
effectiveness
statistical
is
related
to size.
More to
and based
in
general
the point,
it cannot be proven conclusively with the survey statistics that
size is directly correlated with effectiveness.
say
that such a correlation does not exist,
not
show up in the tests.
certain
individual
Also,
dimensions
87
This is not to
only that it
does
this does not mean that
such a correlation exists
for
--
in
cases it does --
some
collectively
whole,
and
there
only that for all
dimensions
considered
for the hypothesis statement considered as
is
insufficient evidence to
support
a
a
general
conclusion.
Perhaps
account
the
larger question to be raised is:
can
management
separately
another?
structure
evaluate
A
review of the organization
of the 57 corporations
who
their real estate may be useful
do
since
has been shown under the previous research hypothesis that
group
is clearly less effective than either the cost or
groups.
these
A
57
close analysis of the data,
companies
are not
decision)
to
however,
structurally
entire 284 companies surveyed.
of
we
for the presence of effective real estate management in
one organization and not
and
How
In fact,
profit
than
that
the
the decision (or lack
not separately evaluate the real
of the corporation does not correlate
facilities
it
this
shows
different
not
estate
and
significantly
with any survey variable.
The reasons
for under-management of real estate assets may be
That
found in similar findings reported in the 1981 HRE study.
study
and
survey
found no correlation among demographic
how
variables
companies manage their real estate and suggested
the decision to manage real estate effectively may have more
do
or
with the attitudes of top management than with company
the
quantity,
properties.
value
or
geographic
dispersion
of
that
to
size
the
"The more aggressive firms are structurally similar
to passive companies, suggesting once again that the combination
people
and
opportunities is the
Similarly,
the
1987
of
critical
factor
survey results seem to point to
88
...
the
same
phenomenom.
To
test this theory,
effectiveness
(which
the same eight critical dimensions
have
been
shown
to
be
unrelated
of
to
portfolio size) were evaluated against the attitudes of the real
estate
executive
completing
the
survey.
Specifically,
executives were asked to evaluate the following statement:
property decision-making,
on average,
plays a critical part in
the overall performance of my organization".
The range of those
who agreed or disagreed with this statement were tested
each of the eight dimensions.
"Real
Table R
against
lists the results of the
test.
Table R:
"Real estate plays a critical role in my organization"
Test run:
Degrees
of
Free dom
Chi-
Reject
Region
square
P-value
OneTailed
Test Conclusion
1. Prop-by-prop
1
2.705
1.9301
.1647
.0823
Reject H:O
accounting
2. Real Estate
1
2.705
35.9082
.0000
-
Reject H:O
1
2.705
7.1478
.0075
-
Reject H:O
1
2.705
.6020
.4378
-
Accept H:0
1
2.705
.0200
.8873
-
Accept H:0
returns low
6. Scheduled mgt 1
2.705
6.5302
.0106
-
Reject H:O
2.705
15.2761
.0001
-
Reject H:0
2.705
14.7645
.0001
-
Reject H:O
Unit
3. MIS for
Real Estate
4. Internal
Rents
5. Real Estate
reporting
7. No exposure
1
corp strategy
1
8. Insufficient
info/methods
Success Rate
The
the
tests
=
6/8
show that while area is
=
statistically related
variables in only 12.5% of the tests,
related in only 25% of the tests,
89
75%
and number of
attitudes on the
to
sites
importance
of
real
estate
management
managers
real
in the organization proved to
effectiveness
in
75% of
the
be
tests.
related
Thus,
who are employing more effective methods for
to
those
managing
estate assets are likely to feel that real estate plays an
important
role within their
organizations.
Conversely,
less
effective managers are also likely to feel that real estate does
not play an important role in the organization.
A
logical question may be raised at this point.
who
For
feel that real estate plays a critical role in the
performance
of
their
corporations,
to pure sentiment,
attributed
what
those
overall
percentage
may
be
or perception on
attitude,
the
part of the manager and what percentage may be attributed to the
role that real estate plays for that company in
the
of
majority
these
managers come
industries where real estate is,
of
overall corporate success?
from
in fact,
Or,
actuality?
Do
organizations
or
a critical component
alternatively
stated,
some rational justification for under-management of
there
is
real
estate in some organizations or industries and not in others?
To
answer
these questions,
to
positively
the
those executives
statement were separated
from
sample and cross tabulated with type of business
perception of the real estate function is,
the
should
the
survey
then
S
If
related to
this
be distributed mostly within those industries which
most real estate intensive
Table
responded
activity.
in fact,
role it plays in the organization,
true
who
group
are
(i.e. retail, banking, etc.).
compares the industry type of those who claim
that
real estate plays a critical role in their organization with the
industry type of the entire sample.
90
Table S:Industry Type of "Real Estate Plays a Critical Role in
My Organization" Compared to Entire Survey
"Real estate plays a
critical role in
my organization"
...
Business Acitivity by
Total
Survey
Heavy Manufacturing
Primary
Secondary
9.0%
1.1%
12.0%
1.8%
.
. . . . .
. . . . . . .12.4%
. . . . . . . . . . . . .
3.4%
13.4%
5.6%
. . . . . . . . . . . . .
. . . . . . . . . . . . .
Light Manufacturing
Primary
Secondary
Retail / Wholesale
Primary
Secondary
Forestry /
. . . . .
. . . . . . .21.3%
.
. . . . . . . . . . . . .
1.7%
Mining /
.
Construction
Primary
.
Secondary
. . . . . . . . . . . . .
Banking /
.
16.9%
1.8%
.
Financial /
.
..
.
.
.
.
.
.
3. 9%
3.9%
3.4%
3.9%
Insurance
19.7%
Primary
. . . . . . . . . . . . .
18.5%
Secondary
. . . . . . . . . . . . .
.6%
1.8%
7.3%
1.1%
6.0%
1.1%
. . . . . . . . . . . . .
6.7%
8.5%
Secondary . . . . . . . . . . . . .
. 6%
.4%
Transportation
Primary
Secondary
.
.
.
.
.
.
. . .
. . .
..
. . . . .
. . . . . ..
Utilities
Primary
Other Business Acitivity
. . . . . . . . . . . . .
Primary
. . . . . . . . . .
Secondary . ..
21.9%
6.2%
20.8%
5.6%
Public Agency
Primary
Secondary
. . . . . . . . . . . . .
. . . . . . . . . . . . .
91
3.4%
- %
3.2%
- %
Table S shows that, with minor exception, the distribution by
industry type is exactly that of the total random sample.
retail/wholesale
respectively,
and heavy industry showed 4% and 3%
nearly
While
variation
all other categories remained within
one
This finding by itself is
percent of the total survey percent.
It shows that perceptions of real estate's role and
important.
value in the organization rests primarily with the attitudes
considered
when
It becomes even more important
managers themselves.
the
together with the fact that it is the attitudes
of
perceptions
manager which may
the
largely
of
and
the
determine
degree to which real estate assets will be managed.
In
the
summary,
accountable,
efficient,
unrelated
in
an
consistent fashion appears to
be
manage
to
decision
and
real
estate
There seems to be some evidence,
to portfolio size.
however,
that as portfolios grow in size and complexity so does
the
of
job
porfolios
in
them.
managing
Rarely
survey seem to be doing a
the
of
managers
did
large
job
better
than
Still, hypothesis testing showed that a
managers of small ones.
correlation between size and under-management cannot
direct
be
stated with a significant degree of statistical confidence.
Management
directly
attitude,
related to
on
other
the
management
hand,
effectiveness.
appears
to
be
Specifically,
those who believe in the value and importance of the real estate
the
organization
function
within
managers
of that function.
which
real
are
And finally,
likely
to
be
management
strong
attitude
places a high degree of value and importance on corporate
estate does not appear to be structurally related
92
to
the
size
or
type
of business,
or the qauntity or value
of
estate held.
*
CONCLUSION:
*
*
ACCEPT RESEARCH HYPOTHESIS.
DATA PROVIDES
SUFFICIENT EVIDENCE TO CONCLUDE THAT EFFECTIVE MANAGEMENT OF CORPORATE REAL ESTATE
IS UNRELATED TO THE SIZE OF THE REAL ESTATE
PORTFOLIO.
THE SURVEY DATA FURTHER SHOWS THAT EFFECTIVE
MANAGEMENT OF CORPORATE REAL ESTATE IS
DIRECTLY RELATED TO MANAGEMENT ATTITUDE.
93
real
5. Hypothesis 3: The Use of Computers in Corporate Real Estate
Indicates Effective Management
a. Background
The
advent
of
computer
systems
and
new
information
technologies in the facilities and real estate business over the
last
decade
has
been
well-documented.
Brainerd 1985.
Urbanczyk 1984.
Many
are now available for
programs
lease analysis,
Young
(see
1983.
Kimmel
1987.
Gottfried 1982.).
CAD-facility
management,
building maintenance management, space and real
estate inventory,
capital investment analysiS,
and more.
That
corporate Amercia is rushing out to absorb the new technology is
clear.
The
systems,
successful implementation and ongoing use of
however,
is
not
entirely
applications
abound
Ebert
MacEachron 1984.
1984.
behind-the-scenes
today
may
not
in the literature.
evident.
be complete.
Successful
(see Hamiliton
Hannon & Davey 1983.).
story of computers in corporate
How such systems
such
Yet the
real
are
1986.
estate
selected,
implemented, deployed, evaluated, and managed by the users on an
ongoing basis will tell more than the glossy circulars and specsheets that can be found on the market today.
The
design
and
performance
of
the
individual
Certainly, when used
themselves is of a secondary concern here.
as
designed
management
such
are
likely
to
greatly
increase
effectiveness and improve the overall performance of
real estate assets.
and
systems
systems
At issue, instead, is the actual deployment
management of computers within the decision-making
94
process
for corporate real estate.
While an entire survey can be devoted to this area,
from
the 1987 MIT survey can begin to provide some
observations.
question
For
the purposes of this study,
may be raised:
the data
interesting
the
following
Does the presence of computers in
the
corporate real estate provide a reliable indication of effective
management?
b. Statistical Test of the Hypothesis
To answer this question,
on
information gathered in the
the results of the earlier research
proceeds
test
vs.
centers
no
that
and
2)
1)
the
cost centers and profit
(i.e.
separate evaluation) is
effectiveness,
management
Specifically,
hypotheses.
from the earlier conclusions
of real estate evaluation
method
with
use was tabulated and analysed in conjuction
computer
the
survey
directly
to
related
the size of the real
estate
portfolio is not directly related to management effectiveness.
computer use was compared between profit centers
and
those
with no separate evaluation and between cost centers
and
those
with
First,
computer
Table
real
T
estate
no separate evaluation.
use
among
these groups
If the hypothesis
should
vary
significantly.
is a cross-tabulation of computer use with
evaluation.
95
holds,
method
of
Table T: COMPUTER USE BROKEN OUT BY METHOD OF EVALUATION
COST
CENTER
PROFIT
CENTER
% USING COMPUTERS
-
("SOMETIMES"
computer
T
use
shows
that,
did
not
54%
43%
80%
60%
42%
49%
54%
44%
70%
53%
52%
53%
29%
31%
TOTAL:
among
vary
IN:
64%
37%
41%
51%
44%
76%
83%
INVESTMENT ANALYSIS
FACILITY MANAGEMENT
DRAFTING & DESIGN
PROJECT MANGEMENT
MAINTENANCE MANAGEMENT
REAL ESTATE INVENTORY
Table
OR "OFTEN")
NO SEPARATE
EVALUATION
on
the
organizations
average
between
surveyed,
who
those
separately evaluate their real estate and those who do not.
Next,
terms of area and number of sites.
in
use
hypothesis holds,
computer
both
computer use was evaluated by size of portfolio,
use
and
Again,
if the computer
there should be little relation
size.
Table U
is
a
between
cross-tabulation
computer use with size of real estate portfolio.
Table U:
COMPUTER USE BROKEN OUT BY SIZE OF PORTFOLIO
OVER
10 MILL.
UNDER
500,000
% USING COMPUTERS
-
UNDER
25 SITES
OVER
1000 SITES
("SOMETIMES" OR "OFTEN") IN:
INVESTMENT ANALYSIS
FACILITY MANAGEMENT
DRAFTING & DESIGN
PROJECT MANGEMENT
MAINTENANCE MANAGEMENT
REAL ESTATE INVENTORY
TOTAL:
74%
51%
35%
43%
91%
59%
63%
74%
56%
96%
67%
38%
73%
59%
22%
34%
39%
31%
64%
81%
57%
59%
70%
41%
96
62%
46%
24%
32%
of
Table
U
shows
significantly
portfolios.
use,
for
that
between
computer
large
and
use
small
on
average
varied
real
estate
the
Together, Table T and Table U suggest that computer
those
who responded to the survey,
is unrelated
to
method of real estate evaluation and is directly related to size
of
the
portfolio.
underlying
As
question
is:
with
the
previous
can this observation
hypotheses,
in
the
the
sample
be inferred for the entire population of corporations in
survey
America with a high degree of statistical confidence?
To
test this,
the same statistical testing methods used
in
the previous hypotheses were employed to evaluate comparisons of
computer
use
between
the following
groups:
1)
No
separate
evaluation vs. profit center, 2) No separate evaluation vs. cost
3) all ranges of size by square feet owned,
center,
and 4) all
ranges of size by number of sites.
Tables
groups
V
and
(comparing
W present the comparisons of
computer
use with
evaluation).
97
method
the
of
first
real
two
estate
Table V: Computer Use by Profit Center vs.No Separate Evaluation
(w/ computer
Degrees
use variable
Reject
Chi-
Region
square
P-value
1. Real Estate
1
Invest. anal.
2.705
8.4227
.0037
.0000
Reject H:O
2. CAD-facility
1
2.705
.1900
.6629
.0000
Accept H:0
management
CAD-drafting
1
2.705
.2315
.6304
.027
Accept H:0
4. Project
Management
5. Maintenance
Management
1
2.705
.7049
.4011
.0000
Accept H:0
1
2.705
.4848
.4862
.0000
Accept H:0
6. Real Estate
1
2.705
2.5984
.1070
.0000
Accept H:0
of
Freedom
Test run:
3.
depandent)
Lambda
Conclusion
& design
Inventory
Success Rate = 1/6
= 15%
Computer Use by Cost Center vs. No Separate Evaluation
Table W:
(w/ computer
Degrees
of
Freedom
Test run:
1. Real Estate
Invest.
Reject
Region
use variable
depandent)
Chi-
square
P-value
Lambda
Conclusion
1
2.705
.0001
.9902
.0000
Accept H:0
1
2.705
.5170
.4721
.0000
Accept H:0
1
2.705
.4418
.5062
.0526
Accept H:0
1
2.705
.1224
.7264
.0000
Accept H: 0
1
2.705
.0476
.8272
.0000
Accept H:0
1
2.705
.2008
.6540
.0000
Accept H:0
anal.
2. CAD-facility
management
3. CAD-drafting
& design
4. Project
Management
5. Maintenance
Management
6. Real Estate
Inventory
Success Rate
The
data
shows
=
0/6
=
0%
that those who do not
separately
their
real estate claim to use computers at least as
those
who do.
In 11
evaluate
often
as
out of 12 tests there was no appreciable
98
difference in computer use between cost centers, profit centers,
and
the
method
"no separate
of
evaluation"
group.
Collectively,
real estate evaluation as a predictor
variable
the
for
computer use has very little power of prediction.
Tables
X
and Y present the comparisons
of computer use
with
portfolio size, both area and number of sites.
Table X:
Test run:
Computer Use by Square Feet Owned
(w/ computer
use variable
depandent)
P-value Lambda Conclusion
Degrees
of
Reject
Chi-
Freedom
Region
square
5
9.236
7.3376
.1967
.0000
Accept H:0
5
9.236
16.3443
.0059
.1809
Reject H:0
5
9.236
10.9361
.0527
.1711
Reject H:0
5
9.236
13.3367
.0380
.0114
Reject H:0
5
9.236
18.6833
.0022
.2452
Reject H:0
5
9.236
8.2428
.2208
.0000
Accept H:0
1. Real Estate
Invest. anal.
2. CAD-facility
management
3. CAD-drafting
& design
4. Project
Management
5. Maintenance
Management
6. Real Estate
Inventory
Success Rate
99
=
4/6
=
66%
Table Y: Computer Use by Number of Sites
(w/ computer
Test run:
Degrees
of
Freedom
1. Real Estate
5
Invest. anal.
2. CAD-facility
5
use variable
Reject
Chi-
Region
square
P-value
depandent)
Lambda
Conclude:
9.236
24.5960
.0004
.0256
Reject H:0
9.236
19.6702
.0032
.1442
Reject H:0
management
3. CAD-drafting
5
9.236
17.4100
.0079
.1818
Reject H:0
& design
4. Project
5
9.236
10.3246
.1116
.0000
Reject H:O
5
9.236
4.9814
.5462
.0660
Accept H:0
5
9.236
30.2748
.0000
.0357
Reject H:0
Management
5. Maintenance
Management
6. Real Estate
Inventory
Success Rate
The
estate
=
5/6
=
83%
data shows that the use of computers in
is
clearly
related
to the size of
corporate
the
portfolio
question.
This correlation held for 9 out 12 tests
Both
and
area
number
of sites as
predictor
real
in
conducted.
variables
show
moderate powers of prediction.
c.
Interpretation of Results
The test results bear out the following:
o
The
use
of computers is not related to
method
of
real
estate evaluation; but method of real estate evaluation is
directly related to management effectiveness.
o
The
use of computers is directly related to the
the real estate portfolio;
size
but the size of the real estate
portfolio is not related to management effectiveness.
100
of
That
computer systems should be observed more frequently in
large portfolios might be explained in several ways.
be
may
that the larger numbers and
argued
First, it
higher
orders
of
magnitude associated with large real estate holdings require the
use of automated systems
size
of
for maintaining information.
the portfolio makes manual operations
inefficient.
conscious
That argument,
however,
attempt on the part
cumbersome
of management to better manage the
it may be argued,
that such intentions are no more likely to be
large
portfolios than small.
portfolios
overall
cannot
be
management
portfolios,
expected to be
more
who
protracted
unsuccessful
and
It
will
and
developed
experienced
systems.
such
the budget for administration and management of
purchase
so
buildings
While it seems that these budgets are rarely deemed
absolute
companies.
for
have
large
seems likely to assume that as companies grow in size
land.
in
both
Derrington 1987.).
adequate by the managers themselves,
--
small
To be sure, the
implementations of
(see Dluhosch, Bon & Veale 1987.
the
progressive
have deliberately and proactively
systems and large organizations who
reliable
in
of their real estate activities than
the research team at MIT have observed
organizations
in
if large
effective
why should they be expected to be more
and
present
Alternatively stated,
in maintaining information on these activities?
author
and
assumes a deliberate and
real estate portfolio and the survey results,
show
The sheer
Thus,
terms
at
--
than
they are sure to be larger
those
allocated
for
small
some point economies of scale will allow
of a computer system in the large firm
101
which
is
otherwise unaffordable in the
small
firm.
Additionally, smaller
firms without a formal real estate unit are likely to have their
various
and
real estate functions scattered across the
various
staff units in an ad-hoc and
Centralized
management
of
line
fragmented
information under
such
units
fashion.
conditions
might not be considered cost effective.
But even where computer systems exist,
that
they
improve
will be put to good use or that
they
upon the management system in place.
consistently
are just as
could
there is no guarantee
and
will
greatly
Firms who do
separately evaluate their real estate
assets
likely to use computers as those firms that
be argued that where real estate assets are
under-managed
through
existing
policy
and
not
do.
It
structurally
procedures,
the
implementation of computer systems will only automate the undermanagement.
the
Again,
the
issue is not the quality or design of
systems themselves but
rather the strategic
deployment
of
such systems in existing decision-making environments.
It
should be noted that the survey results measure only
number
applications
of
sophistication
and
not
the
of the systems themselves.
or
type
level
the
of
It seems likely that
the pattern of computer use will parallel the overall
corporate
be
somewhat
survey
questions
real
estate
fragmented
makes
systems
no
and
delivery
insular.
process
and
thus
The format of the
will
distinction between a collection of individual
and a larger macro system which attempts
to
micro
integrate
many of the smaller systems in a true MIS structure.
It
is apparent that the computer systems by themselves
102
will
not
ensure more effective management.
large
Despite the increasingly
number of computerized management systems
available
for
real estate and facilities, a fundamental question remains:
what
to do with the information these systems provide?
Typical
corps
of
or
most new technology,
generally
support them.
there is no
real
recognized body of industry
consulting
standards
to
The users themselves are not entirely settled on
the role of these systems within the organization.
One V.P. of
Facilities Management, in a recent industry trade show, reported
that
his
system knows where every chair
in his organization
and exactly when to change every belt on every air-handler,
poses the following question:
help
will make us manage information?
CONCLUSIONS:
something
(Gross 1987).
*
*
REJECT RESEARCH HYPOTHESIS. DATA DOES NOT
PROVIDE ENOUGH EVIDENCE TO SUPPORT CLAIM THAT
THE USE OF COMPUTERS IN CORPORATE REAL ESTATE
DEPARTMENTS NECESSARILY INDICATES EFFECTIVE
MANAGEMENT.
THE USE OF COMPUTERS APPEARS TO BE DIRECTLY
RELATED TO THE SIZE OF REAL ESTATE DEPARTMENT
AND NOT THE EFFECTIVENESS OF THE REAL ESTATE
DEPARTMENT.
103
but
Are we buying something that will
us manage our facilities or are we buying
*
is
that
III. Conclusion: Towards Accountability and the Emerging
Discipline of Corporate Real Estate Asset Management
Approaches
vary
to the management of corporate buildings and land
significantly from company to company,
diversity
and
level of sophistication.
both in
terms
When observed in
of
the
aggregate, however, several trends or conditions begin to emerge
which
can be discussed in the
estate
management
attempt
which
to
as a whole.
larger context of corporate
This concluding
go beyond the symptoms of
were
evident
in the
survey and
chapter
management
begin
real
will
difficulties
to
examine
the
underlying causes and possible remedies.
One and Two of this chapter will discuss two issues
Sections
surfaced throughout the survey --
which
general
management.
corporate
and
real
information
and
needs
Section Three will examine the future
estate both as an emerging field of
an emerging academic discipline.
Finally,
of
management
Section
Four
will discuss the dimensions of a strategic approach to corporate
estate asset management in terms of the
real
present day practice and future development
for
implications
of the field.
1. The Importance of Information in Corporate Real Estate
One of the most significant conclusions of the 1987 MIT study
is
that large numbers of corporate real estate managers do
not
One
maintain adequate information on their real estate assets.
in four does not maintain a real estate inventory.
three
do
not
maintain
a real estate MIS.
One
Two out
of
four
is
in
uncertain of the market value of the organization's real
and
one
in
three
is
uncertain
104
of
the
acquisition
estate
cost.
Informed decision making and awareness were issues that cut into
nearly
every
examined
better
dimension
in
of corporate
the survey.
real
In general,
estate
management
under-management
--
descriptor of the situation than mis-management
it is not that these assets are necessarily managed
way of faulty judgement,
but
rather that,
is
i.e.
poorly,
in many cases,
a
by
they
are not managed to their full potential. Thus, the real focus is
on
the opportunity costs associated with management
taken
and not the out-of-pocket costs associated
actions not
with
current
courses of under-management.
It
is difficult to determine the full potential of effective
management
little
for corporate real estate where little is known
and
of
the
is kept.
record
well over half
For example,
survey could not answer if returns from their real estate assets
were greater, less, or equal to overall corporate returns,
do
many
not
Furthermore,
which
are
of
less
reporting
lower
calculate
separate
those who do,
real
than overall returns.
returns,
over
Yet
returns.
estate
only one-third
report
among
half operate as
since
returns
the
firms
neither
cost
center nor profit center, which raises the question: how much of
that lower return is a function of the nature, use, and location
of
the real estate itself and how much is a function of
management?
under-
Could these returns be effectively increased
with
the right management?
Only half of all corporations bother to match individual real
estate
purposes
costs with actual properties or buildings for accounting
--
the
rest
either pool expenses
separately account for real estate at all
105
(28%)
(23%).
or
do
not
Thus, the true
measures
asset
of
real estate performance are hard to assess if
is
never
Correspondingly,
the
evaluated
it
or
monitored
responsible for these assets if
potential of their decisions is not known.
surprising that things have remained
since
for
1981.
time.
is difficult to assess the performance
decision-makers
not
over
the
the
of
full
In this light, it is
relatively
unchanged
It seems unlikely that upper management would press
improved
"fuel economy" of its real estate assets
if
the
mileage and fuel consumption are never recorded. As John Dowling
points out,
on
"Most C.E.O.s do not know how much they are
space.
If
they did,
they would make real estate
higher priority than they do."
To
be
sure,
activity
information
firms in the
systems
the
survey
claim
significant
(manual or
roughly two-thirds claim to
otherwise)
on lease dates and commitments,
properties,
and
for
utilization and current
for tracking square-foot costs by facility,
physical
and
condition
performance
monitoring changes in market value.
maintaining
identification
Systems are also maintained,
existing properties.
degree,
much
(Taylor 1986).
As previously noted,
on-going
surplus
a
in the area of gathering and maintaining real property
information.
have
many
spending
of
capacity
of
of
to a lesser
evaluating
buildings,
and
More revealing, however, is
the fact that only 29 percent prepare the information from these
systems
for top management review on any scheduled basis
quarterly,
semi-annually,
annually).
(i.e.
A full 23 percent do not
report at all.
This
conducted
parallels
on
the
the conclusions of the
use
of computers
106
research
within
the
hypothesis
real
estate
function.
systems
Specifically,
the mere presence of these information
and technology does not necessarily imply the effective
and successful use of them.
The
the
1981 HRE survey revealed that "few firms have
information
suggesting
base
needed for
informed
to
manage
real estate effectively
attitude and uncertainty --
respondents
appears
a
to
rely
These two elements --
are not unrelated.
The 1987 survey
were asked to evaluate statements concerning first,
effect of uncertainty and unpredictability on
decision-making
sufficient
in
That study also concludes that the
primarily on the attitudes of management.
the
policies,
that important real estate decisions are made
data vacuum, or not at all."
decision
setting
developed
and,
information
second,
and
whether
they
they
felt
methodology available
estate
real
to
had
clearly
evaluate the use effectiveness and physical performance of their
properties.
Table Z is a cross tabulation of the responses
to
these statements.
Table Z: Uncertainty vs. Availability of Information
"I DO NOT HAVE SUFFICIENT INFORMATION OR METHODOLOGY TO CLEARLY
THE PHYSICAL PERFORMANCE
EVALUATE
OR USE EFFECTIVENESS OF MY BUILDINGS"
"STRONGLY
AGREE"
"UNCERTAINTY AND UNPREDICTABILITY
OF FUTURE REAL ESTATE MARKETS,
ECONOMIC CONDITIONS, AND ORGANIZATIONAL SPACE NEEDS GREATLY
REDUCES MY CAPACITY TO EFFECT
OPTIMAL REAL ESTATE SOLUTIONS"
107
"STRONGLY
DISAGREE"
"STRONGLY
AGREE"
66%
22%
"STRONGLY
DISAGREE"
33%
78%
The
data
data clearly shows that those who claim to have adequate
and
information
available
to
them
do
not
feel
that
uncertainty or unpredictability reduces their capacity to effect
optimal
real estate solutions.
information,
however,
felt
strongly
that
uncertainty
management attitudes that are prevalent in
Two
today
are
"we're
adequate
corporations
"real estate is a necessary cost of doing
Zeckhauser 1983).
business".
estate
in the real
not
business"
(Silverman
&
While there is certainly some merit to their
and the various dimensions of their continuing
origins
and
decision making.
inhibits their
unpredictability
and
Those who do not have
debate,
the opportunity exists for using these rationales to account for
inefficient management of real estate assets.
to be brought into perspective with the larger mission
need
occupancy
doing
likely
(which are
Similarly,
business."
to
"necessary
cost) are unquestionably a
influence
labor
large corporations who
markets
Yet,
employment business" per se.
not
of
the greatest ongoing corporate expenditure above rent
typically
and
for example,
Payroll expenditures,
the corporation.
do
attitudes
These
operate as profit centers,
they
"not
of
may
be
in
the
while personnel departments
they
--
like all
corporate
=- are bound
support functions
and
are
cost
by
the
staff,
ancillary,
larger
organization to provide their service as efficiently and
effectively as possible.
Profitable or not,
leaner, more productive support
clearly
dependent
on information --
108
A
function enhances the ability of
the overall corporation to realize profits.
is
issue.
accountability is the central
And accountability
the kind
of
ongoing,
reliable,
timely, and relevant information which has been found
to be lacking in many American companies.
2. The Importance of General Managment in Corporate Real Estate:
In most organizations the real estate asset manager is likely
to be considered a specialist.
(see Yee 1986.
Holleran 1987.).
There is evidence in the survey to suggest that,
especially
as
the organization grows in size, this person will be increasingly
saddled
task
with
general management obligations and that,
as
the
of managing an organization's buildings and land grows
complexity,
this
person may need to seek solutions of
a
in
more
general management nature.
The
survey
senior
examined the full range of activities
corporate
real estate executive is likely to engage
over the course of a week and found that
"administration of
department" was the single greatest commitment
real
estate
time
(nearly
twice as great as the next
general management activities --
Overall,
that
real estate department;
in the organization,
etc.
purchasing,
--
largest
the
of
administration of the
reporting to senior management,
for
in
commitment).
liaison with other departments
accounted
the
(tenants)
training,
roughly one-third
of
all
weekly activities.
As the organization grows, the real estate group is likely to
experience
Executives
weekly
mean
departments.
its
own
share
of
bureaucratic
for portfolios under 500,000 sqaure
of
6 hours spent administering
growing
pains.
feet reported
the
real
a
estate
That figure jumps to 13 hours for those who manage
109
portfolios over the 10 million mark.
large
Also, as previously noted,
portfolios are likely to cite the decentralization of the
real
estate mission and difficulties in effecting change
large
organization
as
significant
barriers
to
in
a
implementing
management information systems.
Regardless
of
size,
the
majority
of
decision-making
in
corporate real estate is driven by operational concerns deriving
from
the overall mission of the company.
nearly twice as often,
or profit potential
decision-making,
--
cited
i.e.
(58%),
as either occupancy costs,
situational
those
factors were the most
demands
or
concerns
from
lease expirations, labor strikes,
operational priorities and administrative
real
estate
staff,
as
well as many
difficulties observed in the survey,
of
workloads
the
are not unique to the real
over the last decade tends to be transaction or
estate
oriented,
prescribing
leasebacks,
equity
certain
leases,
estate.
In a sense,
real estate
ventures
--
and
real
however, transactions and deal-making are
head-hunting are to human resource management.
it
sale-
master-limited partnerships --
corporate real estate asset management what
ultimately
real
project
well-intended projects aimed at enhancing corporate
other
of
management
Yet much of the literature of corporate
estate function.
that
stem
which demand immediate management attention.
The
to
which
frequently
(such as emergency roof repairs,
behind-schedule construction,
the
(35%)
(32%). Among secondary bases for real estate
unplanned events or occurrences
etc.)
Operations were cited
will not be real
110
property
recruiting
and
It may be argued
projects,
but
rather an improved real property process that will help American
business turn the corner.
How,
many
then,
can the real property process be improved?
organizations
computer
option
what
may
be needed
is
not
yet
For
another
or new financing acronym but instead
a
solid
grounding in general management principles, such as:
o
Cost Accounting
o
o
o
Management reporting
Long range planning
Inventory and control
o
o
o
Management by objective
Personnel management
Risk Analysis
To be sure, the business of corporate real estate will remain
However,
corporate real estate.
many useful management
tools
decision-making models may be borrowed from the traditional
and
management
estate
the
real
function,
a
greater understanding of these areas
will
addition to
In
disciplines.
enhancing
allow for a greater understanding of the corporation as
also
whole
--
perhaps
one
of
the
most
important
corporate real estate-decision maker can have.
that
tools
The HRE
a
a
study,
in noting that most recruiting for the real estate staff is done
within
it
the company itself,
appears,
often
values
points out that "senior management,
knowledge
of
overall
corporate
objectives, a solid reputation as a team player, and established
associations
with
the firm's other executives more
estate expertise".
111
than
real
3. The Future of Corporate Real Estate Asset Management:
Beyond
of
the level of the individual organizations and
information
needs and general management,
issue
of
corporate real estate as a
field
of
management.
approach
lies the
separate
and
recognized
to managing real estate assets which is found in
is perhaps indicative of the
today
corporations
fact that primary contributions to the field to
from
the
have
come
industry practitioners and
from
primarily
empirical
theories.
While
and
anecdotal,
thus
lacking
tend
this new discipline.
their
professional
to
be
a large number professional organizations and
and capture the latent market,
in
date
well-grounded
challenge
their magazine publishing arms have risen to meet the
asset
of
evolution
for the better part, uncharted may stem
appear unorganized and,
enlarge
many
That this new area should
this field as an emrging discipline.
business
larger
company-specific
and
The inconsistent
issues
real
While developers in soft markets seek new
estate management,
and architects
in facility management,
role
and
a
managers seek to enlarge their
facility
management,
none can claim sole ownership of
none
can claim to be heir apparent
seek
to
cadre
of
role
in
to
the
emerging discipline of corporate real estate asset management.
The question remains,
however,
why hasn't a well recognized
body of knowledge and theory evolved?
question are likely to be offered.
the
style
any
entrepreneurial
Several answers to
First,
some will say that
instinct and seat-of-the-pants
management
of the real estate industry does not lend itself well
kind of formal knowledge base.
112
this
Others may argue that
to
the
the
number
of
differences
in
activities,
priorities,
and
approaches between corporate real estate entities prohibits
the
development
of a common body of knowledge.
a. A Developing Field of Management:
A
more compelling argument may be found in the
is often bestowed upon real estate
that
status
corporatic ns.
"step-child"
groups
within
While some of the high-finance and ribbon-cutting
activities of development and new construction are more prone to
recognitic n
and
glamourous
duties
management ,
furniture inventory,
perhaps prestige,
services
--
valued.
Although
on
the
with
caliber people.
real
estate
staff
were
over managers or
As Holleran points out,
often had little or no
for
tenant
many
never
were
other
years
considered
inordinately
less-than-top
"In years past,
stature
selected
from the
ranks
of
within
relatively
whose careers had come to a dead end."
managers
maintenance
review,
property tax
less
real
the
because real estate was not considered significant.
were
see Yee 1986.).
also
--
estate
and thus departments
passed
executives
corporation
Many
real
the situation is changing,
destinations
populated
estate
corporate
and
continue to be under-recognized and at times under-
positions
"career"
of
the less visible
low-level
(Holleran 1987.
Such a situation is not likely to
breed
dynamic new, management thinking.
The
low
priority
status attached to the
real
estate
facilities
functions within the corporation can also been
in
management
the
prescribes
consulting
sector
which,
state-of-the-art management practices
113
and
found
presumably,
to
corporate
America.
A
(members
review
of
University)
and
the
of
37
top
Management
management
Consulting
consulting
Club
of
firms
Harvard
showed that despite claims to be offering strategic
progressive
consulting
in
all
management
dimensions,
consulting services for corporate real estate are never offered.
During
the
summer
of 1985,
the
members
Consulting Club were surveyed and asked,
describe,
their
in
own
words,
their
of
the
Management
among other things, to
by
business
type
of
consulting work, type of client, and current areas of expansion.
(Management Consulting Club of Harvard University 1986).
responses --
37
Out of
ranging from a few paragraphs to a few pages --
the activities of corporate real estate,
facilities management,
building operations, corporate space planning, or physical plant
management were never mentioned or even alluded to.
Commercial
real estate and construction service were referenced by one firm
client industries but the in-house management
as
and land ---
of
buildings
which is required by all companies in all industries
was never addressed.
Even
if
management
corporate real estate is considered
concern,
it
is
that
suprising
a
"secondary"
the
management
consulting sector has not been quicker to not address it.
finance,
the broad fields of strategic management,
organizational
information
many
firms
productivity,
development,
systems
marketing,
continue to be the
and
consulting
While
operations,
management
mainstays,
are branching into well-defined sub-fields such
telecommunications,
R
&
D
management,
as
policy
development, mergers and acquistions, management education, etc.
114
b. An Emerging Academic Discipline:
If
corporate
world
of
real estate is considered a step-child in
business,
education.
The
it is an orphan in the world
curriculum
cirriculum
or
if any,
representation in
research.
A
and Professional Schools,
Tuck;
none.
none.
is the same --
perspective
1987) bears this out:
Stanford;
two.
the
two
Wharton;
courses,
one
In nearly all cases, the
Rarely
financing and investment.
specific
course
(according
is
the
the
scope
At Columbia,
which
the corporation taken and rarely is
of
business
University of Chicago;
beyond development or investment concerns.
offers
of
and
America's Best Colleges
one course. Harvard; two.
Sloan;
focus
review
of the nation's top ten business schools
to a rating by U.S. News & World Report;
course.
business
management of an organization's buildings
land receives very little,
school
of
the
that
it is clearly stated
the
studies are in preparation for "careers in real estate divisions
construction
of commercial banks and insurance companies and in
and
In Stanford,
development firms."
Development
of
real property --
about
and trust
estates"
These
states
and "Estate Planning" are
Space"
"Commercial
courses in
but rather "outer space"
not
and
talking
"personal
funds.
findings are consistent with findings by Holleran
that
most university courses "have a
who
limited
somewhat
applicability to the corporate real estate operation, as most of
the
programs are heavily oriented toward finance ...
brokerage and real estate development."
Nearly
all
at
(Holleran 1987).
business school programs break down into
115
aimed
1)
the
Core
curriculum and 2) Specialities
property
offered
is
found
or
Concentrations.
at neither of these levels but
is
as an elective or "other" course at the same
such courses
as Agribusiness,
Tax Policy,
Real
instead
level
as
Futures Markets, and
Strategic Management in Health Care.
Business
exposure
argued,
to
aim
to provide a
rich
and
well-rounded
the many elements of modern business.
then,
business
found
schools
that
all
concerns;
It may
organizations share a set
of
be
common
a set of common denominators which
can
be
in any organization regardless of the product or service.
They are: People, Places, Information, and Money.
That is, some
group of people must come together with a common objective under
some
roof or at some location to exchange information
kind
for
the
ultimate
purpose
of
economic
of
some
exchange
or
addressed
in
compensation of effort.
We
know that the management of people is well
business
schools under the headings of human
relations,
general
organizational
represented
behavior,
etc.
personnel
The
management
management,
finance,
economics
of information is a fast
and hot topic in business school with courses
decision
management information
science,
labor
Money management is also
within the disciplines of
accounting.
area
management,
resources,
well
and
growing
offered
in
operations
systems,
research, organizational communications, decision modeling, etc.
To
be
the
sure,
formal field of
facility
management
least some visibility in some universities
gaining
at
Auburn,
Texas
A
&
architectural schools
M,
Michigan
State)
usually
(Official Statement on Facility
116
is
(Cornell,
within
the
Managment
by
IFMA,
1986).
But
while some of the hands-on
and
trade-
specific activities involved with facilities management may seem
appropriate
for
these
curriculums,
developing
the
more
comprehensive field of corporate real estate asset managament in
professional
teaching
architectural
the
field
engineering schools
schools makes no
more
sense
of management information systems
for computer science.
than
out
That corporate
of
real
estate should recieve so little attention in business schools is
revealing since they all claim to be providing a solid grounding
in
the full range of the basic business fundamentals.
results
this
of
survey,
and
others,
And the
show
clearly
buildings and land represent a substantial
company's
that
a
corporate
asset and a vast management effort.
But
the most telling evidence of the
perhaps
low
priority
with which both business and schools together treat real
is
estate
found in the executive education programs that are offered in
universities today.
major
school
the
do not address
curriculum,
buildings,
space,
These programs,
or land.
real
business
like the
estate,
facilities,
Most revealing of all, however, is
It is reasonable to
enrollment in these programs.
assume
that a corporation's decision to take a manager out of his daily
responsibilities
and
subsidize
a
several
month
period
of
training and non-productive time to the firm is an indication of
that
manager's perceived value or importance to
also
seems
programs are,
in
the
reasonable
to assume that managers
the
sent
firm.
to
It
such
for the most part, being prepared for upper slots
organization
and that their current positions
117
can
be
considered
as
somewhere on the track to
the
top.
Thus,
if
corporate real estate managers are to be considered as important
to the firm and on the legitimate corporate career path then
equal
number
executive
of
these
managers
should
be
found
an
attending
education programs as other corporate line and
staff
managers.
A
review of the enrollment for the past
Sloan
out
1100 attendees in the last 30 classes there
two "Contruction Managers" and one "Manager of
Planning".
It
should be noted,
also,
that the
have
not
been
Facilities
construction
managers were from a mining company and an oil company and
may
MIT
School Executive Education Program reveals the following:
of
only
15 years at the
thus
have necessarily been involved in the construction
buildings.
That
facilities
the
managers of corporate
real
estate
of
and
are not selected for such programs seems evident
of
the lower priority in which they are held by the organization.
4.
Real Estate and the Corporate Mission:
Beyond Deal-Making and Towards a Strategic Approach:
What appears to be lacking --
business
approach
strategic
to
is
a
well-organized
and
comprehensive
managing a corporation's real estate
assets
--
a
approach that begins to provide a basic framework for
its
connecting
repair,
--
itself
both in business schools and in
many elements
leasing,
housekeeping
(physical plant
planning,
space
and tenant services,
furniture inventory,
maintenance
project
management,
development and acquisition,
capital budgeting, etc.);
an approach for
prioritizing real estate demands and guiding overall policy
118
and
and
direction; and an approach that can inform, support, and improve
the field today.
the actual decision-making process in
universal
approach is not aimed towards developing
an
Such
strategy
or
uniform
real
is
decision-making
As
solutions.
estate
There
all.
methods for use by
generic
in
shown
the
by
most likely to driven
the
are
no
survey,
operational
concerns of the overall corporation and these concerns will vary
The
considerably.
directly
corporate
larger
the
from
real estate mission
corporate
is
derived
seems
It
mission.
then, to prescribe blanket real estate solutions,
unreasonable,
such as reorganization into a profit center,
without a
greater
of the posture or position of the organization in
understanding
question.
seems more likely,
It
for companies
on the other hand,
to
pursue strategic real estate responses which are in concert with
the
corporate space needs and
existing
For example,
market opportunities.
"high
transaction"
industries
might pursue landbanking,
Older
more
established
existing
real
estate
young, high growth firms in
and "hot" real
estate
markets
equity-leasing, or joint partnership.
companies
in
the
"low
transaction"
industries and "cold" markets may instead concentrate on keeping
operating
and
occupancy costs down.
stragetic responses --
The full range
area for future research in the field.
the
such
together with the methods for evaluating,
selecting, implementing and monitoring them --
making domain,
of
represents a rich
Mapping out the decision
positioning the decision maker,
and
evaluating
strategic alternatives might be one of many techniques that
can be developed.
119
In
evaluating the future of the corporate real estate
field of management,
evolution
of
business
a
it may be worth considering the historical
strategic
activity.
as
management
into
a
well-recognized
Strategic management came into
popularity
during the early 70's and reached its peak during the early 80's
by
introducing
business
a formal,
strategy.
With
advent
the
portfolio
matrices,
the
business
function and profession.
(Horwitch
a whole new consulting base,
schools,
of
to
and market differentiation techniques
strategic business units,
came
and analytical side
systematic,
and a new management
popularity in
1987).
At
under
and
its
peak,
however,
strategic management began to
attack and doubts appeared as to the
fundamental
worth
of the approach.
influence
long-run
At the crux
was the issue of developing strategy
criticisms
come
of
separate
the
from
operations.
Decisions made from detached and abstract strategic
management
models
were
strategic venturism.
(e.g.
field
the
alway
reality.
in
successful
and purpose became less clear with
mission
Corporate
not
(Horwitch 1987).
Peters & Waterman,
the
new
Subsequent literature in
Excellence,
In Search of
1984) advised corporations to "stick to what you know best".
By
evolving
need
management
is
into a recognized management activity which stands
in
comparison,
of
a
development
the
more
corporate
formal
and
real estate asset
systematic
approach.
of such an approach it may be helpful
to
In
the
consider
evolution of strategic management and avoid evolving into a
discipline "unto itself".
The corporate mission and
120
operation
must
be the backbone behind any set of management principles or
theories
which
are
developed
for
corporate
real
estate
management.
What
does the future of this emerging management
look like?
moving
is
Ultimately,
effective real estate management means
beyond reactive and decentralized decision-making
fragmented
across
comprehensive,
is
discipline
well
towards
a
proactive,
and portfolio-wide decision-making process which
supported by adequate and timely information
and
the
of upper-management.
commitment
beyond the dimensions of general management discussed
Moving
earlier,
the organization
which
the
formal
field
of
corporate
real
estate
asset
management will be concerned with such areas as:
o
o
Organizational Strategy (for real estate departments)
Fixed Asset Investment Strategy
o
Corporate Space Management and Planning
o
Life-Cycle Physical Management of Buildings
o
o
o
o
Real Estate Accounting and Reporting
Work Poductivity and the Physical Environment
Buildings Operations Management
Strategic Acquisition, Development and Disposition
With the successful integration of such concerns
with
sound
management practices and reliable
decision-support
systems
--
--
together
information
the corporate real estate
and
manager
can develop a pro-active approach which involves:
1)
Maintaining up to date and exact knowledge of all buildings,
land, leases, and physical assets.
2)
Establishing real property strategy and operational
priorities for guiding ongoing real property decisions
and policy within the organization.
3)
Knowing what management tools are available for evaluating
and guiding real property performance.
121
4)
Knowing when and where to deploy management tools
decisions.
estate
kinds of real
Eventually,
for what
a thorough understanding of the entire range
of
real estate tools and methods available to the decision-maker --
in
structures,
administrative
systems,
organizational
procedures,
information and reporting
structures,
decision-support
etc.
--
together
appropriateness
ultimately
-
deal
of alternative
form
the
with
technologies,
thorough
a
analytical models,
understanding
and consequences of deploying such
represent
the
draft
first
of
Corporate Real Estate".
*
*
122
*
"The
tools,
Principles
of
may
of
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1986.
Thompson,
Kip G.
(1986), "Corporate Real Estate Strategies for
Structuring
Development
Joint
Ventures,"
Master's
Thesis,
Department of Architecture, MIT, Cambridge, Massachusetts.
Urbanczyk,
Jim
(1984),
"Choosing a Computerized
System,"
Journal
of Property Management
November
1984.
Van
Joint
Merkensteijn,
Venture
with
Eric C.
(1986),
Maintenance
/
December
"Is Facilities Planning
Senior Management?"
Facilities
Design
a
&
Management, October 1986. pp.88-89.
in
(1987),
"Executive Level Decision-Making
Veale,
Peter
R.
Managing for the
Future?",
Working
Corporate
Real
Property:
paper
for
the Laboratory of Architecture
and
Planning,
MIT,
Cambridge, Massachusetts.
Wald,
Matthew L.
(1985), "The Smart Building," Commercial Real
Estate Report,
The New York Times,
May 12,
1985.
Section 12.
pp.1, 59-60.
Wardrep,
Bruce N.,
Ph.D.
(1985),
"A Pilot Study:
Unconsolidated
Subsidiaries for Real Estate Holdings",
Industrial Development,
November - December 1985, Vol.154, No. 6, pp. 17-23.
Wilbur, Bernard F.
(1987),
comments during November 18,
1986
Facilities' fourth annual real estate roundtable, published in
"Does Upper Management Care About Its Real Estate Department?",
Facilities Design & Management, February 1987. pp.68-72.
"The Corporate Building
Yee, Roger
(1986),
Design & Realty, March 1986. pp.44-46.
Team,"
Corporate
"The 1986 Corporate Real Estate Executive
Yee, Roger
(1986),
Survey," Corporate Design & Realty, February 1986. pp.56-58.
"Differentiating Between ComputerS.
(1983),
Young, Micheal
Based Property Management and Asset Management Systems," Journal
of Property Management September / October 1983.
Zahn, William F. (1987), "The Effect of Real Estate Decisions on
Company Performance:
A User's Perspective," The Real Estate
Finance Journal, Spring 1987. pp.68-73.
(1984),
"Real Estate:
Zerbst, Robert H.;
Cambon,
Barbara R.
Historical Returns and Risks," Journal of Portfolio Management,
Spring 1984.
127
APPENDIX A:
QUESTIONNAIRE AND COVER LETTER
128
Massachusetts Institute of Technology
Laboratory of Architecture and Planning
Spring 1987
SURVEY OF CO©RIPORATE REAL ES§TATE
ASSET MANAGEMEPT
Background:
1. Your company's (orparent company's) principal business activities are:
(1=primary or sole activity, 2=secondary activity, etc.)
Heavy manufacturing
Light manufacturing
Retail/wholesale
Banking/financefinsurance
Transportation
Utilities
Forestry/mining/construction
Other (please specify)
2. For the last fiscal year, what was your company's sales volume or revenue from operations
(in $ millions)?
.
__250
Under 250
- 500
500 - 1000
1000-5000
Over 5000
3. At the close of the last fiscal year, what were your company's total assets (in $ millions)
Under 250
250-500
500 - 1000
1000-5000
Over 5000
4. Approximately how many square feet of building space does your company own or lease?
under
500,000 500,000 1 million
1 -10
10-25
over 25
million
million
million
uncertain
Owned and occupied
Owned and leased out
Leased
5. Approximately how many sites or facilities does your real estate portfolio include?
Under 25
25-50
50-100
100-500
500-1000
1000 -5000
Over 5000
Uncertain
6. What was the acquisition (historical) cost of your company's real estate (in $ millions)?
Over 1000
500-1000
50- 100
Under 50
250 -500
100-250
129
Uncertain
7. According to your estimate, what would be the current fair market value of the real estate owned
by your company and the value of its leaseholds (in $ millions)?
Leaseholds
Property owned
Over 5000
1000-5000
500- 1000
250 - 500
100-250
Under 100
Over 5000
1000-5000
500 - 1000
250 - 500
100 - 250
Under 100
Uncertain
Uncertain
Organization:
8. Does your company have a formally organized real estate unit?
a.
No
Yes
(if you answer no, please go to question 13).
b. How long has such a unit been in existence?
10 - 20 years
Less than 5 years
5 - 10 years
c. Is the unit now a
More than 20 years
Department of the company
Subsidiary of a parent company
9. What is the title of the real estate unit head?
10. The real estate unit reports to the company
Treasurer or controller
Division vice president
Other (please specify)
President
Group senior or executive vice president
General counsel
11. In which of the following real estate activities does your company's real estate unit engage?
(1=primary or sole activity, 2=secondary activity, etc.)
Leasing
Acquisitions
Property management
Divestiture
Development
130
12. Who is responsible for the following functions? (where applicable,please check more than one
line perfunction).
Real estate
Line operating
Other staff
Outside
unit
units
departments
Consultants
Real estate recordkeeping
Property tax evaluation
Capital budgeting for
real estate
Financial analysis of prop-osed real estate projects
Identification of new real
estate investment needs
Site selection
Acquisition of new
property
Identification of
surplus property
Disposal of surplus
property
Lease approval
Design decisions
Construction supervision
Property management
13. Do the real estate acquisition, development and disposition functions in your company generally
report to the same vice president or director as the property or facility management functions?
Yes
_
No
(if you answer yes, please go to question 15)
a. If not, do you feel there is adequate communication, support and coordination between
these two groups?
Yes
No
Uncertain
Real Estate Performance and Evaluation:
14. On what basis does your company evaluate its real estate activities?
Cost center within operating division
Cost center within real estate unit
Profit center within operating division
Profit center within real estate unit
Depends on the property
No separate evaluation for real estate
a. If you manage your real estate for profit, what are some or all of your basic rationales or
motivations behind this approach? (please check those which apply)
Increased efficiency of real estate resources
Generate revenue for overall corporate purposes
Generate revenue for other real estate requirements
Investment of idle corporate funds
Induce competition with the marketplace
Induce competition among properties within the company's portfolio
More effective evaluation of individual property performance
Tax purposes
other
131
b. If you manage your real estate as a cost center, what are some or all of your basic rationales
or motivations behind this approach? (pleasecheck those which apply)
Ease of use
Facilitate cost recovery through Cost of Goods Sold (for company's main products)
Real estate units not sufficiently profitable by nature
Unavailable management expertise/manpower to manage for profit
Equal allocation of real estate expense across line operations (through overheads)
"Not in the real estate business"
Top management resistance
Other
15. Does your company charge internal rents to its own departments?
Yes
No
a. If yes, on what basis?
Fair market rent
___
Cost recovery
___
Differential pricing depending on type of space occupant
Other (please specify)
16. How does your company account for real estate operations?
In a pool
By category of property
-
Property by property
No separate accounting for real estate
17. Does your company maintain (please check)
A real property inventory
A separate real property management information system (MIS)
a. If you do not maintain an inventory or MIS for your company's real estate, what are the
primary barriers or obstacles for developing and operating such systems in your organization?
(please check those which apply)
Not enough funding or manpower
Difficult to effect change in the organization
Not cost justifiable
Not enough power vested in real estate function
Real estate functions/responsibilities too decentralized
Resistance to new procedures or methodology by real estate staff
Resistance to new information technologies (i.e. computers) by real estate staff
Unfamiliar with available inventory/MIS systems for real estate
Cannot convince top management
Other
18. Real estate investments in your company are analyzed according to (1=primarymeans of
analysis, 2=secondary,etc.)
Pay back period
Net present value (before tax)
Rate of return on investment
Return on assets
Net present value (after tax)
Return on net assets
19. How does the after-tax return on real estate (net income plus appreciation) compare with your
company's overall return?
Real estate returns are generally lower
We do not calculate real estate returns
Real estate returns are generally higher
Real estate returns are generally the same
132
Real Estate Decision Making:
20. Approximately how many hours a week, on average, is the senior real estate executive in your
organization likely to spend on
Leasing negotiation
Project review of in-progress construction and development
Review and analysis of proposed real estate investment alternatives
Site selection and acquisition
Disposition of surplus properties
Facility or property management issues for existing building stock
Legal issues
Planning and analysis of the organization's current and future space needs
Review and preparation of capital /annual operating budgeting reports and requests
Administration of real estate department
Liaison with other departments (tenants) in the organization
Reporting to senior management
Other (pleasespecify)
Other (pleasespecify)
Other (please speciy)
21. At the level of the senior real estate executive in your organization, decision-making for real
property is likely to based upon (or driven by) the following concerns ( 1=primarybasisfor
decisions, 2=secondary,etc.)
Investment or profit potential -- e.g. to increase return on investment; to
enhance value of fxed assets; improve upon financialposition of overall
portfolio; etc.
Occupancy cost -- e.g. to reduce or limit space overhead; operating
expenses, debt service, lease payments, and overall corporate occupancy
costs, etc.
Operational factors -- e.g. in response to new space needs, program
requirements, relocationdecisions, new office technologies, etc. deriving
from the mission of the company
Situational factors -- e.g. in response to existing demands or concerns
which stem from events or occurences (such as emergency roof repairs,
behind-scheduleconstruction,lease expirations, labor strikes, etc.) which
demand immediate management attention
Other factors -- e.g. to show next quarterearnings,protect against
takeover bids, community relations,shield taxable income, etc.
(pleasespecify )
22. In evaluating your company's real estate needs and options -- including lease-buy analysis, pay
back periods for development and construction, major facility renewal proposals, lease terms, etc. -on what "time horizon" or planning periods do you typically base your analysis?
Often
Sometimes Seldom
1 - 2 years
2-5 years
5 - 10 years
10 - 15 years
15 - 25 years
25 - 50 years
Other
133
Never
23. Does your company employ computer programs for decision making in
Often
Sometimes Seldom
Never
Real estate investment analysis
CAD-based facility management/ spaceplanning
CAD-based drafting and design
Project control and scheduling
Maintenance managment
Real estate inventory and tracking
Other
24. Does your company have an ongoing system (manual or otherwise) for maintaining information
and reporting on
Yes
Utilization and current capacity of existing properties
Lease commitments and action dates
Identification and review of surplus or under-utilized properties
Tracking costs per-sq-ft by facility
Identification of significant changes in market value of
real estate holdings (market appraisal, net realizable value, etc.)
Identification of significant opportunities for improved financing
vehicles (equity-leases, master limited partnerships, sale-lease back)
Physical condition and performance of buildings
a. Is this information analyzed and prepared for top management review?
No
Yes (quarterly)
___
Yes (as necessary)
Yes (semi-annually)
Yes (annually)
25. How often does the president or CEO get involved in corporate real estate decisions?
Often
Sometimes
___
Seldom
Never
26. Final decisions on real estate financing are made by the company
President
Treasurer/controller
__
__
Real estate unit
Other (Pleasespecify)
Line operating manager
27. Are duties, responsibilities or performance criteria defined, through departmental policy or
procedure, for the following areas?
As necessary
General policies Standards/formulas/ Discretion of
and procedures thresholds/hurdles line unit
Property acquisition
Property disposition
Development projects
Lease commitments
Space planning/allocation
Preventive maintenance
Capital budgeting
Energy use
Space overhead accounting
134
No
28. Please evaluate the following statements
(A= strongly agree, B= mostly agree, C= mostly disagree, D= strongly disagree, E= no comment)
a. Uncertainty and unpredictability of future real estate markets, economic
conditions, and organizational space needs greatly reduces my capacity to
effect optimal real estate solutions.
b. Diversifying real property portfolios -- by lease/own ratios, lease term
and maturation, capital financing vehicle, etc. -- can significantly reduce
financial risk.
c. I have regular exposure to, and a firm understanding of, overall corporate
strategic plans and objectives from which to base real property decisions.
d. Future flexibility -- in terms of commitments, location, building design
and use, etc. -- is a top priority in evaluating real estate alternatives.
e. I do not have sufficient information or methodology available to clearly
evaluate the physical performance or use effectiveness of my buildings.
f. Real property decision-making, on average, plays a critical part in the
overall performance of my organization.
g. Responsibility for real estate assets are delegated too far down in my
organization.
Thank you for completing this survey. We would welcome any additional comments that you feel
might be useful to our study. Please return the questionnaire in the enclosed envelope to:
The Laboratory of Architecture and Planning
Massachusetts Institute of Technology
77 Massachusetts Avenue, Room 4-209
Cambridge, Massachusetts 02139
If you would like a copy of the results of this survey, please provide the following information:
Name & title
Institution
Address
If you would be willing to answer additional questions, please provide your telephone
number.
(telephone number)
135
MTLABORATORY
OFARCHITECTURE
ANDPLANNING
MASSACHUSETTS INSTITUTEOF TECHNOLOGY,
77 MASSACHUSETTS
AVENUE, CAMBRIDGE, MASSACHUSETTS
02139
ROOM 4-209 (617) 253-1350
June 1, 1987
Dear Colleague:
We at the Laboratory of Architecture and Planning at MIT have been
investigating the management of real estate assets in corporate
America. While an organization's portfolio of buildings and land
represents a sizeable investment and ongoing concern, the actual
day-to-day management of these assets in corporations today remains
largely under-researched.
This survey is being conducted in cooperation with the International
Association of Corporate Real Estate Executives (NACORE) and follows
up a similar survey conducted by Harvard Real Estate, Inc. in 1981
entitled "Corporate Real Estate Asset Management in the United
States." The results of this survey will complement our research at
MIT which is aimed towards gaining a greater understanding of the
current practices and attitudes among corporate real estate decisionmakers today. We ask, in the spirit of cooperation between academia
and practitioners, that you complete the survey and return it in the
envelope provided, before July 1st. Your answers and remarks will be
held in strict confidence; all results will be reported in a consolidated
and anonymous fashion.
If you would like an advance copy of the results of this survey, please
include your address in the space provided. Our thanks in advance.
Sincerely,
Michael L. Joroff
Director
Enclosure
136
APPENDIX B:
STATISTICAL SUMMARY OF SURVEY RESULTS
137
OFSURVEY
RESPONDENTS
RUSINESS
ACTIVITY
PERCENT
FREQUENCY
PROFIT
ORNON-PROFIT
10
NOWN-FT..............
96.51
274
PRIFIT..................
TOTAL...................
284
100.0%
MANUFACTURING
HEAVY
16.21
245
NO VOSWER...............
12.01
34
PRIMARY.................
SECONDARY............... 1.80
284
100.0%
TOTAL...................
MANUFACTURING
LIGHT
80.60
229
NOANSWER...............
13.4'
38
PRIIARY.................
5.61
16
SECONDARY...............
THIRD................... .41
RESPONDENTS
OFSURVEY
DEMOGRAPHICS
PORTFOLIO
BUILDING
PERCENT
FRECJENCY
(IN
SALES
VOLUME
THOUSANDS)
NOANSWER.............
4.20
e..
250..............
UNDER
36
250-500................
................
50 00
1000-5000...............
3VER
5000...............
12.7.
.5.11
29.901
20.12
204 100.1
TOTAL...................
(IN
ASSETS
TOTAL
COMPANY
THOUSANDS)
NCANSWER...............
250...............
UNDER
250-500.................
500-1000................
1000-5000...............
OVER5000...............
8.01
11.30
102
23.900
30.60
100.01
TOTAL..................
284 100.00
TOTAL...................
FORESTRY/MINING/CONSTRUC
TION
92.32
262
NO ANSWER...............
11
3.92
PRIMARY.................
11
SECONDARY............... 3.9
284 100.01
TOTAL...................
BANKING/FINANCIAL/INSURA
NCE
77.50
220
NOANSWER...............
19.71
56
PRIMARY.................
1.81
5
SECONDARY...............
1.11
3
THIRD...................
284 100.01
TOTAL...................
TRANSPORTATION
NOANSWER...............
PRIMARY.................
SECONDARY...............
264
17
93.01
6.01
1.11
TOTAL...................
284
100.01
UTILITIES
91.21
259
NOANSWER...............
8.51
24
PRIMARY.................
.41
1
SECONDARY...............
284 100.01
TOTAL...................
ACTIVITY
BUSINESS
OTHER
73.21
208
NOANSWER...............
20.81
59
PRIMARY.................
16
5.60
SECONDARY...............
THIRD................... .41
284 100.01
TOTAL...................
2B4
UNIVERSITY/COLLEGE
284 100.01
NOANSWER...............
TOTAL...................
204
100.00
HOSPITAL/HEALTHCARE
100.01
284
NOANSWER...............
TOTAL...................
284
100.01
FOUNDATION
NOANSWER..........
....
284
100.00
TOTAL...................
284
100.01
AND
OCCUPIED
SI/FT OWNED
NOANSWER...............
500,000...........
UNDER
TO1 MILLION....
500,000
1 TO 10MILLION.........
10TO 25MILLION........
OVER25MILLION.........
OVER10
(NPONLY)
MILLION..............
UNCERTAIN...............
13.41
33.51
1.80
3.900
.41
4.21
100-01
LEASED
AND
SI/FT OWNED
OUT
NOANSWER...............
500,000...........
UNDER
TO I MILLION....
500,000
I TO10MILLION.........
10 TO25MILLION........
OVER
25MILLION.........
(NPONLY)
OVER10
49.30
31.70
4.60
8.01
1.10
.4%
.41
MILLION.........
UNCERTAIN............... 3.91
100.01
TOTAL...................
LEASED
SO/FT
54
NOANSWER....,..........
74
S00,000...........
UNDER
TO I MILLION....39
500,000
75
1 TO10 MILLION..........
20
10TO 25MILLION........
8
OVER
25MILLION.........
OVER10
(NPONLY)
1
MILLION..............
13
UNCERTAIN...............
TOTAL...................
284
OF
NUMBER
SITES/FACILITIES
NOANSWER...............
2
37
UNDER
25................
31
25-50...................
37
50-100..................
100
100-500.................
30
500-1000................
37
1000-5000...............
OVER5000...............
UNCERTAIN...............
19.00
26.11
13.71
26.41
7.01
2.81
.41
4.61
100.0%
.71
13.00
10.90
13.00
35.20
10.60
13.00
3.20
.40
284 100.00
TOTAL...................
AGENCY
PUBLIC
96.80
275
NOANSWER..........
0.20
9
PRIMARY.................
100-00
284
TOTAL...................
14.41
21.51
TOTAL...................
138
.01
:0.51
14.00
.001.
TOTAL...................
294
4.91
284 100.00
TOTAL...................
RETAIL/WHOLESALE
81.01
230
NOANSWER...............
16.92
48
PRIMARY.................
SECONDARY............... 1.80
THIRD................... .42
ACQUISITION
COSTOFREAL
ESTATE
(INTHOUSANDS)
NC ANSER..........
20
OVER100 ..........
O..........
......
27
'50-500...........
100-250...........
34
50-100............
42
UNDER
50................
UNCEPTAIN
..........
106
MARKET
VALUE
OFOWNED
REAL
ESTATE
(IN
THOUSANDS)
38
OVER
5000...............
22
1000-5000...............
36
500-1000............. 29
30
250-500.................
30
100-250.................
62
100...............
UNDER
NO ANSWER..........
29
UNCERTAIN...............
12.41
7.70
12.71
10.2%
12.40
10.20
284
TOTAL...................
NARKET
VALUE
OF
LEASEHOLDS
(IN
THOUSANDS)
NO ANSWER...............70
24.61
.21.
5000...............
OVER
12
1000-5000...............
4.91
14
500-1000................
5.60
250-500.................
4.
1
...... 40
.00-250.....
71
25.00
100...............
UNDER
12.01
54
UNCERTAIN...............
100.01
284
TOTAL...................
OFSURVEY
RESPONDENTS
REAL
ESTATE
ORGANIZATION
FREOUENCY
PERCENT
UNIT
FORMAL
REALESTATE
IN PLACE
NOANSWER...............
1.41
4
244
85.91
YES.....................
NO......................
36
12.70
LEASING
ACTIVITY:
BY
REAL
ESTATE
UNIT
NOANSWER...............
65
PRIMARY
....--.......
168
SECONDARY...............
46
THIRD...................
4
FIFTH...................
1
TOTAL.......
..... 284
22.91
59.21
16.21
1.41
.41
100.01
ACBUISTIONS
ACTIVITY:
BY
UNIT
REAL
ESTATE
NOANSWER...............
88
PRIMARY
-----...........
128
SECONDARY...............
46
THIRD.................
15
FOURTH..................
5
FIFTH...................
2
31.01
45.!1
16.21
5.31
1.81
.71
284 100.01
TOTAL...................
TOTAL................
100.01
STATUS
OFREAL
ESTATE
UIT
49
NOANSWER...............
DEPARTMENT
OFTHE
COMPANY..............
192
OFTHE
SUBSIDIARY
31
COMPANY..............
12
BOTH....................
DIVESTITURE
ACTIVITY:
BY
REAL
ESTATE
UNIT
NOANSWER...............
111
PRIMARY.................
97
SECONDARY...............
51
THIRD...................
7
FOURTH..................
11
FIFTH...................
7
284 100.0%
TOTAL...................
UNIT
AGEOFREALESTATE
41
NOANSWER...............
60
LESSTHAN5 YEARS.......
57
5-10YEARS..............
60
10-20YEARS............
MORE
THAN20YEARS......66
14.41
21.10
20.11
21.11
23.21
17.31
67.61
10.91
4.21
284
39.11
34.2
18.01
2.51
3.90
2.51
284 100.01
TOTAL...................
TOTAL...................
284
100.01
TOPRESIDENT
REPORTS
79.9%
227
NIANSWER...............
57
20.1%
YES.....................
BEVELOPENT
ACTIVITY:
BY
REAL
ESTATE
UNIT
NOANSWER...............
142
PRIMARY.................
89
SECONDARY...............
40
THIRD...................
7
FOURTH..................
2
FIFTH...................
4
284 100.01
TOTAL...................
REPORTS
TOSENIOR
BR
EZECVICEPRESIDENT
63.41
180
NOANSWER........,......
104
36.6%
YES.....................
50.01
31.31
14.11
2.51
.71
1.41
TOTAL...................
284
100.01
284 100.01
TOTAL...................
REPORTS
TOGENERAL
COUNSEL
276
97.21
NOANSWER...............
YES.....................
2.81
8
284 100.0%
TOTAL...................
REPORTS
TOTREASURER
OR
CONTROLLER
274
NCANSWER...............
96.51
3.51
10
YES.....................
PROPERTY
MANAGEMENT
ACTIVITY:
BYREAL
ESTATE
UNIT
NOANSWER...............
87
PRIMARY ........... 118
SECONDARY...............
63
THIRD...................
FOURTH..................
6
FIFTH...................
2
30.61
41.51
22.21
2.81
2.11
.71
TOTAL...................
100.00
284
REPORTS
TOSAME
VICE
PRESIDENT
0 .................... 7
2.51
1........................7
T 210
73.91
2.......................9w
67
23.61
100.00
284
TOTAL...................
REPORTS
TO DIVISION
VICE
PRESIDENT
88.41
NOANSWER...............
251
11.61
33
YES.....................
TOTAL...................
284
100.01
REPORTS
TOOTHER
245
NOANSWER...............
86.3%
YES.....................
39
13.71
ADEVUATE
COMMUNICATION
AND
COORDINATION
NO ANSWER...............
209
YES.....................
52
No......................
17
UNCERTAIN...............
6
73.61
18.31
6.01
2.11
TOTAL...................
100.01
284
TOTAL...................
100.00
100.01
TOTAL...................
284
139
284
- PART1
EVALUATION
AND
PERFORMANCE
ESTATE
REAL
FREQUENCY
PERCENT
COST
CENTER
IN OPERATING
DIVISION
NOANSWER...............
78.23
21.81
YES.......,.............
OF
EFFICIENCY
INCREASED
RESOURCES
NOANSWER...............
YES.....................
81.33
TOTAL...................
100.C
12.33
GENERATE
REVENUE:
OVERALL
CORPORATE
NEEDS
NOANSWER............ ..
YES.....................
74.63
25.43
TOTAL...................
100.03
TOTAL...................
100.01
PROFIT
CENTER
IN
OPERATING
DIVISION
NOANSWER...............
YES.....................
87.71
12.33
GENERATE
REVENUE:
OTHER
REAL
ESTATE
NEEDS
NOANSWER...............
YES.....................
91.51
8.51
TOTAL...................
100.03
TOTAL...................
100.01
TOTAL...................
COST
CENTER
IN REAL
ESTATE
UNIT
NOANSWER...............
YES.....................
100.01
87.73
PROFIT
CENTER
IN REAL
UNIT
ESTATE
NOANSWER...............
YES.....................
93.03
7.01
95.8%
NOANSWER...............
YES..................... 4.21
TOTAL...................
100.01
TOTAL...................
ONPROPERTY
DEPENDS
NOANSWER...............
YES.....................
86.61
13.41
98.21
1.81
TOTAL...................
100.03
INIUCE
COMPETITION
W/NARKETPLACE
NOANSWER...............
YES.....................
NO
SEPARATE
EVALUATION
NOANSWER...............
YES.....................
TOTAL...................
100.03
79.93
20.13
TOTAL...................
100.03
INDUCE
COMPETITION
AMONG
PROPERTIES
NOANSWER...............
YES,,,,,..............
98.62
1.41
TOTAL...................
100.03
INCOME
PRODUCING
OPERATING
(NON-PROF)
DIVISION
NOANSWER...............
YES.....................
TOTAL...................
INCOME
PRODUCING
REAL
(NON-PROF)
ESTATE
UNIT
NOANSWER...............
YES.....................
TOTAL...................
INVEST
IDLECORPORATE
FMDS
MORE
EFFECTIVE
EVALUATION
OFPROP
PERFORMANCE
NOANSWER...............
YES,,,,,..............
99.3%
.71
100.01
TOTAL...................
100.01
TOTAL...................
.0.0
100.03
OTHER
. . .. . . .. . .
93.71
NO
ANSWER.....
YES..................... E.31
TOTAL...................
100.01
COST
CENTER:
TOTAL
NOANSWER...............
68.31
29.21
OPS
OR RE...............
B0TH.................... 2.53
TOTAL...................
87.71
TAIPURPOSES
92.63
NOANSWER...............
YES,.......,............ 7.41
98.93
1.11
PROFIT
CENTER:
TOTAL
82.43
NOANSWER...............
15.11
CPSORRE...............
1.8
BOTH...................
3.00.................... .41
4.00.................... .41
TOTAL...................
100.01
100.03
140
100.0%
AND
EVALUATION
- PART2
PERFORMANCE
ESTATE
REAL
FREQ'ENCY
PERCENT
EASE
OFUSE
NOANSWER...............
YES.....................
250
34
8.03
12.01
...................
TOTAL
284
100.01
RECOVERY
COST
FACILITATE
THRUCOGS
NOANSWEP............... 98.7%
.
11.30
YES...................
TOTAL...................100.0%
REUNITNOTSUFFICIENTLY
PROFITABLE
NOANSWER............... 93.70
YES..................... 6.30
TOTAL...................100.00
MST
UNAVAILABLE
/ MANPOWER
EXPERTISE
NOANSWER............... 94.71
YES..................... 5.31
TOTAL...................100.0%
THRU
EWAL ALLOCATION
OVERHEADS
NO ANSWER............... 87.7%
YES..................... 12.30
ESTATE
PERFORMANCE
EVALUATION
- PART3
REAL
AND
FREQUENCY
PERCENT
ACCOUNTINS:
BY POOL
81.0%
230
N ANSWER...............
54
19.00
YES.....................
204 100.01
TOTAL...................
BYCATEGORY
ACCOUNTING:
OFPROPERTY
258
NCANSWER...............
YET ..... ..............
TOTAL...............
284
90.30
100.01.
TOTAL...................100.01
BY
PROPERTY
ACCOUNTING:
PROPERTY
40.9%
139
NOANSWER...............
145
YES.....................
NOTINREALESTATE
BUSINESS
NO ANSWER............... 72.20
YES..................... 27.0%
TOTAL...................
TOTAL...................100.00
TOPMANAGEMENT
RESISTANCE
NOANSWER...............
YES.....................
90.80
9.2%
TOTAL...................
100.01
OTHER
94.41
NOANSWER...............
YES..................... 5.60
2B4
100.00
NOSEPARATE
ACCOUNTING:
ACCOUNTING
FOR
REAL
ESTATE
76.80
219
NO ANSWER...............
66
23.21
YES.....................
2184 100.00
TOTAL...................
REAL
ESTATE
INVENTORY/MIS
IN
PLACE
20
NOANSWER...............
154
INPLACE.......
INVENTORY
45
MISINPLACE.............
57
BOTH....................
9.9%
54.21
10.80
20.10
TOTAL...................100.0%
TOTAL...................
INTERNAL
RENTS
CHARGED
NO ANSWER............... 1.80
YES..................... 67.3%
31.00
No....... ..............
TOTAL...................100.00
FAIRMARKET
RENT
NOANSWER............... 75.00
YES..................... 25.0%
TOTAL...................100.01
COSTRECOVERY
NOANSWER............... 63.0%
YES..................... 36.6%
2....................... .4%
TOTAL...................100.0%
DIFFERENTIAL
PRICING
BY
OCCUPANT
TYPE
NOANSWEP............... 91.91
YEE.....................
0.10
TOTAL...................
OTHER
NOANSWER............... 9S.4%
YES..................... 4.6%
TOTAL...................
141
284
100.00
REAL
ESTATE
PERFORMNCE
M EVALUATION
- PART4
FUNDING
/
INSUFFICIENT
HANPOWH
NOANSWER...............
YES.....................
251
88.41
11.61
TOTAL...................
2B4
100.0?
DIFFICULT
TOEFFECT
CHANGE
NOANSWER...............
YES.....................
273
11 8
96.11
.9?1
FREQ
UENCY
PERCENT
PERIOD
PAYBACK
NO ANSWER...............
172
60.61
YES.....................
49
17.31
.......................
51
10.01
3........................
3.21
9
4.......................2
.7%
6.............
......... 1
.41
TOTAL...................
284 100.0?
214 100.0?
TOTAL...................
NETPRESENT
VALUE
(BEFORE
TAO)
NO ANSWER...............
206
72.51
48
16.9%
YES.....................
7.41
21
2.......................
3... ...................
5
1.8
.71
4.......................
2
.......................
1
.41
6.......................
1
.41
NOTCOSTJUSTIFIABLE
88.01
250
NOANSWER...............
34
12.01
YES.....................
284 100.01
TOTAL...................
INSUFFICIENT
POWER
INREUNIT
VESTED
263
NOANSWER...............
YES.....................
21
92.61
7.41
TOTAL...................
100.0?
284
TOTAL...................
294
NETPRESENT
VALUE
(AFTER
TAO)
NOANSWER...............
179
65
YES.....................
35
2...............
3...............
2
4...............,... ..
1
1
.......
5..............
1
6.......................
TOO
FUNCTION
REALESTATE
DECENTRALIZED
94.71
269
NO ANSWER...............
5.3?
15
YES.....................
TOTAL...................
294
100.0%
RESISTANCE
TONEW
PROCEDURES
BYRE
STAFF
NOANSWER...............
YES.....................
280
4
98.61
1.41
TOTAL...................
284
100.01
TOTAL...................
TOTAL...................
RETURN
ONNETASSETS
239
NOANSWER...............
17
YES.....................
22
2.......................
4
3.......................
2
5.......................
284 100.01
TOTAL...................
277
7
97.5?
2.51
TOTAL...................
284
100.01
273
11
96.1?
3.91
100.0?
84.2?
6.01
7.71
1.41
.71
284
100.0?
TOTAL...................
DTER
NO ANSWER...............
YES.....................
284
284
100.0?
TOTAL...................
92.6?
7.41
TOP
CANNOT
CONVINCE
NANAGENENT
NOANSWER...............
YES.....................
100.01
RETURN
ONASSETS
75.71
NOANSWER...............
215
29
10.21
YES.......,.............
33
2....................... 11.61
4
1.41
3.......................
4.......................
3
1.1?
100.0?
284
TOTAL...................
263
21
63.01
22.91
12.31
.71
.4%
.41
.41
RATE
OFRETURN
ON
INVESTMENT
112
39.41
NOANSWER...............
47.2?
YES.....................
134
37
13.01
2.......................
3.......................
1
.41
TONEWINFO
RESISTANCE
TECHNOLOGY
BYRE
STAFF
99.61
283
NO ANSWER...............
.41
1
YES.....................
WITH
UNFAMILIAR
?ISIINV
AVAILABLE
SYSTENS
NOANSWER...............
YES.....................
284
100.0?
TOTAL...................
284 100.0%
142
RETURN
COMPARED
W/FIRNS
RETURN
OVERALL
NOANSWER...............
51
RERETURNS
HIGHER.......
59
RERETURNS
SAME.........
20
RERETURNS
LOWER........
33
DONOT
CALCULATE
RE
RETURNS..............
121
18.0?
20.8%
7.01
11.6?
TOTAL...................
100.01
204
42.61
OFNEWCONS/DEV
REVIEW
HOURS2 HRS/WEEK:PROJECT
NEGOTIATION
HOURSI HRS/WEEk:LEASE
Valid
Cue
Percent
Percent
Percent
ValueFrequency
Value Label
14
31
2
3
4
5
6
35
7
3
13
22
15
4
4.9
10.9
12.3
4.6
7.7
5.3
1.4
1.1
3.2
.4
4
2
8.1
.4
.7
2.1
1.4
.7
1
.4
98
34.5
23
1
2
12
15
20
25
30
TOTAL
6
284
ValueLabel
7.5
7.5
16.7 24.2
18.8 43.0
50.0
7.0
11.8 61.8
69.9
8.1
72.0
2.2
73.7
1.6
78.5
4.8
79.0
.5
12.4 91.4
.5 91.9
93.0
1.1
96.2
3.2
98.4
2.2
99.5
1.1
.5 100.0
MISSING
0
10
2
3
4
5
6
7
14
31
35
13
22
15
4
3
9
1
23
1
2
0
0
6
0
0
0
4
0
0
0
0
0
0
0
0
1
1
.4
20
2
117
.7
41.2
TOTAL
284
100.0
16
--
Valid
~~~~~~-
.-
12
3.00 ---------
21
4.00 -----------
22
2
1
7
2
17
0
1
0
0
1
0
0
2
1.00 -
----- :-----------~----
2.00 |-
-
--------
~~~
19.001
120.00
5.075
Maximua 30.000
7
1
10
12
9
1
7.7
2. 1
.4
6
6.00 |--
1
3
0
9
0
7.00 18.001-9.00 |
10.001|
11.00
0
13.00 .
3
137
24
16
8
Frequency
Histogram
Std Dev
5.189
Minimum
40
32
0.0
Cases 117
Missing
100.0
100.0
284
30
14.00
1
0
0
1
15.00
16.00
17.00
0
0
18.00
19.00
3
20.00 --
50
40
Minimum
0.0
Mean
Maniau
-
-
---
12.00
0
ValidCases
167
90.5
96.6
97.3
.7
98.0
.7
2.0 100.0
1.1
40.2 MISSING
1
3.646
20.000
24
0
16
Histogram
Frequency
Std Dev
3.700
Maximum 20.000
Cases
Valid
6.1
3.2
.4
.4
VALUE
0
3.610
22
6
4.00-----------------5.00 -
18.00 |
Std Dev
52.4
56.5
60.7
83.7
87.8
88.4
18
14.00
1
15.00
|
16.00
|17.00
1
4.114
17.7
4.1
12.2
15.0
4.1
.7
2.0
0.0 |----------1.00|----1-- -2.00 |3.00|- -
1
Frequency
Histogram
Mean
34.7
3.9
14.1
9.2
26
6
2.1
180 6.3
11
40
26
6
22
20
27.2
TOTAL
12.00 |-'
13.001:
10
7.5
40
15
20
5.00|----------6.00i-7.0018.00|9.00
|--:-----10.00
11.00 |
0
11
1
1.1
19.00
20.00 |-21.00 |
22.00 1
23.00 |
24.00 1
25.00 1-26.001
27.00 |
28.00 |
29.00 |
30.00 |
7.5
0
2
3
4
5
6
COUNT
0.0 |------
Cum
PercentPercent
100.0
VALUE
6
31
41
Value FrequencyPercent
ValueLabel
3.6
3.6
18.6 22.2
46.7
24.6
53.9
7.2
12.6 66.5
13.2 79.6
80.8
1.2
81.4
.6
85.6
4.2
86.8
1.2
10.2 97.0
.6 97.6
98.2
.6
.6
98.8
1.2 100.0
MISSING
100.0 100.0
2.00 1----------:----------------3.00 -----------:---4.00 1 ------5.00 --------------6.00 --.
7.00 --0.00 -------.
9.00
.
:--------------10.00 ---11.00
12.00 .
13.00
.
14.00
.
15.00 16.00 .
17.00 |.
0
Mean
--
14.4
4.2
7.4
7.7
.7
.4
1
13
--------- ~----
1.00--------- :
2.1
10.9
2.5
.7
6.0
.4
.4
12
VALUE
0.0
6
31
41
12
21
22
2
.7
2
17
1
1
10
COUNT
COUNT
ESTATE1NVSESTMENT
REAL.
HOURS3 HRS/WEEK:REVIEW
Cum
Valid
Percent
Value FrequencyPercentPercent
147
Cases 137
Missing
Minimum
32
40
0.0
PROPERTY
OFSURPLUS
HOURS5 HRS/WEEK:DISPOSITION
AND ACQUISITION
SELECTION
HOURS4 HRS/WEEK:SITE
Value Frequency Pocent
Value Label
1.4
14.1
10.6
4.8
6.0
4
40
30
0
Valid
Percent
22.4
7.6
Cue
Percent
'a.cd
Value Frequency Percent Pe-cen't
Value Label
25-7
2!.7
.7
6.7
E.
7
2.10
2.1
2
6
15
16
12
.4
.4
30.
50
TOTAL
COUNT
1.2
3.5
.6
.6
5.4
76.6
79.5
90.6
91-3
96.5:
5.00
19
0
10.00
- -------
9.00
2
0
0
6
1
0
1
0
3
0
0
0
0
0
0
0
0
02
2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
--
..
19.00
20.00
21.001
22.0'
23.01
24.0'
25.0I
01
26.0
27.001
22.0
01
29.0
01
30.00 --
16.00
17.001:
18.00
19.001
20.00 21.001
22.00
23.00
24.00
25.Au
0
0
0
0
26.00|
27.00
28.00
2.9.00
0
34.00
25.00
36.00
Mean
'axiaum
37.00
38.001
39.00
42.00 1
42.00
1
44.00
45.00
46.00
47.001
48.00 1
49.001
50.00 'T
80
16
EIU Dev
24
22
,
40
Frequency
6,201
Mnitus
0.0
maximus50.000
171
4.371
20.000
Cases
Valid
40.00 1
41.00 1
5.240
7.2
29.5
7.2
.6
.4
.7
2.0
1.2
91.0
94.0
95.2
1.4
1.8
.7
.6
1.2
2.0
1.8
.4
.6
.4
95.8
98.8
99'4
100.0
MISSING
117
284
79.0
80.2
82.6
028.6
1.4
.4
5
2
1
2.1
100.0
100.0
----------------------------- :
.
:
12
24
26
60
48
Frequency
Histogra2
integral
Valid 'ases
2
1
0
0
5
0
0
0
1
V
31.00
22.00
0
Mean
0.0
1.00 2.00 ---3.00 4.00 --5.00 --6.00
7.00
8.00
9.00,
10.00:11.00
12.00 --.
12.00
14.00 .
15.00 --
12
54
31
12
10
12
1
2
4
0
10
0
4
0
0
5
11.00
12.00
12.00
14.00
15.09
16.00 17.00
18.00
4.2
19.0
10.9
VALUE
COUNT
7.00
8.00
2
4
10
4
5
2
TOTAL
VALUE
2
2
7
1
.
0.0
.00
2.00
3.00
- - --- --- --4.00 -- - -- -- -- - ---
4
40
30
13
1
12
15
16
17
20
24
30
100.0 100.0
284
6
10
1.20
99.4
.7
.6
100.0
.4
39.2 MISSING
2
12
54
31
78.4
27.9
10
19
0
1
2
Purn
Percent
112
Cases
Missing
144
167
Std Dev
5.446
Cases 117
Missing
Minisul
0.0
HOURS6 HRS/WEEK:FACILITY
MANAGEMENT
Valid
Cum
PercentPercent
Percent
Valuefrequency
Value
Label
0
8
1
31
2
3
-4
5
6
8
10
12
33
2.8
10.9
11.6
5
1.8
20
14
15
1
1
4
1
140
7.0
5.3
.7
2. 1
5.6
.4
.4
.4
1.4
.4
49.3
284
100.0
20
21
FUTURESPACENEEDS
HOURS8 HRS/WEEK:PLANNING
ISSUES
HOURS7 HRS/WE'EK:LEGAL
15
2
6
16
1
Cum
Valid
Percent
Percent
Percent
ValueFrequency
Value
Label
5.6
27.1
50.0
53.5
67.4
10.4
77.8
1.4
79.2
4.2
83.3
11.1 94.4
.7
95.1
.7
95.8
.7
96.5
2.8
99.3
.7
100.0
MISSING
5.6
21.5
22.9
3.5
13.9
0
1
2
3
4
5
6
8
10
12
6
46
51
13
27
26
3
3
4
1
14
1
103
TOTAL
3.3
3.3
2.1
28.7
25.4
16.2
56.9
18.0
28.2
64. 1
7.2
4.6
14.9
79.0
9.5
93.4
9.2
14.4
95.0
1.7
1.1
96.7
1.7
1.1
98.9
2.2
1.4
99.4
.6
.4
100.0
.6
.4
36.3 MISSING
284 100.0
COUNT
8
31
33
5
20
15
2
U'J
0
6
0
16
0
1
0
0.0
0.0 |----:
1.00:----------:
46
51
13
-----------
2.00|- ------ :
3.00|---5.00 1------------6.00 |-.
7.00 |
8.00
3.00
0
.
|-
9.00 |
10.00--------------
1
11.00|
12.00
113.00'
14.00|-.
1
15.00
|:
16.00'.
17.00 |
18.00
19.00|
20.00'21.001-
---- ----
-- :----------
---
0
2.260
181
10
3.00 |-
16
4.00 -- --
14
5.00 |--
9
0
5
1
0
0
0
0
6.00 1--
Minimum
0
0
0
60
48
0.0
1.001-
2.00
31
3
10
4
16
5
6
0
9
20
14
9
5
1
141
.4
.4
49.6
284
100.0
1
8
16
24
32
Std Dev
4.439
Maximus 21.000
ValidCases
144
Missing
Cases 140
Mi-nimum 0.0
100.0
.7
MISSING
100.0
8.00|--:
9.00 |:
10.00 1
i
11.00
12.00 ,
13.00 1
14.00 1
15.00 |
16.00
17.00
18.00 |
19.00
1
20.00 1-
Mean
-
7.00|
0
2.727
-.---30
20
10
Histogram
Frequency
StdDev
2.549
40
ValidCases
4.368
67.8
79.0
88.8
63 95.1
98.6
3.5
99.3
.7
7.0
11.2
9.8
-----
Histogram
Frequency
Mean
10.5
39.2
60.8
- - - - - - -- - - - - -
Maximus 20.000
0
1.8
10.5
28.7
21.7
--- - - - - - - - - - - - - -
0
Cases 103
Missing
2
5.3
14.4
10.9
3.51
5.6
4,9
--- :-
|--
0.0
14.000
Cases
Valid
41
VALUE
15
41
31
0
0
36
24
12
Histogram
Frequency
2.945' StdDev
Mean
Maximum
:----
---------4.00 |5.00 |----------6.00|-.
7.00
1
8.00 1:
9.00 i
10.00
111.00
12.001
13.00
14.00 |-
26
3
4.00|----------:-----
-
2.00 -----------
27
-----------------
t--
1.00 ---
15
1
TOTAL
VALUE
COUNT
VALUE
0
0
0
0
4
1
100.0
0
100.0
COUNT
TOTAL
Valid
Clim
Value FrequencyPercentPercentPercent
Value
Label
143
Cases 141
Missing
Minimum
-.40
'.I.
50
0.0
-.
>20070
14>
~'IE~A2
22
004
REAL 37AMEDEPT
HOURS:^ HR0/WEEK:ADMIN19TER
Value Frequercy
Vase Label
Percent
Cue
Valid
PercentPercent
Vi0oa
4
72
380
5
3
4
20
5
1.4
25.4
12.4
:.80
4.6
2.6E
46.8
24.7
4
32
8.4
8.4
Value
abel
49.4
0
74.0
77.2
E5.7
94.2
2
24
3
7.1
6
0.4
2.1
25
522
8
6
97.4
99.4
.6
225
4
.7
40.:0
Frequency
PercentPercent reCent
2.6
7
8
1
12
12
6
15
5
16
4
20
222
11
:00.0
C18
8.8
7.7
2.8
.4
4.7
''4
12.4
2. 4
25.4
2.0
12.4
29.4
40.8
10.9?
51.7
,.0
95.7-
.5
06.2
.
62.7
3.0
22.6
100B
100.0
TOT
AL
T
120.0
VALUE
2.00
'3
2
0
3
0
2.0
-.5
87.6
92.0
1.0
94.0
.4
48
5
13
10
.4
29
36
-----------
2.00 H--.
4.00 --------
37
40
50
.
5.00 ----- __.
6.0027.00
9.00
-
TOTAL
9.00
1
1
2
2
83
284
5
.
.4
.5
.7
10
.7
1.0
29.2 MISSING
100.0
9370
97.5
98.0
99.0
100.0
100.0
ic.90 i-30
0
0
0
0
0
1
Mean
Maximus
ValidCases
COUNT
12.00
VALUE
11.00
10.00.
14.00
0.0 |---- .
1.00|-------:--------------------2-001--------:----------------------
16.00
17.00
16.00
3.001------
19.00
20.001--------......-- I..
.
.
...
I.........
75
60
45
30
15
0
Histogram
Frequency
2.377
StdDev
2.420
Minimua
8.00-------------9.00
.
:----------------------------10.00--------1.00
0.0
12.00 ------12.00 14.00
.
15.00 ------
20.000
154
.
4.00 |---------:--------------------.00 ---------- :---------------6.00 ----------.
7.00
.
MissingCases 130
16.00 |---17.00
18.00
.
19.00
|
.
20.00 ----:-21.00
|
---
23.00 .
24.00 .
25.00H:---26.001.
27.001.
28.00I.
29.001:
30.00
31.00
32.00
22.00
34.00
25.00
36.0037.00
38.00
39.00
40.00 -41.00
42.00
43.00|
44.00!
45.00
46.00
47.001
'48.00
49.00|
50.00
0
Mean
8.429
Maximus 50.000
146
24Fr2u4c
16
H
Histogram
Frequerccy
SId Dev
2.57
Miniucu
0.:
W/OTHERDEPARTMENTS
HRS/WEEK:LIASON
H0URS0!
HOURS12 HRS/WEEK:REPORTING
TO SENIORMANGEMENT
Valid
Value
Cue
Value FrequencyeercentPercentPercent
Labe
4
27
2
14
4
37
4
2
5
17
7
10
12
15
9
4
99
Tr-TAL
284
2.2
1.4
9.5
14.6
15.7
10.2
4.2
6.5
18.4
12.0
12.0
20.0
1.4
2. 2
.7
1.1
1.80
27
6.0
.4
.5
4.9
3.2
1.4
24.9 10S.NG
100.0
alid
Value Frequency
PercentPercent
Value LaneaI
2.2
16.8
0
1
32.4
30.9
57.2
77.2
3
4
27
29
12
34
37
4
2
5
0
17
0
1
0
0
6
1O
12
4.2
.7
1.0
.4
.5
.4
.4
.4
29.9 MISS00N
Vali
Cases
8.5
27.6
52.8
04.3
79.4
E7.9
00.9
20
40
50
100.0
1
85
284
100.0
97.0
98.0
99.5
90.0
00.5
100.0
:00,0
VALUE
0.0
1.001----------2.00 -------
3.00--------4.00 -----5.00 -------6.00 7.00 -0.00 1-_
COUNT
----------------------_ --- ----------- -----------------------------------
~.001-
8.00
9.00 1
10.00
11.00|
1001-
13.00 |
14.00 |
27.00|1
18.001
19.00
20.00|I.........I.........
185
5.00
16.00
17.00 1
!8.00
........ I. .........
!.........I
8
16
24
Histogra Frequency
Std Dev
:-
2.00 ------------------------------------2.0-----------4.00 -------------5.00 -- ---6.00-
11.00
.
12.00
13.00 .
14.00,
15.00I:----------
4.957
20.000
VALUE
0.0
9.00
10.00-------
0
Mean
Maxieun
23
.5
27.1
25.1
11.6
I.0
92.4
93.0
97.8
100.0
16.00
1.
4
.4
19.0
7.1
10-.
6.0
1.4
TOTAL
COUNT
50
30
17
4
4
79.5
00.5
1
54
Cug
Percent
4.174
Minimum
20.001-
40
32
21.00 |
22.00|
'-00'
0.0
24.00 1
25.00 |26.00
Missing
Cases 99
h.001
29.00
30,00
311.00
00
33.00 1
34.00 1
35.00 |
36.00 |
27.00 |
29.00
40.00
41.00
42.00
4.00
44.00
45.00
46.00
47.00
48.00
49.00
50.00
Mean
maxiu:
2.754
50.000
Cases199
Valid
147
1
|1
1
|
1
1
|
1
|
|I.....................
1.......,...
0
12
24
36
48
Histogram
Frequency
Std
Dev
5.245
Missing
Cases 05
Minilus
60
0.0
HOU
S13 HRS/WEEK:0THER
HOURS14 HRS/WEEK:OTHER
Valid
ValueLabel
Value Frequency
PercentPercentPercent
1
2
3
4
5
6
7
10
13
284
1.80
I
1.1
2
3
4
5
.7
2.5
2.1
.7
.4
1.4
.7
.4
1.1
.4
07.0
13.5
13.5
0.1
21.6
5.4
27.0
10.9
45.9
16.2
62.2
5.4
67.6
2.7
70.3
10.8
81.1
5.4
86.5
2.7
89.2
0.1
97.3
2.7
100.0
MISSING
100.0 100.0
1
I
1
2
3
276
204
100.0
1
1
1
.4
.4
.4
.4
284
100.0
25.0
25.V0
25.0
25.0
50.0
75.0
100.0
25.0
MISSING
100.0 100.0
VALUE
VALUE
2
1.00|---:2.00 |---------3.00 |------,
4.00 I----------------
3
5.00 |----------:
Mean
Maximum
1
1
1
I
90.6
COUNT
COUNT
0
--------------------------------
1
5
6
7
TOTAL
TOTAL
-----------
4.00 |-------:
5.00 |
---
Cus
Valid
Value FrequencyPercentPercentPercent
Value
Label
.4
12.5
12.5
.4
12.5 25.0
.4
12.5 37.5
.7
25.0
62.5
1.1
37.5 100.0
97.2 MISSING
----------
I..,.......I
.......
,..I...,......
I........,
I...,...
. ,.I
2.00 |-------:----3.00 |------:-6.00
HOURS15 HRS/WEEK:0THER
Valid
CuB
Value frequencyPercentPercentPercent
ValueLabel
VALUE
1.00----:
01
0
1
4
2
3
1
247
TOTAL
2
7
6
2
5
3
2
7
6
2
1
15
20
40
COUNT
Cup
3.625
5.000
1
2
3
4
Histogram
Frequency
StdDev
1.506
Minimum
1I
0
0
1.00l-:-------2.00 |
3.00 |
0
4.00 I
5.00 -----6.00 |-----:
7.00 ---:-
5
0
1
2
3
4
5
1.000
----
7.00 0.00 |
9.00
-
ValidCases
B
Missing
Cases 276
4
0
0
2
0
10.00 ----------
00
11.00
v-4
I
16.00|
0
0
0
12.00
13.00|--14.00
15.00 |-17.00
I
18.00
19.00
20.00 I-:---------21.00 I
I
22.00
23.00
0
3
0
0
0
.
.
1.
24.00 1.
25.00 !.
26.00
27.00I
29.00|
30.00
31.00
32.00
33.00
34.o)
35.00
36.0)
|
37.00
38.00
39.00|
40.00 |- --0
,ean
maximum
7.432
40.000
2
4
6
Histogram
Frequency
Std Dev
7.705
Minimu
a
10
1.000
PERWEEK
TOTALHOURS
Cum
Valid
Value FrequencyPercentPer:entPercent
0.0
1.90
2.00
4.00
5.00
6.00
7.00
10.00
11.00
12.00
13.00
15.00
16.00
17.00
20.00
22.00
23.00
24.00
25.00
26.00
27.00
28.00
29.00
30.00
32.00
33.00
34.00
35.00
36.00
37.00
38.00
39.00
40.00
41.00
42.00
43.00
44.00
45.00
46.00
47.00
48.00
49,0
50.00
51.00
52.00
53.00
54.00
55.00
56.00
57.00
59.00
60.00
61.00
62.00
64.00
65.00
66.00
69.00
100.00
107.00
160.00
TOTAL
18.9
18.9
56
1.0
2
1.0
.7
2
.7
1.3
4
1.3
3
1.0
1.0
.3
.3
1
2
.7
.7
.7
.7
2
.3
.3
1
.3
1
.3
1.0
1.0
3
1
.3
.3
1.0
1.0
3
.3
1
.3
6
2.0
2.0
1
.3
.3
.3
.3
1
.3
.3
1
.3
.3
1
1.0
1.0
3
.3
.3
1
.3
.3
1
.3
1
.3
1.0
1.0
3
.7
.7
2
.3
.3
1
2.4
2.4
7
1.0
1.0
3
1.7
1.7
5
.7
.7
2
1.3
1.3
4
.7
.7
2
19.2
19.2
57
3.0
9
3.0
1.7
1.7
5
2.4
7
2.4
2.0
2.0
6
3.4
3.4
10
1.7
5
1.7
1.3
1.3
4
2.4
2.4
7
1.7
1.7
5
3.4
3.4
10
1.0
1.0
3
1.7
1.7
5
.7
.7
2
1.7
1.7
5
.7
.7
2
2.0
2.0
6
.3
.3
1
.3
.3
1
1.7
1.7
5
.3
1
.3
.7
.7
2
.3
.3
1
.3
.3
1
.3
.3
1
.3
.3
1
1.7
5
1.7
.3
.3
1
.3
.3
1
10.0 ---- 1
-O--AL
297
297
100,0
18.9
19.9
20.5
21.9
22.9
23.2
23.9
24.6
24.9
25.3
26.3
26.6
27.6
27.9
30.0
30.3
30.6
31.0
31.3
32.3
32.7
33.0
33.2
34.3
35.0
35.4
37.7
38.7
40.4
41.1
42.4
43.1
62.3
65.3
67.0
69.4
71.4
74.7
76.4
77.8
80.1
81.0
85.2
06.2
07.9
88.6
90.2
90.9
92.9
93.3
93.6
95.3
95.6
96.3
96.6
97.0
97.3
97.6
99.3
99.7
100.0
Count Midpoint
-2.25
0
.08 ------------------------------59
3-41
9
6.74 3
3
10.07 5
13.40 -16.73
4
20.061-6
4
23.39|-26.721-5
30.05|-4
33.38|-----13
36.71 ---11
40.04-----------------------------------60
43.371--- -------28
46.70|------16
50.03 ----18
53.36----14
7
56.69
60.027
4
63.35|-1
66.68|1
70.011~
73.34
0
76.67
0
80.00
0
0
83.33
0
86.66
89.99
0
92.32
0
0
9E.65
5
99.98|-0
102.31
1
106.64|109.971
0
0
113.301
0
116.631
0
119.96|
0
122.29
0
126.621
0
129.95
133.201
0
0
136.61
139.94
0
143.271
0
0
146.60|
0
149.93|
0
153.261
0
156.591
159.9211
0
163.25
.
0
33.165
Mean
Maxiau
Page 12
149
Std Dev
23.251
Minisus
60
75
0.0
160.000
ValidCases
100.0
15
30
45
HistograR
Frequency
297
Missing
Cases
SPSS/PC+
1/2/80
- P A--1
DECISIOMAKING
REA PROPERTY
DECISION
BASIS:INVSESTMENT
POTENTIAL
N ANSWER...........
PRIMARY.................
DE"ONDARY...............
THIRD...................
FOURTH..................
F17TH...................
40.83
32.40
2.8
4.60
2.80
TOTAL................... 100.00
DECISION
BASIS:OCCUPANCY
COST
NO ANSWER...............
PRIMARY.................
SECONDARY...............
THIRD...................
FOURTH..................
FIFTH...................
.-.- - - "
6..........
30.30
35.21
28.50
4.6%
.70
.41
.41
TOTAL................... 100.00
TIMEHORIZON:
1-2 YEARS
NOANSWER...............
OFTEN...................
SOMETIMES...............
SELDOM,.................
NEVER...................
TOTAL...................
TIMEHORIZON:
2-5 YEARS
NOANSWER...............
OFTEN...................
SOMETIMES...............
SELDOM..............
NEVER...................
TOTAL...................
TIMEHORIZON:
5-10 YEARS
NOANSWER...............
OFTEN...................
SOMETIMES...............
SELDOM..................
NEVER...................
67
89
48
35
45
284
54
99
85
28
18
23.60
31.30
16.90
12.31
15.10
100.00
19.01
34.90
29.91
9.90
6.3%
284
100.01
50
17.61
99
78
44
13
34.90
27.5,
15.51
4.60
NO ANSWER...............
PRIMARY.................
SECONDARY...............
THIRD...................
FOURTH..................
TOTAL...................
19.71
57.70.
19.41
2.00
.41
TOTAL................... 100.00
DECISION
BASIS:SITUATIONAL
FACTORS
294
TIMEHORIZON:
10-15
YEARS
NC ANSWER...............67
43
OFTEN
..............
SOMETIMES
............
70
57
SELDOM..................
47
NEVER...................
TOTAL...................
284
10.01
2.0
20.2
24.61
20.20
16.50
100.0Z
40.1%
12.01
SECONDARY............... 36.31
NO ANSWER...............
PRIMARY................
THIRD............ ...
FOURTH.....,............
FIFTH...................
7.41
3.53
.71
TOTAL................... 100.0%
BASIS:OTHER
DECISION
FACTORS
.....
NO ANSWER.........
PRIMARY.................
SECONDARY....,..........
THIRD...................
FOURTH..................
..........
FIFTH........
TOTAL...................
63.00
SELDOM.................,
NEVER
...................
5.60
50.01
16.21
7.40
20.80
21
59
TOTAL...................
294
100.01
COMPUTER
USE:FACILITY
MANAGEMENT
(CAD)
NOANSWER...............
47
16.50
OFTEN...................
73
25.7
SOMETIMES
...........
13.41
11.30
22.20
I0
SELD0..............
32
NEVER...............94
TOTAL-..................
284
100.01
DECISION
BASIS:OPERATIONAL
FACTORS
COMPUTER
USE:INVESTMENT
ANALYSIS
NOANSWER
...............
16
OFTEN
...................
142
SOMETS...............
46
COMPUTER
USE:DRAFTIN6/DESI6N
(CAD)
NO ANSWER
"'..........
44
OFTEN.. ..........
02
15.50
28.90
SOMETIMES............. 42
!4.8
SELDOM..................
27
9.50
NEVER..............
....
89
31.3
TOTAL...................
204
100.02
COMPUTER
USE:
PROJECT
MANAGEMENT
NOANSWER...............38
OFTEN...............
83
13.41
29.21
SOMETIMES...........
71
25.00
SELDOM.................. 7.40
MEYER
...................
71
25.01
TOTAL...................
284
100.00
COMPUTER
USE:MAINTENANCE
MANAGEMENT
TIMEHORIZON:
15-25
YEARS
NO ANSWER...............75
OFTEN....,..............
27
SOMETIMES...............
39
SELDOM.............
63
NEVER...................
Bo
26.41,
9.50,
22.22
NO ANSWER...........,, 47
OFTEN........-....... 70
SOMETIMES...............
55
SELDOM..................
36
NEVER...................
76
TOTAL...................
204
100.00
TOTAL...................
TIMEHORIZON:
25-50
YEARS
COMPUTER
USE:REAL
ESTATE
INVENTORY
284
16.50
24.61
19.40
12.7%
26.80
100.0!
5.60
21.8%
2.10
2.50
4.91
100.T.
NOANSWER...............
31
T
OF EN...................10
17
SOMETIMES...........
46
SELDOM..................
NEVER..................
130
0.00
16.20
45.80
TOTAL...................
204
100.000
2B.5Z
NO ANSWER...............
OFTEN..................
151
SOMETIMES...........
60
5.30
21.23
SELDOM.................. 15.3 1
NEVER...................
42
TOTAL-.....
............
204
100.07.
TINEHORIZON:
OTHER
COMPUTER
USE:OTHER
NO ANSWER......,........
233
92.00
SELDOM..................
3
1.10
NEVER...................
48
16.901
NO ANSWER...............
254
80.40
OFTEN...................
2.00
SOMETIMES...........
3
SELDOM..............
1
,41
NEVER...................
1B
TOTAL...................
284
100.00
TOTAL...................
23:
150
REAL
PROPERTY
DECISION
MAKING
- PART3
FREQUENCY
PERCENT
SYSTEM
INPLACE:UTILIZATION
STUDY
NOANSWER...............
YES.....................
NO......................
16
196
72
PRESIDENT/CEO
INVOLVEMENT
NOANSWER...............
6
5.63
69.03
2.:1,
128
45. 13
SOET1lYES...............
92
28.91
65
SELDOM.................
22.9%
OFTEN...................
25.41
TOTAL...................
284
100.01
SYSTEM
INPLACE:LEASE
DATES/COMMITMENTS
NOANSWER...............
12
YES.....................
249
No......................
23
TOTAL...................
284
NEVER...................
4.21
87.7%
8.13
AZR
TOTAL...................
284
i00.01
PRESIDENT
ON FINAL
RE
DECISIONS
NOANSWER...............
192
67.63
100.0%
TOTAL...................
284
100.01
SYSTEM
INPLACE:IDENTIFY
SURPLUS
PROPERTIES
NOANSWER...............
13
4.61
196
YES.....................
69.01
75
ND.... ... ..............
26.41
TREASURER
ON FINAL
RE
DECISIONS
NI ANSWER...............
177
62.31
YES.....................
107
37.73
TOTAL...................
284
100.02
TOTAL...................
294
100.01
SYSTEM
INPLACE:TRACKING
COST/SDFT
NOANSWER...............
18
6.33
YES.....................
161
56.71
ND......................
105
27.0%
LINE
UNITONFINAL
RE
DECISIONS
NOANSWER...............
268
YES................
TOTAL...................
284
RE UNIT
ON FINAL
RE
DECISIONS
ND ANSWER...............
240
84.5Z
YES.....................
44
8.11
29.9
62.03
TOTAL...................
284 100.0%
100.01
OTHER
ON FINAL
RE
DECISIONS
NO ANSWER...............
211
YES.....................
73
SYSTEM
INPLACE:IDENTIFY
IMPROVED
FINANCING
NOANSWER...............
10.21
29
YES.....................
25.41
72
64.4Z
183
No......................
SYSTEM
INPLACE:PHYSICAL
CONDITION
NOANSWER...............
YES.....................
156
NO......................
103
54.93
36.31
TOTAL...................
100.01
284
9
8.81
3.21
57
48
10
YES (ANNUALLY)..........25
20.11
16.91
2.51
235
YES(ASNECESSARY.......
47.51
74.1
TOTAL...................
284
100.01
284 100.01
TOTAL...................
TOPMANAGEMENT
REVIEW
NOANSWER...............
ND......................
YES(9DARTERLY).........
YES(SEM1-ANNUALLY).
5.61
TOTAL...................
284
100.03
TOTAL...................
204
100.03
SYSTEM
INPLACE:IDENTIFY
CHANGE
IN MKTVALUE
NOANSWER...............
23
YES.....................
85
No......................
176
94.41
8.8%
284
TOTAL...................
100.0z
151
REAL
PROPERTY
ECISION
MAKING
- PART4
FREQUENCY
DERCENT
TOTAL....--..........
284
100.01
FUTlE FLEIIILITY TOP
PRMTY
11.6?
13,71
STROILY
AGREE-........
MOSTLY
AGREE.........--MOSTLY
DISAGREE
.-...
STRONGLY
DISAGREE....
NOCOYMMENT....
.....
7
103
108
39
12
15
TOTAL.........---- ...
284
........------ "--------.
PROCUIEES
FORPROP
ACMIBITION
25
8.8?
NOANSWER...............
93
AS NECESSARY............
32.71
&
POLICIES
GENERAL
40.02
PROCEDURES...........
116
STANDARDS/FORMULAS/THRES
12.77
HOLDS................
36
T
4.92
IONIrLINEUNIT. 14
DISCRE
PRENUES FU CAPITAL
INTING
NOANSUER..............
33
ASNECESSARY...........
39
GENERAL
POLICIES
&
PROCEDURES...........
154
STANDARDS/FORMULAS/THRES
HOLDS................
40
DISCRETION
OFLINEUNIT. 1
284 100.01
TOTAL...................
TOTAL...................
284 100.0%
PRDCEURES FORPROP
DISPOSITION
27
NOANSWER...............
110
ASNECESSARY............
POLICIES
&
GENERAL
114
PROCEDURES...........
STANDARDS/FORMULAS/THRES
17
HOLDS................
DISCRETION
OFLINEUNIT. 16
9.51
38.7?
40.12
5.01
3.6?
PROCEDURES
FOR
ENERGY
USE
NOANSWER...............
50
ASNECESSARY............
68
1ENERAL POLICIES
&
PROCEDURES...........
71
STANDARDS/FORMULAS/THRES
HOLDS.......,........
33
DISCRETION
OFLINEUNIT.62
54.21
14.11
6.31
17.6?
19.82
35.7?
25.41
13.1%
6.01
PROCEDURES
FORLEASING
COMMITMENTS
31
NOANSWER...............
59
ASNECESSARY............
GENERAL
POLICIES
&
PROCEDURES...........
135
STANDARDS/FORMULAS/THRES
37
HOLDS................
DISCRETION
OFLINEUNIT.
UNCERTAINTY
REDUCES
MY
CAPACITY
TOMANAGE
RE
13.0%
7.7%
STRONLY
AGREE...........
27
71
MOSTLY
AGREE............
101
MOSTLY
DISAGREE.........
61
STRONGLY
DISAGREE.......
16
NOCOMMENT..............
DIVERSIFYING
REREDUCES
RISK
33.82
16.51
10.6?
9
3.21
........................
STRONLY
AGREE...........
13.02
51
46.31
132
MOSTLY
AGREE............
35
12.31
DISAGREE.........
MISTLY
STRONGLY
DISAGREE.......6
2.1?
51
18.01
NO COMMENT..............
284
100.0?
TOTAL...................
284
!00.01
TOTAL...................
TOCORP
MAVE
EIPOSURE
PROCEDURES
FOR
PREVENTIVE
MAINTENANCE
40
NO ANSWER...............
60
AS NECESSARY............
GENERAL
POLICIES
&
PROCEDURES...........
STANDARDS/FORMULAS/THRES
34
HOLDS................
OFLINEUNIT. 51
DISCRETION
7
2.51
........................
STRATEGIC
PLMS
14.1%
21.11
34.9%
6.71
22.6%
29.6%
31.31
6.02
....... 284
100.0%
E PLAYS
A CRITICAL
RILE
IN MY01
STROILY
AGREE-...........
MOSTLY
AGREE............
MOSTLY
DISAGREE.........
STRONGLY
DISAGREE.......
NOCOMMENT.............
TOT---.........
....
85
93
58
29
13
29.92
27
20.4%
10.22
4.6!
284
100.0?
RERESPONSIBILITY
TOO
FARDOW IN MYORG
..........-.--.........
6
21?
STRONLY
AGREE-.--------.10
352
MOSTLY
AGREE............
26
9.21
MOSTLY
DISAGREE.........
77
27.1%
STRONGLY
DISAGREE.......
1S7
55.3?
9.5?
25.01
35.5
21.5?
5.6?
284
100.01
TOTAL...................
13.41
25.72%
19
67
84
89
17
8
........................
2.8
NO
COMMENT.........
284 100.0%
TKAL...................
PROCEDURES
FORSPACE
PLANNING/ALLOCATION
3B
NOANSWER...............
73
Al NECESSARY............
GENERAL
POLICIES
&
96
PROCEDURES...........
STAKDARDS/FORMULAS/THRES
47
HOLDS................
30)
DISCRETION
OFLINEUNIT.
STRONLY
AGREE........
MOSTLY
AGREE-.........
MOSTLY
DISAGREE.........
STRONGLY
DISAGREE.......
NOCOMMENT.............
----......-.--..........
6
2.12
PROCEIRES
FO OVERENM
ACCUNTIN
(SPACE)
18.71
53
NOMSUER...............
65
22.92
ASNECESSARY............
GENERAL
POLICIES
&
PROCEDURES...........
36.3
103
STANDARDS/FORMULAS/THRES
HOLDS................
31
10.92
DISCRETION
OFLINEUNIT. 32
11.3%
284 100.01
TOTAL...................
47.51
INUFFICIENT INFOTO
EVALUATE
BUILDINGS
TOTAL.....
11.62
21.82
100.01
283
TOTAL...................
10.9
20.8?
100.01
25.02
284 100.01
TOTAL...................
PEURES FORDEV.
PROJECTS
NOANSWER...............
56
ASNECESSARY............
101
GENERAL
POLICIES
&
PROCEDURES...........
72
STANOARDS/FORMULAS/THRES
37
HOLDS..........
DISCRETION
OFLINEUNIT. 17
2.52
36.3%
38.01
13.71
4.2%
5.32
97
STRONLY
AGREE...........
114
MOSTLY
AGREE............
MOSTLY
DISAGREE.........
38
18
DISAGREE.......
STRONGLY
10
NOCOMMENT..............
34.2f
40.1?
13.41
6.31
2.52
284 100.01
TOTAL...................
12.0?
18.0?
152
TOTAL...................
204
100.3?
APPENDIX C:
ABSTRACT OF HARVARD REAL ESTATE
153
INC. STUDY
ABSTRACT OF FINDINGS - HARVARD REAL ESTATE SURVEY
A survey conducted by Harvard Real Estate, Inc. of corporate America's
approach to managing its multi-billion dollar real property holdings indicates that,
while many companies have created real estate offices and given them a number of
responsibilities, few have chosen to treat real estate as an independent asset. One
out of five American companies lacks the property inventory that would tell senior
management what it owns or leases.
Most firms do not have a separate real
property management information system.
As a result, few firms have developed
the information base needed for setting informed policies, suggesting that important real estate decisions are made in a data vacuum, or not made at all.
Corporate real estate, the buildings and land owned by companies that are
not primarily in the real estate business, typically accounts for 25 percent or more
of a firm's total assets. Despite this enormous value, it remains an undermanaged
asset.
Just 40 percent of American firms clearly and consistently evaluate the
performance of their real estate.
The method of evaluation, or lack of it, is
unrelated to a company's structure, and is probably explained by the mixture of
personalities, strategies, and management styles.
One out of five American
corporations manages its real estate for profit, aiming to match or exceed the rate
of return it could achieve through alternative investments.
These more aggressive
firms are structurally similar to passive companies, suggesting once again that the
combination of people and opportunities is the critical factor in determining
whether a profit orientation is chosen.
In sum, the survey shows that professional real estate organizations are
prevalent in corporate America, but diagnostic tools for guiding and evaluating real
estate performance are not. Only when this situation is corrected can senior
154
management make truly effective corporate use of its real property assets. The
basic elements of a real property asset management program are (1) an up-to-date
inventory of buildings and land (2) a management information system that tracks
real estate income and expense property by property, separately from non-realestate income and expense and (3) a system for assessing at fair market value all
space, including that occupied by internal departments.
In the 1980s a need for
investment capital and a growing awareness among board members, external
financial analysts, and stockholders of the true value of corporate real estate will
require senior executives to manage real property assets as effectively as any
other company asset.
155