“Best Practice, Best Fit, Best Model?”
Strategic configurations of Corporate
Real Estate Management in Europe
European Real Estate Society Conference 2013
Vienna, Austria, July 5th 2013
Dr. Annette Kämpf-Dern
Prof. Dr. Andreas Pfnür
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 1/22
“Best Practice, Best Fit, Best Model?”
Strategic configurations of CREM in Europe
AGENDA
I. Introduction and Research Question regarding a CREM concept:
What is CREM and how should a CREM management concept look like?
II. Framework: Literature Overview and the CREM Map
III. Research Design: Exploring the most advanced using CA-QDA
IV. Findings: Some “Best Practice”-Principles, but heterogeneous designs
V. Discussion: “Best Fit”-Designs that need further research to identify
systematics of well-functioning configurations
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 2/22
I. Intro
Wide consensus about what CREM generally is about
CREM definition
Purpose: Providing the strategic direction and supervision” that ensures “that land and
building matters are dealt with so that they operate efficiently and effectively”.
Thorncroft (1965); Stapleton (1986); RICS (2008)
Function: Establishing and maintaining a “close match between an organization’s business
and property strategies”. Bon (1994)
Activities: Forecasting, planning, directing, coordinating and controlling real estate activities
necessary to provide (acquire), operate (use) or liquidate (dispose) real estate assets.
Thorncroft (1965); Stapleton (1986); Kaganova et al. (2006); Kämpf-Dern and Pfnür (2009)
Objects: Managed are buildings/parcels of land, building clusters or portfolios of buildings
and land holdings. Bon (1994); Ching
Application: Corporates whose business is not real estate.
Bon (1994); Pfnür (2002)
Definition used: Corporate Real Estate Management (CREM) denotes the planning,
decision, organization, implementation and controlling of all those real estate activities
necessary to provide, operate or liquidate real estate from all perspectives (the owner, the
user and the producer) of corporates whose business is not real estate.
The goal of CREM is to support the overall corporate strategy acknowledging user-oriented
(cost-benefit-ratio), financial (capital invested) as well as operative aspects.
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 3/22
I. Intro
Yet, tasks to be performed can differ considerably
Overview of CREM tasks
CRE Management Tasks:
Governance, Portfolio Management, Asset Management,
Operative RE Facility Management
CRE Core Tasks („Services“)
Supply
• Leasing
• Acquisition
• Project Development
Usage/Operations
• Technical
• Infrastructural
• Commercial
Services
Recovery
• Letting
• Sale
• Project
Development
Interaction with Core Business and other support functions
Communications, IT, HR, Accounting, Legal, …
Source: Own graph based on Management Model St. Gallen; Hartmann/Lohse/Pfnür (2007), p. 8f.;
Kämpf-Dern/Pfnür (2009), p. 26; DIN EN 15221 Facility Management
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 4/22
I. Intro
Focus of Corporate Real Estate Management moves:
From task manager to strategically relevant function
MANAGEMENT TASKS
Def. of policies, objectives & standards, systems set-up, controlling & improvement  Governance
Assessment/determination of requirements, portfolio planning & controlling  Portfolio Management
Strat. planning, organizing & controlling building clusters/individual buildings  Asset Management
Operative (day-to-day) planning, organizing & controlling tasks  RE Facility Management
CORE TASKS
Supply
Usage/Operations
Recovery
• Leasing
• Technical Services
• Letting
• Acquisition
• Infrastruct. Services
• Sale
• Project Development
• Commercial Services
• Project Development
SUPPORT TASKS
Communications, IT, HR, Accounting, Legal, …
Source: Own graph based on Management Model St. Gallen; Hartmann/Lohse/Pfnür (2007), p. 8f.; Kämpf-Dern/Pfnür (2009), p. 26
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 5/22
I. Intro
Moreover:
CREM tasks can be in one, two, or three perspectives
CREM USER perspective
CREM INVESTOR perspective
Maximization of
benefit-cost ratio
of RE resources
Maximization of
capital value
invested in RE
CREM Activities
Maximization of
profit from producing
RE and RE services
CREM PRODUCER perspective
Source: Kämpf-Dern/Pfnür
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 6/22
I. Intro
Summarized: Breadth and depth of CREM in corporates
and over time varies considerably
CREM responsibility/influence areas
Strategic level
Usage
Investment
e.g. Corporate Identity,
Employer Branding,
Productivity,
Sustainability
Behavioral/
intangible orientation
e.g. Corp. Finance,
RE Invest./RE Portf. Mgmt.
IV.
II.
e.g. Green Building,
Workplace Design,
Building Flexibility
Sickness Rate
III.
e.g. Technical Functionality,
RE Accounting
Production
Operative level
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 7/22
I.
Financial/
tangible orientation
I. Intro
So: What is a “good”1 CREM system? How can
CREM be institutionalized2, a “CREM concept” look?
Research question
What we see: Set-ups that are highly diverse in every aspect !
What we want to know: What are the relevant determinants for CREM
institutionalization? How are they interrelated?
Does a “super ordinate plan” for CREM exist?
What we are looking for: A systematic, theory-based recommendation
A CREM Management Concept
Guiding on: CREM strategies, structures, processes, qualifications, culture, KPIs, …
1) Effective and efficient
2) „Institutionalization of CRE Management means the whole complex of measures that are necessary to develop and implement a real estate strategy
that fulfils the purpose and goals of CREM.” (Pfnür 2002)
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 8/22
II. Frameworks
Majority of CREM research deals with parts
of CRE management setup – none with the whole
Overview of CRE management institutionalization research (selection)
Business goals and context
 CREM goals





Lundstrom (1993);
Nourse et al. (1993);
Lindholm et al. (2006);
Lindholm (2008)
Hartmann et al. (2010)
CREM outsourcing functions
 Kimbler and Rutherford
(1993);
 Manning et al. (1997);
CREM strategies
CREM organization
 Manning/Roulac (2001);
 Manning/Roulac (1996);
 Gibler et al. (2002);
 Kämpf-Dern (2010)
 Bon et al. (2003);
 Hartmann (2011)
CREM controlling / KPIs
CREM partly holistically
 Lundstrom (1993);
 Schaefers (1999)
 Lindholm/Nenonen/Gibler
(2006);
 Pfnür (2002)
 Acoba/Foster (2003)
 Gibler/Black (2004)
Which design to make ALL parts together be effective and efficient?
 Holistic approach needed! (also: Veale 1989)
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 9/22
II. Frameworks
CREM-Map proposes CREM institutionalization parameters:
targets, strategies, organization & controlling system
Institutionalization framework
Municipality/
public
Investors
Sector, regulations,
competition, …
Customers
CREM-influence of
stakeholders
Corporatemanagement
Company targets
& strategies
Size, internationalization, portfolio, ...
CREMcontrolling
User
(BUs, staff)
CREM-history &
mandate
CREM
CREM-targets
Controlingl
system
Real estate
division
External corporate
environment of interaction
Degree of integration into
the corporate strategy
Spheres of
activity
regarding
CREMinstitutionalization
Shape and
operationalization
CREMstrategy
Width and depth of the
content
Ownership rate
External
servicers
CREM-organization
Centralization
Sourcing
Organizational
structure
HR/
culture
Processmanagement
Internal corporate environment of the CREM
Source: Kämpf-Dern/Pfnür
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 10/22
III. Research
CREM research approach needs to be considerably
different to majority of established business research
Comparison of situation and approach rationalization
Majority of business economics research
CRE management research
 Usually within one established discipline/
function (e.g. finance, marketing, sales,
production, …)
 New/young function that touches multiple
disciplines simultaneously (e.g. finance,
building management, production, IT, HR, ..)
 Considers one or two perspectives
 Needs to consider three equally important
perspectives  high complexity
 Can build on established theories
 theory/hypotheses testing
 Needs to adapt/establish theories
 theory generating
 What? How much/many?-Questions
 Why? How?-Questions
 Correlations, Structural equation analysis
 System analysis
 Quantitative research methods (e.g. large
scale surveys, dyadic surveys, secondary data)
 Explorative research methods (e.g. case
studies, fuzzy cluster analyses, primary data)
 Analysis of large number of average/
comparable individuals/companies
 Analysis of leading/trendsetting companies
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 11/22
III. Research
Research Design: Explorative CREM-Research
Units of analysis: Large European corporates
Target of the
research
Comparison of the institutional designs of the Corporate
Real Estate Management from European large-scale
companies (case studies), notably
 guiding target system and typical strategies
 integration of the CREM into company organization and
organizational CREM-configuration
 CREM-relevant framework of the company
 CREM control system
Reference
Companies
Selected by the following criteria
 advanced stage of CREM development
 great quantity of existing space and heterogeneous type of use
(office-, retail- and/or service space)
 willingness to collaborate
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 12/22
III. Research
10 European companies with highly diverse
context parameters participating
Case study approach
Context-Parameters
Characteristics
Telecommunication
Industry
5
Office
Business & portfolio
structure
Size & internationality
1
(“Burning Platforms“)
Retail
Production/Logistics
3
Technology
Industrial
Office & retail: 2
Office & retail & technology: 5
Office & logistics respectively industrial: 3
Homeland
Background &
experience with crises
Logistics
Financial
Services
2
(Formerly)
state owned,
no crisis
2
(DT, SC)
Several
countries
3
Europe
Global
2
4
Private,
no crisis
(Formerly)
state owned,
crisis
3
Private, crisis
1
(AL)
X = Number of companies by major characteristics
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 13/22
(DP, FT, TS)
4
(T, ABB, CB, SI)
III. Research
Heterogeneity of sample and in-depth-information
require alternative method of analysis
QDA comes from Social Sciences, in business rather innovative
Computer-Aided Qualitative Data Analysis (CA-QDA)
Research question / theory
Definition of selection criteria
and categories
Review of material line by
line: Subsumption or new
category formulation
Revision of categories after
10-50% of material review
Final material review
Analysis and interpretation
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 14/22
III. Research
Research results documented in Case Vignettes used to
identify/compare general principles & influential parameters
Vignette-Example Telecommunication company
CREM-Map
Topics
Individual specification
1
Context &
Industry; Background; Portfolio
Organization Structure; Size; Internationality
Telecom; formerly state owned; huge diverse and international RE portfolio
2
Context
CREM Experience, History &
Mandate
Long-term experience; partly “burning platform”;
mandate: global partner, (yet focus on home country); central control
3
Targets/
Strategy
Corporate objectives & strategies;
CREM-targets and strategies;
kind of fixation/communication
Among others: reduce costs through standardization and efficiency increase
Maximize ROCE; minimize RE costs;
Written form; communicated extensively
4
Targets
CREM strategy development and
strategy operationalization
Cost reduction: Operating & user cost; increase cash / reduce capital
employed; add value /maximize of RE not core business relevant any more
5
Strategy
Strategy width & depth
Primarily financial orientation (strategic & operational)
6
Strategy
Ownership rate
Target: Minimize!
7
Organization Positioning of CREM executive
2nd level; reports to CFO
8
Organization Centralization & Organizational
Structure
RE Portfolio Management: Centralized
RE Asset Management: Centralized (partly regional)
PrM/REFM: Local (Operations), Centralized (Monitoring & Controlling)
9
Organization Sourcing Model
Outsourcing of REFM & RES; more outsourcing intended
10
Control
Kind/degree of transparency
Very high: objects/contracts/costs in home country (HC); medium: space
utilization (HC), objects/costs international (INT); low: contracts and space
utilization (InN)
11
Control
Center type; Control systems
(budgeting, transfer pricing)
Revenue, center; “Carefree total rent”
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 15/22
Source: Results of interviews
IV. Findings
Diverse bundles of objectives and prioritizations …
Examples
Real Estate USER perspective
Real Estate INVESTOR perspective
Become “best employer“
“Add value / maximize return
from real estate“
Increase core business productivity
Reduce user costs
Increase cash-balance/ cash
Improve sustainability/ecology
Reduce operating costs
Professionalize
CREM internally
Legend:
Very important
Corporate 1
Corporate 2
CREM
Real Estate PRODUCER perspective
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 16/22
IV. Findings
... resulting in very different, but all well-performing
constellations of institutionalization parameters
Examples
Mandate
Efficient service contractor
Consultant &
“Last Call”
Global Partner,
central control
CREM = BU
Center type
Cost centre
Revenue centre
Profit centre
Investment
centre
Target system&
strategy prior.
MAX ROCE
MIN real estate costs
MIN cumulative costs
MAX core
business
Target-ownership
rate
Overall min!
CREM-board
Finance
Organizational
structure/
sourcingmodel
“Fulloutsourcing”
Control of users
“Carefree total
rent”
Commodity min! Specifically higher
Service
“Managing
Agent”
REAM, REFM
HR
Outsourcing
REFM & RES
“Price element
systems”
Overall > 65%
BU/Operations
“Managing
Agent” REFM
& RES
“Transfer of third-party
costs”
Integrated,
“traditional”
Global CREMbudget
Produktionsunternehmen. Core business specific RE; high need for flexibility; high degree of own usage
FS-Companies (Retail). Predominantly commodity-usage. corporate identity is important (Customers & staff).
Telco 1: Private background. commodity-real estate, mobile communications. growth strategy, international.
Telco 2: State-owned background. real estate-mix (many aren’t necessary anymore). present core business is decreasing.
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 17/22
V. Discussion
Guiding “principles” can be identified, but
specification of design parameters vary
Summary from observations (selection)
“Best practice“ “Principles”
(universally valid trends increasing
effectiveness)
CREMMap
Targets/ Distinctively derived from corporate
Strategy objectives, corporate strategies and
CREM-targets; written fixation and
extensive communication
….
Strategy Understand business & provide
integrated workplace
Orga
Control
Specification of individual design
parameter
depends on ... / varies with ...
Content and focal points of corporate
target system as well as time frame
planned for
….
Individual business needs & corporate
culture
….
….
Maximal reasonable bundling of similar
tasks, internal/external outsourcing
Size, CREM professionalism, experience
with outsourcing
….
….
….
….
Source: Results of interviews
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 18/22
V. Discussion
Conclusion & Hypothesis: Not one „Best Model“ –
Instead: „Best Fit“-Approach needed
„Fit“ of Vision/Mission/Targets, Situation, Design Parameters
Design Parameters
of management system
Vision/Mission/Corporate Targets
CREM Targets (Target System)
A
Strategy
ControlSystem
B
C
D
Context SystemFit
InterSystemFit
Situation (Constraints)
IntraSystemFit
Organization
Internal Corporate
Environment of the CREM
External Corporate
Environment
Source: On the basis of Kämpf-Dern (2010): Organisation des Immobilienmanagements als Professional Service, p. 69
Next step research: Which parameter constellations make a “best fit”?
Theoretical foundation: Configuration framework (Mintzberg, Miller/Friesen, etc.)
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 19/22
V. Discussion
Next step: Specifying and testing emerged hypotheses
regarding well-performing CREM configurations
Initial hypotheses regarding CREM institutionalization
CREMMap
Targets/
Strategy
Strategy
Orga
Control
Questions of research
Hypotheses regarding institutionalization
When choose which superior
orientation/ positioning?
Positioning depends mainly on industry & portfolio
structure; positioning drives priorities of
professionalizing activities
….
….
Requirements of/ impact on
Transparency of business strategies, requirements
space efficiency/effectiveness? & behavior major prerequisite for space efficiency
(costs) & productivity optimization
….
….
Degree, type & control of
outsourcing?
„Case-by-case-subcontracting if existing
management competence & national portfolio„
otherwise trend to general contractor
….
….
….
….
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 20/22
V. Discussion
CREM management concept not to be constituted
on „best model“, but on „best fit configuration“
Summary & Outlook
Problem
Research question
Research design
 CREM’s role and purpose quickly developing and changing
 Several surveys/research approachs but no integrated concept to
guide institutionalization
 Identify or develop a CREM management concept that supports
CREM to fulfill its (respective) purpose effectively and efficiently
 Develop a CREM management model based on general
management research as well as CREM research
 Explore renown CREMs to validate & concretize model
Major findings
 Model structure & contents confirmed by interview partners
 General “principles” are followed by companies, but wellfunctioning constellations are highly diverse
Conclusion &
Outlook
 No “Best Model” identified, instead configurational approach
 Next: Testing hypotheses emerged with larger number research
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 21/22
Contact information
Dr. Annette Kämpf-Dern
Prof. Dr. Andreas Pfnür
Head of Real Estate Management &
Project Development FBI
Head of FBI - Forschungscenter
Betriebliche Immobilienwirtschaft
Tel.:
Fax:
Email:
Tel.:
Fax:
Email:
+49 (6151) 16-5264
+49 (6151) 16-4417
kaempf-dern@bwl.tu-darmstadt.de
05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 22/22
+49 (6151) 16-3717
+49 (6151) 16-4417
pfnuer@bwl.tu-darmstadt.de