Relocation process:
What services do tenants need?
Work in progress
Miikka Putto
Aalto University
Real Estate Business
Content
Background
Aim & methodology
Preliminary findings
Discussion
Further research
2
Background
3
Background: why study relocation?
Office occupiers’ relocation decisions have an impact on
• On all actors within the built environment and society at large
• On the relocating organization itself
– Organisation
– Individuals
 Understanding where and
how organizations relocate
is important!
4
What is relocation?
Relocation is “a change of address of a firm from location A to location B” (Pellenbarg
et al. 2002)
-> Organisation’s address changed from A to B
-> Office occupiers, short and medium distance
Optimal location
- Neo-classical approach
- Behavioral approach
- Institutional approach
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Process focused
- Organizations are comprised of
people
- Decisions are made - and
affected – by people
Previous research, examples
Firm relocation: state of the art and
research prospects *1
*1: Pellenbarg, P.H. & Wissen, L.J.G. van & Dijk, J. van,
(2002). "Firm relocation: state of the art and research
prospects,“ Research Report 02D31, University of
Groningen, Research Institute SOM.
An examination of business occupier
decision making: distinguishing small
and large firm behaviour *2
*2 Greenhalgh P. (2008) ‘An examination of business
occupier decision making: distinguishing small and large
firm behaviour’, Journal of Property Research, 25(2) 107126
Intra-firm decision-maker perceptions
of relocation risks *3
*3 Rasila, H.M., Nenonen,S. (2008) "Intra-firm decisionmaker perceptions of relocation risks", Journal of
Corporate Real Estate, Vol. 10 Iss: 4, pp.262 – 272
Power or activity? Roles of
individuals in relocation processes *4
6
*4 Rothe, Peggie; Sarasoja, Anna-Liisa (2012) Power or
activity? Roles of individuals in relocation processes.
Joint CIB W070, W092 and TG72 International
Conference, Cape Town, South Africa, 23.-25.1.2012
Risks
Relocation includes several
risks
•
•
•
•
•
financial risks
functional risks
corporate culture risks
interest group risks
future risks.
(Rasila & Nenonen 2008)
On the employee level:
• increased absenteeism
• substantial reductions in
productivity
• low morale and a poor attitude
toward the company that may
persist for months and years
• an increase in work errors
• the loss of experienced,
hardworking people
• even attempts to sabotage the
move.
(Attwood 1996)
7
Relocations in Finland
8
Service needs in relocations, Finland (n=136) (Prefe project 2009)
Muutoksen läpiviennissä henkilöstön kanssa
Change management
käytännön asioiden järjestelyissä
Taking careMuuton
of practical
arrangements
Vuokrasopimusneuvotteluissa
Lease agreement negotiation
Sopimusjuridiikan ja sopimuskäytäntöjen ymmärtämisessä
Legal advice
Vaihtoehtojen arvottamisessa ja valinnassa
Comparison & Selection of option
Tarjolla olevien tilavaihtoehtojen kartoittamisessa
Searching potential premises
Työympäristön tarvittavien toiminnallisuuksien määrittelyssä
Determining
work environment
criteria
Tarvittavien tilojen määrän ja ominaisuuksien määrittelyssä
Space requirement analysis
0%
Käytämme
10%
20%
30%
Emme ole käyttäneet, mutta olisi tarvetta
40%
50%
Ei ole tarvetta
60%
70%
80%
90%
En osaa sanoa
Have used; Have not used but a need exist; No need; Can not say
The Finnish context: what do tenants think they
need?
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100%
Tenant representation
•
•
•
•
•
Tenant
representation
Commercial tenant representation
Occupier representation
Relocation management
Relocation services
Leasing advisory services
Characteristic
• Service provider (consultant) offers services related to relocation process, often
searching suitable premises and negotiating lease conditions.
• Other services might be included
• Principal is tenant
• Implicit characteristic is the relationship between tenant (as a client) and a
consultant. Consultant have to represent exclusively the client.
• Earning logic varies: fee can be paid by the tenant or by the landlord
10
Tenrep market in Finland
The majority of lease negotiations is done
without Tenrep consultant
- Some markets even 80…95%
might use consultant
Typical client for Tenrep consultant
-
Large, international company
-
Sensitive for economic fluctuations
-
Centralised CREM
-
Consultant company
-
Brand orienteed companies
Company background that used
Tenrep services 2010 in Finland
Internation
al (69%)
Domestic
(31%)
TenRep association
Ounasvuori 2012
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Triggers to hire a Tenrep consultant
-
Expiring lease contract
Organisational changes
Business expansions / cut downs
Hurry
Premises have to support special functionalities
Lack of supply (specific requirements)
12
Research aim and methodology
13
Research aim
• To understand the nature of relocation processes
• To understand challenges that tenants come across
• To identify service needs
• What kind of relocation processes do tenants have?
• What challenges do tenants come across?
• What services should be developed?
14
Research methodology
• Multiple case study
• Semi-structured interviews
Landlord interviews
Tenant rep consultant interviews
Tenant interviews
Describe practices, Identify challenges
Develop service concept related to relocations
15
Preliminary findings
16
Challenges that organizations come
across
Tenant interviews:
-
Signifigant time is spent on the process
-
Relocation project management is hard to handle
-
Often employees were not involved to process
-
The emphasize of communication was in the later phases
•
Suprisingly the respondents (at least so far) did not considered that advice
in lease negotiation would have been be beneficial
•
Tenants are interested about real estate services but pay willingness is low
•
Some of the respondents indicated that external advice would have been
beneficial
17
Added value – consultant experiences
•
Savings
•
Professionalism
•
Tenrep consultant is able to
negotiate better lease conditions
•
Possibility to concentrate only to
essential issues
•
Time spend
•
Tacit knowledge
•
In-house knowledge does not exist •
No need to waste time to long lists
•
•
•
Consultant knows the real estate
market
Professionalism
18
Consultant can find all alternatives
– access to silent market
information
•
Tenants benefits are continuously
guaranteed
•
Special knowledge available
(taxation eq.)
Discussion
19
Discussion
• More emphasize to relocations is needed
– Awareness
– Relocation should be seen as an investment not a cost
• In-house versus outsourcing
• Tenants are interested in real estate services but willingness to pay
is low
• Should landlord integrate some services to their budgets?
• For example, technology parks are offering already wide range of
services. Could they built up a business concept to support
potential tenants to move in?
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Possible benefits for the real estate
industry
• Space providers
– To understand relocation processes
-> Supply side of the market develops
-> Letting process more effective
• User organisations
–
–
–
–
Perceive understanding of all aspects of relocation
Less risky relocation process
More efficient relocation process
Take financial, social and environmental aspects better into
account
• Service providers and consultants
– To identify service need and develop services
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Summary and further research
Relocations
•
Significant impact
•
Organisations confront challenges
•
Finnish market is undeveloped, business potential exists
•
In order to understand location decisions, the relocation process needs
to be investigated further
Current study continues, so far challenges have been recognised.
Next step is to understand office occupiers’ service needs
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Thank you!
Miikka Putto
miikka.putto@aalto.fi
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