Corporate

Real Estate
Benchmarking
White Paper
October, 2010

Published by

CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Executive Summary

The following document is the

result of a survey conducted from
September 15-30, 2010 on the CRE3
Consulting website (www.CRE3.net).
CRE3 invited 771 corporate real
estate and facility management
professionals to take part and participants were informed that the
completed survey will be the basis of this white paper and may become
a benchmarking tool used to compare information with peers about:

Total Cost of Occupancy/FTE and the Top Occupancy Cost

Categories

How information systems are being used to support CRE Strategy

How others are preparing for the changes to the lease accounting
standards

The top five data requests coming from senior management

How others are moving their portfolio toward sustainability

The results validate the notion of a convergence occurring in the

corporate real estate industry. The dictionary defines convergence as,
the process of coming together or the state of having come together
toward a common point.
For CRE professionals the convergence is bringing together:

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The intensifying focus real estate will receive from the C-Suite as a
result of the FAS13 changes coming into effect in January, 2012
that will capitalize future rent obligations bringing millions/
billions of dollars onto the balance sheet;

The increasing need for organizations to reduce real estate

related operating expenses thru lower occupancy costs; and,

The desire among corporate leaders to achieve environmental

sustainability through LEEDS certified design principles, effective
energy management and building efficiency.

CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Each of these elements on their own offers unique challenges but, the
combination of them is creating a sense of urgency CRE departments
will be forced to embrace or they will lose opportunities to contribute
meaningful value to the organizations they support.

Survey Participants Statistics

The following is a profile of the corporate real estate executives who
participated in this study benchmarking survey:

Total Size of Portfolio in

Square Footage

Portfolio Owned v

0 - 1,000,000

17%

Owned

68%

1,000,001 - 5,000,000

20%

Leased

32%

10,000,001 - 25,000,000

10%

25,000,001 - 75,000,000

22%

5,000,001 - 10,000,000

15%

75000000+

14%

Property Types

Geography of Portfolio
Office 100%

North America 100%

Warehouse/Distribution

57%

Europe

57%

Data Center

42%

Asia

43%

R&D

42%

South America

35%

Retail

39%

Other

Manufacturing

35%

Vacant Land

28%

Other

9%

8%

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CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Corporate Real Estate

Department Composition
Over the past 10 years corporate real
estate departments have undergone an
evolution along with the facilities and
maintenance departments.
Traditionally, the CRE executive
reported to the Chief Financial Officer
and the Facilities Staff reported to the Human Resource Department.
With todays resource constraints brought on by the challenging
economic times and the changing view companies are now taking in
managing their real estate portfolio, the CRE/facilities organizational
structure has changed. More and more, the facilities and real estate
departments are merging into one department typically led by the Senior
Real Estate Director who still reports to the CFO but, now has
management responsibilities of all premises including facility services,
maintenance and operations. The names of some of the newly named
departments include Corporate Services and Workplace Services
indicating their management extends beyond just real estate and
facilities.
In many corporate organizations, the real estate and facilities
department is counted on to provide office, manufacturing, distribution,
R&D, retail and other space types to support their organization's
operational needs. The facilities need to be clean, appealing to the
employees, be operated cost efficiently and project the appropriate
image of the company.
In most organizations the real estate portfolio of owned and leased
assets sit on the balance sheet as the second or third most valuable or
expensive single asset depending on whether they're leased or owned.
This places the real estate and facilities department in the envious
position of managing a critical asset and one that can truly impact,
positively and negatively, the financial performance of their
organization.
Because of this simple truth, the CRE professional deserves a very
prominent seat at the table charting major decisions involving the
financial and future direction of the company. By operating the portfolio
in the most efficient manner possible, at the lowest of realistic total cost
of occupancy and the least possible environmentally impact, the CRE can
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CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

have more profound impact on the overall organization than just about
every other department.
But, when the CRE professional gets to the table they better bring along
solid actionable business intelligence about occupancy costs, space
utilization/optimization, facility benchmarks, environmental impact and
financial terms which may allow for dispositions or acquisitions to grow
or contract in support of the direction of the company.
The departmental composition of those who participated in the survey
included:
Roles/Responsibilities
Real Estate

92%

Facilities

73%

Maintenance/Operations

28%

Finance

12%

Other

9%

Corporate Real Estate

Department Business
Processes
With the smaller staff in CRE departments are forced to become
generalists in a number of critical areas. In addition, they must rely on
information systems to deliver more information in order to support the
business.
Going forward, CRE departments will be well advised to develop a multidisciplined project team of professionals from CRE/facilities, finance/
accounting, operations, outsourced FM providers, IT and procurement;
conduct work sessions to document critical CRE tasks (acquisition/
disposition, lease administration, work orders, moves/adds/changes,
space management of occupancy/vacancy, maintenance, and
departmental dependencies); and, refine the workflows to gain greater
efficiencies, data input adoption and improve internal customer
satisfaction.
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The business processes cited by participants in our study include:

Business Processes
Lease Administration

97%

Portfolio Management

89%

Facility Management

77%

Space Management

71%

Reservations/Hoteling

33%

Maintenance

29%

Work Order Management

26%

Construction Project Management

23%

Other

7%

Outsourced Providers

CRE executives are being challenged

by senior management like never
before to reduce occupancy costs and
contribute to bottom line savings. While the CRE department budget is
being cut to fund initiatives, technology and additional staff it is
burdening them to, do much more with much less.
One alternative is to out-source non-core competencies to full service
real estate firms and integrated facility management firms to leverage
their expertise and derive significant value. The benefits of this
approach could be:

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Collaborate/leverage an advanced level of expertise, innovation

and industry best practices

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CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Create a single point of contact and continuous service vs. project

to project basis

Align critical occupancy cost category reduction strategies with

service offerings

Access bundled services beyond traditional brokerage and

property/facility management

Benchmark occupancy costs, space utilization and environmental

sustainability among peers

Enhance internal employee satisfaction by standardizing

operations and processes

Utilize vendor technologies

Apply performance-based, percentage of cost reduction fee

arrangements

Companies are out-sourcing brokerage, portfolio management, lease

administration, facility management, traditional soft services (cleaning,
waste management, landscaping, business support, reception, and mail
room), hard services (preventive/reactive maintenance, non-stop control
room and small repairs) and taking advantage of evolving expertise in
energy conservation (Reduce Energy Costs and Consumption/Waste).
When they engage global providers, the payoff can result in truly
integrated service offerings such as:

Map Service Offerings to Occupancy Cost Categories

Benchmarking Facility/Portfolio Operating Cost Performance

Workplace, Building and Portfolio Efficiency

Energy Management/Procurement

Environmental Sustainability best practices

Green Building Design, LEED Certification and Construction PMO

Carbon Footprint Management

Space and Move Management

Work Order Processing/Call Center

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It should be noted that some of the savings-based outsourcing

agreements that were pervasive 4-5 years ago are now coming due to
renewal and some relationships are being reevaluated due to a desire to
in-source some of the functions but, in general the benefits remain.
Those who participated in the study indicated their use of the following
outsourced providers:
Brokerage
CB Richard Ellis

28%

Jones Lang LaSalle

24%

Grubb & Ellis

16%

Cushman and Wakefield

12%

Other

9%

Colliers International

8%

Property/Facility Management

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Johnson Controls

21%

EMCOR

17%

CB Richard Ellis

12%

Jones Lang LaSalle

12%

Self Manage

10%

Grubb & Ellis

9%

Cushman and Wakefield

8%

Sodexo

7%

Other

4%

Colliers International

2%

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CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Lease Accounting Standards

In 2012, the International Accounting

Standards and the Financial
Accounting Boards will, utilize a
completely new model for lease accounting under which lessees rights
and obligations under all leases, existing and new, would be capitalized
on the balance sheet according to a recently published white paper
entitled, The overhaul of lease accounting: Catalyst for change in
corporate real estate authored by PricewaterhouseCoopers.
The new lease accounting standard will:

Eliminate off-balance sheet accounting assets currently leased

under operating leases will be brought onto the balance sheet

Replace straight-line rent expense with interest expense

Recognize and carry leases at an amortized cost based on the

present value of payment to be made over the term of the lease

Include optional renewal periods that are more likely than not
expected to be exercised and include contingent amounts for
percentage rent or CPI increases

Impact lease renewal and contingent rents by being continually

reassessed, and the related estimates trued up as facts and
circumstances change

Require significant systems and process changes at adoption date

and maintenance on an ongoing basis

Not permit pre-existing leases to be grandfathered

The implications will place real estate front and center in the CFO/
Controllers cross hair when the cost and value of these leases are
realized. It is likely that many functions now being managed in the RE/
FM Department will be assumed by the Finance Department. And,
rightfully so given the amount of risk exposure a large leased portfolio
has to an organization. The new standard will have a greater impact on
retailers and banks that rely heavily on leased facilities to support their
operations but it will affect all leased facilities.
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CRE departments should assemble financial information and lease

abstracts, get information systems in order and document controls,
procedures & processes. They should reexamine everything and
anticipate how they might alter their corporate real estate strategy to
address the tax considerations, operational, economic, regulatory,
intercompany, governance, budgetary and financing issues.

97% participants in our study were taking steps toward compliance

that included:
"Every relevant staff member is being trained by our accounting
firm's top experts on this topic. The first webinar was just last
week."
"We are looking at all leases, new locations and renewals, and
keeping the term as short as possible while eliminating renewal/extension option language (except for locations where
lease term must be aligned with a particular program term)."
"The director of our financial department is developing our
process for implementing the standards when they are finalized and effective."
"Our company has traditionally modeled projects that are
leased on a capitalized basis. However, our lease portfolio is a
small percentage of entire portfolio so no dramatic actions are
needed other than ensuring reporting of obligations externally."
"We are already FASB compliant for current financial reporting
mandates. The Real Estate department is partnering with tax,
accounting, and financial reporting departments to be ready for
capital leasing accounting requirements. We are also partnering with our RE software provider."
"We are looking at all operating leases and tenant improvement
allowances and making sure we understand the impact to our
organization."
"Holding seminars for various groups."

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CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Information Systems to
Support Corporate
Real Estate Strategy

Critical to effectively managing corporate real

estate portfolios are the information systems
including a companys financial systems and
the many disparate point solutions managing
leases, work orders, maintenance, space and energy.
Many of the Integrated Workplace Management Systems (IWMS) that have
emerged over the last decade are effective in capturing location
information and automating repetitive workflows but do little with the
financials found deep within the profit and loss, balance sheet and cash
flow statements. The problem is compounded when a company has an
international portfolio without standardization across countries and their
Business Units are solely responsible to capture consistent data.
In most organizations there is a fundamental gap in meeting senior
managements need to access a summary level source of actionable
business intelligence dashboards that measure the financial
performance of their owned assets and leased facilities.
Help is on the way. There is an emerging technology to fill the gap
utilizing cloud computing where organizations will aggregate
information across the portfolio from existing, siloed systems and
measure occupancy costs from their IWMS, work order, lease, space,
energy management systems and data warehouses while accessing data
from their financials about debt service, depreciation, operational
income and tangentially related facility expenses.
Organizations will be able to compile their real estate financial
performance, conduct critical analyses and develop strategic initiatives
to reduce costs without the need for the deployment of new information
systems. The benefit to organizations will be:

Reliable, comprehensive information across the enterprise

Cost effective expense compared to the value of the information

gained

Ability to predict the outlay of capital and reduce occupancy costs

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Document Title
CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Provide critical information to shareholders, investors and

regulators about the financial performance of one third of their
total operational costs

The challenge is on how they will fill their CRE information gap. Many are
in search of the holy grail solution in collecting information within their
organization to collect comprehensive financial performance information in
order to calculate true total cost of occupancy that will fundamentally
change the way they manage their companys CRE holdings.
Participants in our study cited the use of:

Platform or Point Solutions

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Internal, Proprietary System

82%

Argus

78%

Maximo

68%

Lease Harbor

38%

TRIRIGA

34%

ARCHIBUS

23%

ManagePath

17%

Accruent

14%

Manhattan Centerstone

14%

FAMIS

11%

PLANON

4%

"No System in Place"

3%

FM Interact

3%

Siterra

2%

Enableon

1%

Document Title
CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Corporate General Ledger/

ERP
SAP

43%

ORACLE

35%

PeopleSoft

12%

Proprietary System

7%

Other

2%

Information Requests from

Senior Management and
Reporting

The thirst for data within many

corporations is placing demands on
CRE information systems like never before. It requires a massive
aggregation of information from RE/FM point solutions, IWMS systems,
companys ERP system, energy utilization and materials management
systems and the one-off, excel spreadsheets or legacy access
databases that too many people currently rely on. Compounding the
challenge of tapping into these potential sources is whether CRE
professionals have consistent data across the portfolio on properties
they self manage and those they dont.
The key for the CRE team will be to access, source and deploy a solution
or solutions that calculate the components that comprise total costs of
occupancy and measure the financial performance of all owned and
leased facilities.

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CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

As importantly, these solutions will help them answer the Top Five
questions that are being asked by senior management of the
participants in our study include:

1. What is our Total Cost of Occupancy Per Square Foot?

Employee Per Square Foot
Electricity Cost Per Square Foot
Data Processing/IT Cost Per Site
Cost Per Site
Cost Per Full Time Equivalent
Market Comps by Location
2. What are our Future Rent Obligations?
3. What is our Space Utilization?
Shadow Space
Total Occupancy Per Net Sales
Occupancy Rate
Churn by Location
Square Foot Allocations
4. Can you produce Dashboards and Real Time Information?
Project Tracking
Market Comps by Location
Financial Modeling
Budget Forecasting
5. What are we doing to move our portfolio toward environmental sustainability?

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Document Title
CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Survey participants were asked, How do you utilize information

systems to respond to data requests and develop, implement and
manage your corporate real estate strategy?
Their responses included:

There is an increasing intensity for monthly and quarterly reporting periods.

Systems are used to measure costs and progress made on cost
reduction initiatives
We manage the size of the office portfolio to maintain as close
as possible a 90% occupied rate
These data points are a function of information exporting into
custom spreadsheet reports. We use these key indictors to
measure performance success of cost savings strategies.
Our risk management would be crippled without effective systems. We do not know how we managed our portfolio without
them before. Our goal is to have everything at our finger tips.

In response to these requests, the steps to collect/report the

information may include:

Create a multi-disciplined team of professionals (RE, FM,

Accounting, IT, Operations, outsourced service providers, etc.) to
fan out across the enterprise to assemble the data

Work backwards from the reports being demanded by senior

management to populate the detail under the column headings

Determine where the occupancy cost information is currently

being held and figure out how you can access it

Develop the key performance indicators required to make

strategic decisions you cant manage what you cant measure

Prepare reporting mechanisms for the data senior management

hasnt asked for but will need to get an accurate picture of facility
operating costs

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Document Title
CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Develop a plan to get clean, reliable and consistent data across the
entire portfolio (dont underestimate how hard this one will be)

Focus energy on displaying the synthesized data what will the

dashboards look like

Make an honest assessment of current systems and get the necessary

budget to fund a comprehensive information system or integrated
solution that will deliver the metrics to develop and implement a CRE
cost reduction strategy

Get a clear understanding of the reporting demands you needed to

comply with the changes to the lease accounting standards

Establish a rigid and attainable timeline to complete the process

Our industry has never been challenged as much for information than now.
The back of napkins and shoebox records wont work anymore.
Management will demand a higher level of sophisticated reporting that
weve never seen. The time for action is NOWAre you ready?

Occupancy Cost Reduction

One of the biggest issues in reducing

operation expenses is determining a
companys Total Cost of Occupancy.
Equally as challenging is locating the
information within the enterprise.
Participants were asked which of the primary occupancy cost categories
they tracked that included:
1. Property Occupation Net rent, taxes, acquisition costs and debt
service
2. Adaptation and Equipment - Fit out, improvements and capital
investments
3. Building Operation - Energy/utilities, maintenance, repair, moves,
churn, security, and cleaning

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4. Business Support - Reception, catering, vending, internal/external

distribution and mail room
5. Management Service charges, fees for real estate, facilities,
property and project management
In addition, survey participants were asked, Under the current
challenging economic times there is increasing need for
organizations to reduce real estate related operating expenses thru
lower occupancy costs. What steps or initiatives do you have in
place to reduce occupancy costs?
Maximize our space utilization and densification
Utilize energy management systems for energy reduction
Out source maintenance to third party providers
Reverse metering our utilities and wheel it to other locations
Exercise early renewals at the bottom of market rents
Adjust acceptable level of utilization to determine which spaces
we can consolidate into facilities that have more attractive rent
rates or owned facilities that are more efficient to operate and
opt not to renew the lease or sell the surplus asset.
Reduce the overall need for space by implementing alternative
workplace strategies of hot desking, hoteling, creating
touchdown areas, and more efficient room booking
Utilize information systems to develop optimum Cost/SF metrics and identify those facilities that could be subject to cost reduction, consolidation, or disposition based on a financial performance benchmark
Address operational efficiency of our owned facilities and
thereby reduce energy consumption
Decrease the utilization of expensive facilities with space management to show vacant and under performing facilities
Rationalize our portfolio and consolidate staff/facilities to dispose of non-core assets

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Document Title
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The most critical element is developing an accurate benchmark

as your companys total cost of occupancy. The average
Cost/Full Time Equivalent metric of our surveyed participants was $6,459.
The initiatives survey participants provided are just a few approaches
you could take to justify the reduction in your overall occupancy costs of
office, manufacturing, distribution/warehouse, and retail locations.
The most effective way is to identify leased or owned properties that can
be eliminated entirely and therefore become among the most cost
effective facilities in your portfolio is the one you no longer own/lease.

Sustainability
In developing a sustainability strategy
plan for your portfolio the blue print
starts with determining the overall
sustainability goals of the organization
and identify initiatives are already in place to address sustainability.
A contributing factor to companys overall corporate social
responsibility strategy is for the CRE professional would be to bring the
real estate perspective by:

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Evaluating the financial and environmental impact of capital

investment decisions focused on resource consumption and
carbon efficiency

Outsourcing non-core services to 'green, cleantech' providers

Streamlining and 'greening' departmental workflows

Automating corrective and preventive maintenance schedules and

alerts to maintain facilities at peak resource and energy efficiency

Establishing carbon disclosure reports and creating sustainability

scorecards

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Exploring the feasibility and benefits of alternative and renewable

energy sources (solar, wind, geothermal, hydroelectric, Cogeneration, etc.)

By achieving greater efficiency of business workflows and facility

operations, carving out occupancy costs and implementing
environmental sustainability measures not only makes good business
sense but, its the right thing to do for the environment.
Our survey participants were asked, There is a growing desire among
corporate leaders to achieve environmental sustainability through LEEDS
certified design principles, effective energy management and building
efficiency. What steps are you taking to move your portfolio closer to
sustainability?
Their responses included:

Move forward sustainability initiatives that support the business objectives. Energy Management Systems employed at all
locations. Recycling efforts deployed. Re-lamping of facilities
to reduce energy employed. Focus more on Energy Star than
LEED.
Preparation of a plan for upper management to approve committee in place to form teams for each unit leaders appointed
to enforce initiative budget transformation over a realistic
time frame
Increased recycling including composting food waste and
collection of over 20 types of recycled products (plastic, batteries, binders, etc) Additional renewable energy projects...solar arrays on rooftops and one wind project Carbon
tracking across the entire company
Green to Gold treasure hunts, up grade lighting, building
temp adjustment earlier in day, increased recycling initiatives

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Conclusion

The survey participants provided some great insight about how they are
managed their corporate real estate portfolios and offered some
benchmarking information many organizations could use for
comparison.
Benchmarking is a critical step toward achieving departmental objectives
of achieving a desired future state but once youve benchmarked your
portfolio, the CRE department will need to put together a strategic plan.
Through facilitated sessions with internal constituents and outside
consultants the process will help to develop a plan that will get the
organization to crawl, walk and then run.
Along with a consultant CRE departments will co-develop a strategic and
tactical solution unique to the organization might utilize a process
driven approach that will challenge the internal team to:
THINK: What is the real estate portfolios current and desired
future state?
BUILD: What are the specific initiatives to be implemented across
the real estate/facilities department(s) and portfolio that bring
about the desired efficiency, economic and environmental
sustainability results?
OPERATE: How/who will implement the plan, what will become the
KPIs to measure progress and define success, and how will the
momentum be maintained until the desired future state is
reached?
Some steps you might consider to help you get started could be:

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Assign a member of your team to research the accounting

standards being developed in the new FAS13 guidelines and
anticipate the balance sheet impact of future rent obligations

Make a comprehensive assessment of the information systems

youll need to provide real time reporting and the actionable
business intelligence youll use to support strategic decision
making

Document Title
CRE3 Consulting - Corporate Real Estate Benchmarking White Paper

Develop a concise listing and source of the data of your top ten
occupancy cost categories (rent, utilities, taxes, insurance, churn,
maintenance/cleaning, TI, management fees, etc.), create/
benchmark key performance indicators, set goals for cost
reduction improvements and implement initiatives to achieve them

Research available case studies on the impact of LEED certification

has on building efficiency and make inquiries within your
organization about how the CRE department can participate in
overall corporate social responsibility initiatives

Schedule a meeting with your organizations CFO/Controller to

layout your strategy to overcome the impact and leverage the
benefits of the CRE convergence

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Document Title
About CRE3 Consulting

CRE3 Consulting provides solutions for corporate and commercial real

estate organizations to address the Efficiency, Economics and
Environmental Sustainability of their portfolio of leased and owned
facilities.
The firm assists organizations in developing the blue print of a
strategic plan designed to implement portfolio-wide initiatives that
increase operational efficiency, reduce occupancy costs, and contribute
to overall social responsibility initiatives.
CRE3 promotes the bottom-line business benefits of sustainability and
leverages industry best practice strategies to address: business
process improvement/ transformation; portfolio optimization/
rationalization; space occupancy/utilization; alternative workplace
strategies; operational efficiency; green and LEED certified design;
smart building systems; energy demand/consumption; renewable
energy; and utilize/deploy technology/information systems.
CRE3 was founded to support corporate and commercial real estate
professionals ability to respond to the C-Suites demand to answer the
questions: what is our total cost of occupancy?; how can we reduce it?;
and how can our real estate assets be managed strategically so that the
portfolio can serve our organizations operational needs and contribute
to our companys desire to achieve environmental stewardship?
By effectively managing the size and cost of the portfolio, which
accounts for the second or third greatest cost of most organizations,
real estate executives can impact their organizations bottom-line and
profitability while contributing to corporate social responsibility
initiatives important to many companies today.
CRE3 applies a process driven methodology to help organizations
define their desired future state and create a crawl, walk, run approach
to achieve results.
For more information, visit us at www.CRE3.net

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APPENDIX

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CRE3 Consulting
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Lakeville Massachusetts 02347
Phone 617-529-1970
www.CRE3.net

CRE3s Thought Leadership can be found at the

CRE3 Forum (www.CRE3.wordpress.com)

2010 CRE3 Consulting - All Rights Reserved - The survey results contained in this white paper have been exclusively researched and written by CRE3 Consulting. The information may
not be modified, copied, distributed, transmitted, displayed, reproduced, published, licensed,
transferred, or sold, without the prior written permission of CRE3 Consulting.
For information, send an e-mail info@CRE3.net.