Alternative Officing Is Here To Stay

Posted on May 4, 2012

The way executives handle portfolio optimization and asset management is shifting due to alternative offices, according to a breakout session held this week here during the CoreNet Global Summit. The session, titled “Portfolio Optimization and Asset Management: Will demand forecasting future-proof the portfolio with built-in flexibility?” was moderated by Keith Keppler, principal, consulting services for Cresa Partners, and featured panelists Russ Howell, managing director, strategic consulting for Jones Lang LaSalle; Erica Chapman Esq., VP of real estate and facilities for InVentiv Health; and Michelle Myer, VP of real estate and facilities for Oracle.

The panelists discussed several points that had come out of CRE 2020, a year-long global research initiative which yielded several bold statements about how corporate real estate will change by the year 2020, about which had previously reported. They had mixed views on embracing alternative officing or third spaces when addressing portfolio optimization. “Starbucks, home offices—even the company cafeteria—are all third places,” said Howell. “We can learn how to use that in a more integrated way.”

Myer said her company has begun to look at emerging collaborative work environments and using flexible office solutions like Regis and other firms that sell space by the month or by the hour offer, “but are you trying to push people out of the office or bring them in to collaborate?” She said that she can usually accommodate traveling workers within the portfolio, and while she agreed that Regis solutions are a great option for remote workers, she objected to using a Regis solution in close proximity to leased space, calling it wasted money. When she polled the attendees to find out if any of the end users employ this arrangement, no one raised their hand.

The panelists also addressed the issue of developing the ability to future-proof portfolios with built-in flexibility to respond to the residual uncertainty. “It’s highly challenging to have a fixed asset and think you can have flexibility [that’s planned],” said Myer. Signing shorter lease terms can build in flexibility, but tenants pay a premium for it, she said. “I’d rather have flexibility through options.”

Howell also pointed out the need to incorporate a band of flexible options into corporate portfolios. Following the session, Kenneth Rudy, president of strategic consulting/solutions development forJLL, told regarding alternative officing, “They don’t have to be brick-and-mortar solutions. Workers today can be highly productive in residential offices, airports, even Starbucks.”

When discussing whether demand forecasting will improve and significantly narrow the band of uncertainty in regard to future requirements, Chapman disagreed, saying the current state of demand forecasting is not reliable enough. “Demand is being driven by consumers, which is the starting point for demand forecasting, but the uncertainty of data and the economy are a real challenge for corporate real estate.”

Also addressed was the issue of technological innovation and whether it will enable the integration of data streams from different parts of the organization into cross-functional dashboards to better support real-time decision-making. “This is still a spreadsheet environment, but we need to start creating these dashboards,” said Howell.

An attendee pointed out, “When talking about technology, nobody ever mentions real estate—until you know what you’re looking for, it will cost millions of dollars that CRE doesn’t have.”

Keppler countered that what’s needed is to normalize the data and be able to repeat it during the time period needed, while Myer said, “Dashboards are only a snapshot of a moment in time.” Another attendee commented that he was “not sure if large organizations are stable enough to support the dashboard system.”

Finally, the session dealt with the statement that by the year 2020, “organizations will recognize the potential detrimental impact of cost-cutting on productivity, changing the conversation from cost containment to value creation.” The panelists were hopeful that this would happen, and Myer said that when corporations are so focused on cost-cutting, they truncate other options that could save them money or ultimately improve their position. Howell commented, “If you focus on the value-creation piece the cost-management piece will take care of itself.”

Carrie Rossenfeld, Globe Street