By: AJ Magner, Managing Director with JLL
I’m sure you’ve heard. The commercial real estate industry is thriving. In fact, according to JLL, investment sales in the U.S. are on pace to reach an all-time high this year.
To keep your real estate healthy and profitable, portfolio optimization should still be top-of-mind … even in the strongest economic climates.
When you think portfolio optimization, do you think cost cutting or space reduction? Despite initial assumptions, there’s more to portfolio optimization than scaling back in times of trouble.
Rethink Real Estate: The Big Picture
Defined by JLL, portfolio optimization is “a comprehensive process that models real estate supply against real estate demand to drive efficiencies across a portfolio.”
It’s not just about cutting back. In many cases, portfolio optimization has been utilized to justify the need for more real estate.
Taking a step back: As one biggest line items on your business’ budget, it’s vital to approach real estate spend strategically—during the best (and worst) of times. Beyond basic rental and operating costs, your real estate portfolio plays a starring role in employee attraction, retention and overall productivity.
Looking at the holistic, long-term impact of your space, is it adequately meeting the needs of your business?
4 Tips to Optimize for Success
With the right approach, all businesses can find simple ways to optimize and advance the value of current real estate holdings. Read on for 4 quick tips to start optimizing today.
1. Eliminate silos. The first step to long-term real estate bliss is collaboration. Bring all stakeholders, from finance and HR, CRE professionals to C-suite executives, to the decision-making table. Various viewpoints will bring differing opinions and recommendations to light, while concurrently building team-wide buy-in.
Work with your team to develop a mutual understanding of core business objectives, and encourage open discussion to discover pain points and trouble zones across departments. This process will reveal more specific needs and opportunities throughout your portfolio, while promoting stronger communication and group consensus.
2. Analyze the numbers. Research shows that, “…most office space that corporations own or lease is underutilized for a striking 60 percent of a typical workday.” Curate portfolio data to get a by-the-numbers view of your space’s performance. Examples of valuable data include size in square feet, number of seats, number of square feet per seat and per employee, employee numbers, operational costs, under-utilized space and productivity inefficiencies.
Use this set to create a benchmark to understand your capacity and redistribute capital. The most successful companies pinpoint underperforming locations and relocate as quickly as possible. For others, the financial pain of relocation is enough to prevent change.
3. Design for talent. It’s no secret that most businesses are looking for new ways to attract and retain talented millennial professionals. Leverage portfolio optimization to evaluate how your workplace can appeal to new talent. Millennials are seeking workspaces that foster creativity, flexibility, productivity and collaboration.
Related Read: Keeping Pace with Millennial Impact on CRE Demand
Not sure where to start? Survey your current employees under 35 about workspace preferences. Example questions may include: How are open spaces contributing to creativity? Are you more productive in open or closed spaces?
4. Focus on sustainability. What’s good for the world is good for your consumer too. Sustainable operations are more likeable, more socially responsible and often more affordable. Underused space wastes your company’s resources, utilities and energy consumption.
One example: JLL recently helped the Empire State Building to become Gold LEED certified. The result? The owner is seeing $4.4 million in yearly savings. Check out the full video.
The strongest, and most optimized, portfolios are those that adapt to continual change. Work with your team to focus on maintained momentum and ongoing improvements by quarter, or year-over-year.
About the Author
AJ Magner is Managing Director located in JLL’s Cleveland office. AJ oversees corporate account teams and relationships. He works with both corporate and non-profit clients, nationally and internationally. View AJ Magner’s bio or connect with him on LinkedIn.
Image credit via Flickr Creative Commons.