How Major Changes to the Supply Chain Will Transform Corporate Real Estate

By Scott Henley

As the supply chain increasingly turns to automation, there will no doubt be an impact on the workforce. In fact, recent McKinsey & Company research suggests as many as 45% of activities individuals are paid to perform can be automated by adapting currently demonstrated technologies, representing about $2 trillion in annual wages. It’s not only impacting lower-skill or lower-wage roles, but even higher-paid occupations such as financial managers, physicians, and senior executives.

The report noted that organizational and leadership implications are enormous, and c-suite leaders will need to redefine jobs and processes so that organizations can take advantage of the automation potential available—saving labor, increasing output and quality, and improving reliability.

This is not to say automation will totally take over these jobs; McKinsey estimates fewer than 5% of occupations can be entirely automated using current technology, but 60% of occupations could have 30% or more of activities automated. Tasks that once took up a huge portion of the day can now be assisted by this automation, freeing up employees to conduct more meaningful and creative work.

The implications on real estate are staggering—there’s been a huge shift in how companies are leasing and utilizing space. For instance, there’s been a significant increase in collaborative and co-working setups, and many employees don’t even need to physically be present to do their jobs anymore.

Consider a law firm’s real estate needs just 20 years ago. Some of the larger names needed tens of thousands—even hundreds of thousands—of square feet in order to adequately house partners, associates, paralegals, paperwork, and a significant law library. Today, many are leasing much smaller footprints, as technology has reduced their space utilization—all of those books and paperwork can now be accessed quickly with a mere click of a mouse. (In fact, The Atlantic recently highlighted the rise of virtual law firms, which provide traditional legal services through attorneys working remotely, whether from home, a coffee shop, or co-working space.)
It’s important to take this automation into mind when developing or re-evaluating a company’s real estate strategy. It’s critical to have a knowledgeable corporate real estate team on hand to determine how this automation might affect your workforce and your space needs going forward.

For more information about how you can grow your business through corporate real estate decisions, contact Scott Henley at 904-514-2883 or shenley@phoenixrealty.net.

Five Best Practices for Real Estate Optimization

By Scott Henley

When you own or occupy a sizable real estate portfolio, it’s easy for efficiency to get lost in the shuffle—you may be throwing away money that could instead be used to increase your bottom line. In order to keep the portfolio thriving and profitable, it may be time to consider an optimization plan. Here are some best practices to consider:

1) Bring the Entire Team to the Table: Group consensus is at the core of the optimization process, so make sure all stakeholders are involved in the process, including real estate professionals, the financial team, human resources, and company leaders. Use this as an opportunity to discuss business objectives and gather various viewpoints and recommendations.

2) Crunch the Numbers: How is your space performing? Understand the entire portfolio’s square footage, number of occupants, operational costs, energy consumption, lease setups, geographical overlaps, and vacant space to see where you can redeploy capital, erase inefficiencies, and strategize.

3) Modernize and Refresh: Where can you bring your portfolio up to today’s standards? Occupants increasingly expect more collaborative spaces, amenities, superior technology, and sustainability. There are cost-effective ways to upgrade your portfolio to garner more attraction, increase employee retention, and position your company as a market leader.

4) Streamline Processes with Technology: From portfolio management to lease administration, a plethora of software options are available to help companies and real estate professionals keep track of important numbers and documentation.
5) Reevaluate Lease Options: Work with your real estate team to look at where different lease options may positively impact your financial position. For instance, your company might consider a sale-leaseback out of owned real estate, allowing you to turn an asset into cash for reinvestment. Perhaps an early renewal will help your company save rental costs in an increasingly heated real estate market. Or there may be opportunities to consolidate offices and sublease space that was otherwise being inefficiently used.

For more information about how you can grow your business through corporate real estate decisions, contact Scott Henley at 904-514-2883 or shenley@phoenixrealty.net.

Is Your Office Looking Beyond Millennials?

By Scott Henley

As corporate real estate advisors, we’re finding that more companies are making real estate decisions, such as how to design their tenant spaces, based on a Millennial workforce. It’s difficult not to—last year, the Millennial generation surpassed Generation X to become the largest share of the American workforce, according to the Pew Research Center.

However, both Generation X and Baby Boomers still make up a significant chunk of the employment base. In the first quarter of 2015, it was estimated that Millennials accounted for 53.5 million of U.S. employees, Generation X for 52.7 million, and Baby Boomers for 44.6 million.

Despite the staggering number of Gen Xers and Baby Boomers still in the market, there seems to be a corporate mind shift to the newest trend of collaborative workplaces that are seemingly preferred by the Millennial generation. Executives and managers are moved out of closed-door offices and sit among the rest of the employees, cubicles have fallen out of favor to benching, and there are many more communal spaces to frequent.

Is it fair to leave other employees who prefer more concentration and flexibility in the dust?

As interior furnishing company Herman Miller points out, workplaces can be designed to meet the varying needs of all generations and employees. In fact, there are plenty of Millennials who would prefer a place to concentrate and not overhear neighboring colleagues’ sales calls.

When it’s time to consider new space, whether a relocation or redesign of your existing office, consider all of your employees’ needs. Do you have space where they can meet with peers? Do you have an area where a closed-door meeting can take place with a reasonable expectation of privacy? Do you have alternative workspaces where a worker who needs to concentrate can separate himself from workplace chatter? Are there project-specific areas that allow employees to spread out and collaborate? And have telecommuting or virtual offices been considered?

A happier office is a more productive office—and one that considers all the needs of a cross-generational workforce.
For more information about how you can grow your business through corporate real estate decisions, contact Scott Henley at 904-514-2883 or shenley@phoenixrealty.net.

Does Your Real Estate Portfolio Meet Your Company’s Goals and Objectives?

By Scott Henley

A company’s corporate real estate portfolio can have a significant impact on business performance and the overall bottom line. So it’s critical that a company makes sure its real estate strategies are aligned with its business’ corporate goals and objectives, or it may be looking at some very expensive missteps down the road.

For example, a global corporation had a goal of ramping up sales of its best-selling item by 200% over the next five years. The problem: When it signed the 10-year lease for its corporate headquarters, it didn’t take into account the number of employees that would be needed to achieve that goal. There was enough market demand for the company to hit that target, but it realized a few years down the line that it didn’t take enough space, forcing it to find additional office space at a rental rate that has since more than doubled.

In order to avoid expensive situations like this, it is critical that companies have the right team around them to help shape their corporate real estate strategy.

A corporate real estate advisor, for instance, can take a company’s goals and objectives and form a portfolio plan that gives the company flexibility to weather upturns, downturns, and other changes in its business. Determinations might include:

  • How much space the company must retain for the long-term, no matter the business climate;
  • How much space the company needs on a shorter-term basis;
  • What space the company may want in the future;
  • Changes in the employee landscape that may affect future space needs, such as a corporate shift towards hoteling or telecommuting;
  • How the company can optimize its current portfolio (also known as “rightsizing”) to eliminate wasted space and make sure the right space is available at the right time to meet the company’s ongoing needs.

It is important to note that developing the ideal strategy for a company doesn’t only involve the participation of the c-suite and real estate team. The most effective plan encompasses the input of the entire organization, including stakeholders like human resources, the financial department, and leaders or managers of all critical business units. Only then can a company truly understand if its real estate portfolio is meeting its core goals and objectives.

For more information about how you can grow your business through corporate real estate decisions, contact Scott Henley at 904-514-2883 or shenley@phoenixrealty.net.

What You Need to Know Now About FASB 13 Changes

By Scott Henley

The Financial Accounting Standards Board (FASB) will soon significantly change how the commercial real estate industry reports lease transactions on financial statements. These changes are right around the corner, impacting both tenants and owners adhering to GAAP standards—and will likely have a substantial effect on companies’ bottom lines. Here’s what you need to know.

First, let’s understand FASB 13—it’s what regulates accounting standards for office leases in the United States. Every lease must be classified as either an operating lease or capital lease based on specific criteria, and most leases today are classified as the former. The difference: operating leases are treated as an ongoing operating expense while capital leases are treated as a financing transaction and are reported as an asset and a liability.

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