Corporate Real Estate Management [1st ed.] 9783658322212, 9783658322229

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Thomas Glatte

Corporate Real Estate Management

essentials

essentials liefern aktuelles Wissen in konzentrierter Form. Die Essenz dessen, worauf es als „State-of-the-Art“ in der gegenwärtigen Fachdiskussion oder in der Praxis ankommt. essentials informieren schnell, unkompliziert und verständlich • als Einführung in ein aktuelles Thema aus Ihrem Fachgebiet • als Einstieg in ein für Sie noch unbekanntes Themenfeld • als Einblick, um zum Thema mitreden zu können Die Bücher in elektronischer und gedruckter Form bringen das Expertenwissen von Springer-Fachautoren kompakt zur Darstellung. Sie sind besonders für die Nutzung als eBook auf Tablet-PCs, eBook-Readern und Smartphones geeignet. essentials: Wissensbausteine aus den Wirtschafts-, Sozial- und Geisteswissenschaften, aus Technik und Naturwissenschaften sowie aus Medizin, Psychologie und Gesundheitsberufen. Von renommierten Autoren aller SpringerVerlagsmarken.

More information about this series at http://www.springer.com/series/13088

Thomas Glatte

Corporate Real Estate Management

Thomas Glatte School of Real Estate Fresenius University of Applied Sciences Heidelberg, Germany

ISSN 2197-6708 ISSN 2197-6716 (electronic) essentials ISBN 978-3-658-32221-2 ISBN 978-3-658-32222-9 (eBook) https://doi.org/10.1007/978-3-658-32222-9 © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Planung/Lektorat: Karina Danulat This Springer Vieweg imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

What you will find in this essential

• An explanation of the essential elements of corporate real estate management (CREM) and how it can be distinguished from other forms of real estate management • An overview of the scope and composition of real estate portfolios of nonproperty companies • The influence of corporate strategy on the real estate strategy of a corporation as well as associated real estate goals and the measurement of their success • Fundamental aspects of professional data management in corporate real estate management • An explanation of the relationships between the real estate portfolio, the organization and the procurement of real estate services • Introductory explanations of specific aspects of CREM such as corporate social responsibility, sustainable building, corporate architecture, corporate design and workplace management • The impact of changes in the world of work on corporate real estate management in the future.

v

Preface

I have been working in corporate real estate management in one of the major DAX 30 and Fortune 500 companies for over 20 years, including in managerial positions for 15 years. I have also been teaching this topic for over 15 years at various institutes such as the Technical University of Dresden and its training company EIPOS GmbH, the IREBS Real Estate Academy, and the University of Stuttgart. For over ten years, I have been actively involved in the further development of corporate real estate management in Europe as a board member of CoreNet Global, the industry association of corporate real estate managers. Throughout this time, I have been motivated by a dual mission. While I wanted to advance the real estate management of my company in order to make a sustainable contribution to the company’s success, I always felt that it was also important to share success stories and failures with my peers in other companies and with the next generation of corporate real estate managers. Our industry is comparatively young and the people in it still have a lot to learn, including myself. In my professional life to date, I have had the opportunity and good luck to push ahead with a large number of real estate projects and to set up a CREM organization in a relatively stable and well-managed environment. With the help of publisher Springer Vieweg I was able to use my experience to speak to an interested readership in my books Development of Corporate Real Estate and Compendium of Corporate Location Strategies, both published in German language, as well as in numerous articles for technical journals. I was therefore very pleased that with the essentials format, Springer Verlag developed a series of books for a quick and focused introduction to complex specialist topics and offered me the opportunity to summarize the topic of corporate real estate management for this purpose. The aim of this book is to give an introduction to corporate real estate management and to convey fundamental aspects

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Preface

of a proactive and value-oriented handling of corporate real estate. The book is addressed in particular to career changers from the real estate industry and from the companies themselves, but also to students, scientists, and construction and real estate experts. After a very successful launch of this book’s German edition, I am very grateful that Springer Verlag is now also publishing the English version. Chapter 1 explains the terminology of CREM and distinguishes it from other thematic fields of real estate management. Chapter 2 provides an introduction to corporate real estate management. Chapter 3 deals with data management. Chapter 4 focuses on the real estate portfolio, the CREM organization and the sourcing of real estate services. Chapter 5 highlights some selected aspects of real estate management that are specific to CREM. Chapter 6 summarizes the other chapters. I would like to thank Springer Verlag and my employer BASF for the opportunity to work on this publication. My thanks also go to Prof. Dr. Andreas Pfnür from the Research Center for Real Estate Business Administration at the TU Darmstadt for his many years of friendly cooperation on a variety of CREM topics. I make extensive use of the results of this cooperation in this book. I would also like to thank my esteemed colleagues Stefanie Hofmann and Wolfgang Scholl from BASF’s Global Real Estate department for the technical review of this book. I am also very grateful for the very professional collaboration with Bernd Leinenbach, who has been supporting me for many years especially in English-language publications. Finally, I would like to thank my wife Pia GlatteBast with all my heart for her patience and support in the creation of this book and the publications used in it. Heidelberg/Dresden August 2020

Prof. Dr.-Ing. Thomas Glatte

Contents

1 Derivation and Delimitation of Corporate Real Estate Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Basic Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Corporate Real Estate Management—A Definition . . . . . . . . . . . . . 1.3 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.1 Institutional and Corporate Real Estate Management . . . . . 1.3.2 Distinction from Other Forms of Real Estate Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.3 Corporate Real Estate and Industrial Real Estate . . . . . . . . . 1.3.4 Operationally Required Property and Surplus Property . . .

1 1 1 2 2 4 5 6

2 Introduction to Corporate Real Estate Management . . . . . . . . . . . . . . . 2.1 Real Estate Portfolios of Non-Property Companies . . . . . . . . . . . . . 2.1.1 Scope of Corporate Real Estate Portfolios . . . . . . . . . . . . . . 2.1.2 Composition of Corporate Real Estate Portfolios . . . . . . . . 2.2 Corporate Strategy and Real Estate Strategy . . . . . . . . . . . . . . . . . . . 2.3 Goals and Success Measurement in CREM . . . . . . . . . . . . . . . . . . . .

9 9 9 9 12 14

3 Data Management as the Basis of Professional CREM . . . . . . . . . . . . . 3.1 Transparency—Every New Beginning is Difficult . . . . . . . . . . . . . . 3.2 Less is More—Focused Data Collection . . . . . . . . . . . . . . . . . . . . . .

19 19 19

4 Portfolio, Organization and Sourcing of Real Estate Services . . . . . . . 4.1 The Challenge of Corporate Real Estate . . . . . . . . . . . . . . . . . . . . . . 4.2 Challenge CREM Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Portfolio Versus Organization—Dependencies and Levers . . . . . . . 4.4 The Challenge of Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23 23 26 27 29

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4.5 Sourcing Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30

5 Specific Aspects of Corporate Real Estate Management . . . . . . . . . . . . 5.1 Corporate Social Responsibility and Sustainable Building . . . . . . . 5.2 Corporate Architecture and Corporate Design . . . . . . . . . . . . . . . . . . 5.3 Working Environments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1 The Importance of the Workplace . . . . . . . . . . . . . . . . . . . . . 5.3.2 Modern Workplace Management . . . . . . . . . . . . . . . . . . . . . . 5.3.3 Types of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.4 Influence of Changes in the World of Work on Future CREM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33 33 38 39 39 40 40

6 Summary—The (Bumpy) Road to Becoming a CRE Manager . . . . . .

47

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51

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Derivation and Delimitation of Corporate Real Estate Management

1.1

Basic Information

Corporate real estate management (CREM) experienced a strong awakening in Anglo-Saxon countries in the 1980s and in Continental Europe in the 1990s. In the early 2000s, things were very quiet until the start of the financial crisis in 2008. Since then, the industry has been experiencing a renaissance, which has been recognized by the trade press. As an example, the value of total corporate real estate assets in Germany is estimated at around 3 trillion euros (Pfnür 2014, p. 2). This means that around one-third of real estate assets in Germany falls into the corporate real estate category. Against the background of these impressive figures, only the housing industry, the public sector and churches are of similar importance. In contrast, the projects of traditional real estate investors and real estate portfolio owners, which are clearly more present in the media and in the specialist literature, are of relatively minor importance to the economy. Reason enough to take a closer look at the management of corporate real estate and its control and to question what it is all about.

1.2

Corporate Real Estate Management—A Definition

As is so often the case, a good introduction to the topic involves taking a close look at the terminology. Definition according to Andreas Pfnür (Pfnür 2014, p. 14): “Corporate real estate management (CREM) should be understood to mean all property-related activities of a company whose core business is not real estate. © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 T. Glatte, Corporate Real Estate Management, essentials, https://doi.org/10.1007/978-3-658-32222-9_1

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Derivation and Delimitation of Corporate Real Estate Management

CREM deals with the economic procurement, support, and utilization of the properties of production, trading, and service companies as part of their corporate strategy. The properties serve to carry out and support the core activities.” Note: In German-speaking countries, this definition is also supported by the world’s leading association of corporate real estate managers, CoreNet Global, (CNG o. J.) and the German Property Federation (Zentraler Immobilien Ausschuss) (ZIA o. J.).

Thus, CREM is concerned with the real estate assets of companies in the private sector (corporates); this is why these assets are also called corporate real estate (CRE). The original purpose of these corporates is aimed at all forms of entrepreneurial activity—anything other than the construction, management, or exploitation of real estate. Hence, from the perspective of the real estate industry, they are also referred to as non-property companies. In the broader sense, corporate real estate management encompasses all strategic, tactical and operational levels of real estate value creation, i.e. portfolio management, asset management, property management and building management, and often even wider infrastructure services, also called facility services (Nävy and Schröter 2013, p. 12); Fig. 1.1 illustrates this structure (Glatte 2014, p. 6). In a narrower sense, CREM is used to refer to the strategic tasks of real estate management at corporates only.

1.3

Definitions

1.3.1

Institutional and Corporate Real Estate Management

Real estate is very popular as a relatively secure investment. The security for investors is due in particular to the fact that real estate constitutes a “real value”, i.e. physically existing and usable objects. Especially in times of crisis, the frequent flight into fixed assets, such as real estate, shows its high valuation as a so-called “safe haven” for investors. The reason for this is on the one hand the de facto “eternal existence” of land and on the other hand the durability and longevity of the structures. A total loss of value, such as in the case of securities, therefore, only occurs in property ownership in very extreme, exceptional situations. Institutional real estate management therefore focuses on the procurement, management, and sale of real estate for the purpose of investment. This type of real estate is called investment property. The primary focus of institutional real estate management is to generate a return on investment property, optimizing the

1.3 Definitions

3

TAXONOMY OF REAL ESTATE MANAGEMENT (REM) (Infrastructural) Facility services

Investment property

Corporate property

Investment/capital investment Optimization of risk, return, liquidity

Use

Support

Optimization of internal value added

Effectiveness & efficiency

Management concept

Yield-oriented property management

Usage-oriented property management

Operational excellence

Company concept

"Property company"

"Non-property company"

Institutional real estate management

Corporate real estate Management (CREM)*

Property purpose Objective of the real estate activity

Strategic

Portfolio Perspective

Portfolio vs. Building

Tactical

Service *Note: this also applies to public and ecclesiastic real estate management

(Real Estate) Portfolio Management Overarching strategic tasks with a focus on the entire real estate portfolio or larger parts of it, including the definition of operator, user and service strategies

(Real Estate) Asset Management Strategic and tactical tasks with the focus on (smaller) real estate portfolios or individual buildings, including supra-regional commissioning/management of additional services (facility services)

Property Management Individual building or service perspective

Operational

Management focus and value driver levels

Strategic vs. Operational

Local tactical tasks and owner function (lessor) with focus on a very local real estate portfolio or individual buildings, including commissioning/management of additional services (facility services)

Building Management

Facility Services

Local operational tasks with the focus on the management of individual buildings, including the commissioning/management of subcontractors for individual trades (also often called „hard services“)

Operational services beyond building management (also often called „soft services“

Facilities management

Type of property

Fig. 1.1 Overview of real estate management disciplines

return on the one hand and minimizing the risks arising from the property on the other. In contrast to the classic real estate industry, it is not the real estate returns that can be achieved through construction, leasing, or sale that are the primary drivers for the construction, design, management, and sale of real estate. Depending on the type of property, these needs can be fairly simple, average, or very complex. In corporate real estate management, the usage requirements are traditionally specified by the user. The user is the representative of the core business and thus of the area that earns the actual money in the company. Therefore, the user’s role compared to the CRE manager as a provider of space is comparatively strong. Thus, at corporates, from an internal perspective, there is what realtors call a “tenant market”. This is logical as corporate real estate often represents one of the largest cost blocks and a very large part of corporate assets. In this context, the handling of the company’s real estate has greatly changed. The fact that the property is not part of the core business, but—purely from an economic point of view—a means of fulfilling the (core) business object leads

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to some special features for corporates when dealing with their real estate, even if there are a lot of parallels with the classic real estate industry in terms of development, structure and distribution of tasks (see Fig. 1.1).

1.3.2

Distinction from Other Forms of Real Estate Management

The owner-occupier perspective of corporate real estate management is comparable with two other special forms of real estate management: • Public Real Estate Management (PREM) • Ecclesiastic Real Estate Management (EREM). With these two forms of real estate management, the needs are likewise defined by the user, i.e. by the state with its authorities or social institutions, and by the church with its congregations, administrative structures, and its own social institutions. Another feature that corporate, public and ecclesiastic real estate management have in common is the existence of a large number of—often not marketable—special properties. While the corporate real estate manager is concerned about the reuse and utilization of a former industrial facility, a municipal real estate manager has to deal with schools that are no longer needed, and an ecclesiastic real estate manager, due to shrinking congregations, with orphaned church buildings. Likewise, all three types of property management are equally affected by official requirements such as monument conservation, renovation costs, and a high level of public interest in the way they handle their real estate. However, there are very clear differences, particularly in terms of commercial aspects such as accounting and balancing, and in terms of the focus on certain value drivers—economic, social, cultural and social. Therefore, it makes sense to consider these forms of real estate management separately. For the explanations in this book, the focus will be on corporate real estate management. However, a large part of the explanations on real estate development and real estate utilization can also be applied without restriction to the two other areas of real estate management mentioned above.

1.3 Definitions

1.3.3

5

Corporate Real Estate and Industrial Real Estate

The term “industrial real estate” (German: Unternehmensimmobilie) is common in the literature as well as in relevant specialist media. In Germany, the term was defined in particular by the “Initiative Unternehmensimmobilien” (Corporate Real Estate Initiative), an interest group of developers and managers of commercial and industrial real estate (Initiative Unternehmensimmobilien o. J.). Through greater transparency, this initiative endeavors to position corporate real estate as a separate asset class in Germany, suitable for investment. It subsumes the following specific types of real estate in this category (Initiative Unternehmensimmobilien 2014, p. 4): • • • •

Production properties Logistics/warehouse properties Transformation properties Commercial parks.

Production properties are mostly halls with a moderate proportion of offices suitable for a wide range of production types. In principle, their hall areas can also be used for other purposes such as storage, research and service, or for wholesale or retail. The third-party usability of production properties depends on their location. Warehousing/logistics properties are mainly existing properties with mostly simple storage options and possibly some service areas. For the purposes of corporate real estate management, these are differentiated from modern logistics halls by their maximum size of 10,000 sqm. They are characterized by different expansion and quality standards as well as flexible and inexpensive types of space. They are usually reversible and suitable for higher-value uses (e.g. by retrofitting ramps and gates). Transformation properties are properties that are not or no longer operationally necessary and which, as former manufacturing facilities, have a building structure that has grown organically for operational reasons. They usually have a so-called “campus character”, i.e. they do not consist of individual buildings, but rather of a building complex—usually also infrastructurally interconnected. The transformation process is the transition from a previously full (owner occupant) use to another subsequent use by third parties, a process that often takes several years. This is preceded by the classification of the property as a non-operational and, hence, “surplus” property by the previous operational user (see Sect. 1.3.4). In this process, the property is usually sold by the corporate and then at least

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Derivation and Delimitation of Corporate Real Estate Management

partially leased back. The resulting rental income offers the buyer the opportunity to significantly reduce development and financing risks and to use this income to carry out modifications or renovations. Buyers of such transformation properties are often project developers who accompany the transformation process towards a fungible and thus marketable commercial park and who, after the transformation process has largely been completed, sell it to investors as an investment property. In addition to the continuous cash flow in the development phase described above, the potential of these properties also lies in the fact that the project developer can increase the densification of the industrial areas, which are frequently not fully exploited in terms of site planning, and often in the unique charm of their historical industrial architecture (“red brick character”). They are thus usually characterized by a mix of revitalized, historic buildings and new buildings. Transformation properties are also often found in inner-city locations and are therefore easily accessible by public or private transport. Commercial parks are usually planned and built specifically for leasing to companies. They consist of several individual buildings as an ensemble. Management and supply and disposal infrastructure of commercial parks are organized in a uniform manner. They have all types of spaces (office space usually between 20% and 50%). Commercial parks are commonly located on the outskirts of a city and easily accessible. The term “corporate real estate” is much broader than the scope of the industrial real estate mentioned above. It includes all forms of properties that corporates need for the execution of their core business, including administrative buildings, social buildings, training centers, research and application technology buildings, agricultural buildings such as greenhouses, etc. The type of property is actually immaterial as long as its use serves the business purpose itself. In these cases too, especially in connection with industrial companies, the term corporate real estate is sometimes imprecisely used in the trade media as a synonym for industrial property and vice versa.

1.3.4

Operationally Required Property and Surplus Property

Real estate is necessary for a corporate to fulfill the purpose of its core business. As long as the need is largely operationally justified, these properties are operationally required. This operational need can change over the life cycle of a property for a variety of reasons. As soon as the operational need is lost, the property is no longer operationally required. If that is the case, however, it still ties up capital that is

1.3 Definitions

7

not available to the core business for investment purposes. Thus, from a core business perspective, such property is to be declared “surplus”, monetized, and its revenues to be reinvested in the corporation’s core activities. Note: In most cases, yields of real estate investments are also below yields achievable in a company’s core business. If this is not the case, and the respective company has significant real estate holdings, it should seriously question its strategy and business model. There are numerous examples where former core activities were divested and the management of real estate became a core business. In such cases, the company no longer operates a corporate real estate management but an institutional real estate activity.

The identification of operationally unnecessary properties within the company and their optimized utilization—from the perspective of the respective company—with regard to possible opportunities and risks are among the essential core tasks of a corporate real estate manager. It is also important to differentiate between property that is operationally necessary and property that is not from an accounting perspective. Internationally operating companies mostly use the International Financial Reporting Standards (IFRS) (IFRS o. J.). The IFRS apply two important standards to real estate: • International Accounting Standard 16 “Property, Plant & Equipment”, or IAS16, regulates how to account for the property, plant and equipment of a company (IASB, IAS 16 2005) • International Accounting Standard 40 “Investment Properties”, or IAS 40, regulates how to account for investment property (IASB, IAS 40 2005). A very significant difference between the IAS and the accounting regulations of the German Commercial Code (HGB) is that instead of valuation at acquisition cost, IFRS focuses on a valuation at market value and, thus, information for owners or shareholders. In the event of an asset being added, for example, through the construction or purchase of a property, it is valued and shown in the balance sheet in the amount of the acquisition or production costs, both under IAS 16 or IAS 40, and under HGB. Corporate real estate is mostly subject to the requirements of IAS 16 as long as it is necessary for the operational purposes of a core business whose object is not to generate profits from real estate. What is particularly interesting from the CREM perspective is the property’s subsequent valuation. Under IAS 16 there is a choice between two models for subsequent valuation:

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• Cost model • Revaluation model. With the cost model, the acquisition or production costs are reduced by scheduled and / or unscheduled depreciation. With the revaluation model, the valuation is based on the usual fair value minus scheduled or unscheduled depreciation. In practice, the cost model is usually applied, i.e. the buildings are depreciated over the years and thus decrease in value. Real estate that is not required for operations must be accounted for in accordance with IAS 40. Here are some examples where IAS 40 is applicable: • Land that is no longer needed for production but is held for long-term appreciation, for example, through project development • Buildings used for a company’s own administration in the past that are now rented to third parties (outside the company). From a CREM perspective, it is important that real estate that is not required for operations must be treated as investment property. This, in turn, must be valued under IAS 40 in subsequent years at fair value (market value). This means that at the time of the declaration of formerly operational property as “not necessary for operations”, the property must be revalued as investment property. As operational property is usually valued according to the cost model of IAS 16, a revaluation according to IAS 40, depending on the degree of depreciation, can lead to significant appreciation or devaluation of the property and thus to adjustments to the corporate’s balance sheet. Note: Leasing a building to another company within the group is not to be regarded as an investment property and is therefore not subject to IAS 40 but to IAS 16.

2

Introduction to Corporate Real Estate Management

2.1

Real Estate Portfolios of Non-Property Companies

2.1.1

Scope of Corporate Real Estate Portfolios

Although the core business of so-called corporates focuses on all kinds of activities, they may still have a considerable property portfolio. There are numerous surveys supporting this statement. On the basis of the monthly reports published by the German central bank (Deutsche Bundesbank), Schulte was able to determine that real estate accounts for approximately 10% to 12% of the total assets of German companies (Schulte and Schäfers 1998, p. 41). The value of these assets per company can be gleaned, for example, from the list (see Table 2.1) indicating the real estate assets of the DAX 30 companies in 2004 and 2016 (Glatte 2018, p. 22).

2.1.2

Composition of Corporate Real Estate Portfolios

In 2014, the composition of corporates’ real estate portfolios was examined as part of a study by the Research Center for Real Estate Management at the Technical University of Darmstadt (FBI o. J.) on behalf of the CoreNet Global association (CNG o. J.) and the German Property Federation (Zentraler Immobilien Ausschuss) (ZIA o. J.) (Pfnür 2014). This study determined that the value of corporate real estate of all kinds in Germany was just under e 3 trillion (see Sect. 2.1). Of this, approximately e 500 bn is the value of land (Pfnür 2014, p. 17). Another interesting picture emerges when types of use are distinguished (Pfnür 2014, p. 19): 22% of corporate real estate are factories and workshops (e 660 bn)

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 T. Glatte, Corporate Real Estate Management, essentials, https://doi.org/10.1007/978-3-658-32222-9_2

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Introduction to Corporate Real Estate Management

Table 2.1 Real estate portfolios of the DAX 30 companies (2004 and 2016) Book values [in bn e] 2004

Acquisition costs [in bn e] 2016 2004

2016

Adidas

–

1.0

–

1.4

Allianz

16.7

3.1

unknown

4.0

BASF

2.4

5.3

6.2

11.3 10.3

Bayer

3.3

4.8

8.0

Beiersdorf

–

0.4

–

BMW

3.4

6.2

5.6

10.9

Commerzbank

0.9

0.4

1.0

0.9

Continental

0.9

2.8

1.6

4.5

11.4

8.0

21.0

16.8

Deutsche Bank

3.6

1.9

–

Deutsche Boerse

–

0.0

–

0.1

Deutsche Lufthansa

0.8

–

1.5

–

Daimler

0.8

4.3

Deutsche Post

5.3

2.5

7.4

4.8

Deutsche Telekom

9.6

7.0

17.6

18.5

11.9

1.8

18.7

3.8

e.on Fresenius

–

3.9

–

6.6

Fresenius Medical Care

0.8

1.5

1.2

3.2

Heidelberg Cement

–

6.9

–

9.7

Henkel

0.8

1.1

1.6

2.2

HVB Group

2.5

–

3.9

–

Infineon

0.5

0.4

1.1

1.1

Linde

1.0

1.5

1.9

3.0

Lufthansa

–

1.3

–

2.7

MAN

1.1

–

2.2

–

Merck

–

2.0

–

3.4

Metro

8.8

–

12.1

–

Munich Re

1.4

2.4

2.1

3.6

ProSiebenSat1 Media

–

0.1

–

0.1

RWE

8.2

2.9

13.7

7.3 (continued)

2.1 Real Estate Portfolios of Non-Property Companies

11

Table 2.1 (continued) Book values [in bn e] 2004

Acquisition costs [in bn e] 2016 2004

2016

SAP

0.7

1.1

0.9

–

Siemens

4.6

4.2

9.2

7.9

ThyssenKrupp

4.6

0.3

7.7

0.4

TUI

1.3

–

1.8

–

Volkswagen

7.2

19.6

13.7

33.5

Vonovia

–

0.1

–

0.1

and 35% are commercial and warehouse buildings (e 1.05 trillion). This means that with a share of 57% or a value of e 1.71 trillion, corporate real estate (as defined in Sect. 1.3.3) represents significantly more than half of corporate real estate assets in Germany (see Fig. 2.1).

Other Buildings 10% Hotels & Restaurants 4% Administration Buildings 29%

Trade and Warehouse Buildings 35%

Factories & Workshops 22%

Fig. 2.1 Real estate portfolios—value-based breakdown by type of use

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Introduction to Corporate Real Estate Management

Production building

86%

Technical building

84%

Research & development building

84%

Trade building

54%

Warehouse Stock

67%

Administration building

71% 0%

20%

40%

60%

80%

100%

Fig. 2.2 Ownership rates by types of use

Another analysis by the Research Center for Real Estate Business Administration at TU Darmstadt shows that the ownership rate among German companies is 68.9% (Pfnür und Weiland 2010, p. 41). Compared to previous analyses, this is only a marginal decrease. In 2002, the figure was still slightly over 70% (Pfnür und Armonat 2004, p. 42). Germany is thus far above the USA at approx. 30%, the UK at approx. 55% and Asia at 20% (Pfnür 2010). A look at the distribution of ownership ratios by asset class (Fig. 2.2) clearly shows the problem: in particular, the asset classes grouped under the term “industrial real estate” show an above-average ownership ratio (Pfnür 2014, p. 32). This is due to the challenges for corporate real estate presented in Sect. 4.1.

2.2

Corporate Strategy and Real Estate Strategy

In contrast to property companies, whose core business and thus corporate strategy are characterized by real estate management, property-related strategies in nonproperty companies are by necessity subordinate to the general group strategy. In a nutshell: the core business determines the management of real estate rather than the other way around. But this is exactly where there is a potential conflict that CRE managers have to deal with. On closer inspection, a purely top-down hierarchy between business and CREM does not seem particularly appropriate, but rather an interaction between clearly defined requirements of the core business

2.2 Corporate Strategy and Real Estate Strategy

13

on the one hand and their impact on real estate realities on the other. Fig. 2.3 illustrates this process (Glatte 2014, p. 13). Why might this be so? A look at the balance sheets of German companies reveals that they still show very high real estate assets (5% to 20% of fixed assets). When queried, real estate departments confirm the sustained very high ownership rates in the real estate portfolio (see Fig. 2.3). Due to the very heterogeneous level of maturity of the respective real estate departments in the various groups of companies, the number of pertinent contacts thins out very quickly when the real estate or workplace-related costs, the real estate portfolio and, ultimately, the costs, are analyzed in detail (which requires a fairly high level of transparency with regard to the processes). It is not evident that due to the cost pressure, economically weaker companies have a higher transparency than supposedly profitable companies. The background to this is the fact that in many companies the alignment between corporate and real estate strategy and thus between operational requirements and real estate implementation is regarded as a one-way street—the CREM department being a mere executioner of operational requirements. The upshot is

CORE BUSINESS CORPORATE STRATEGY

Alignment with other functional strategies (HR, IT, Security etc.)

REAL ESTATE STRATEGY

REAL ESTATE MANAGEMENT (CREM) Fig. 2.3 Interaction between core business and CREM

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Introduction to Corporate Real Estate Management

a lack of transparency, an extensive portfolio of space that is not required for operational purposes or is not used efficiently, and thus the high real estate costs, which ultimately lead to non-competitive operating, labor and workplace costs. It is exactly the inflexible, “immobile” nature of property that renders it absolutely necessary to turn this operational one-way street into a two-directional highway (see Fig. 2.3). In today’s dynamic and demanding economic environment, flexibility, speed and profitability are particularly important. These are all requirements for which real estate is not exactly known in the classic investment market. Here, real estate—especially for utilities—is valued as an addition to the portfolio, particularly because of its stability and security, and the concomitant lower returns are accepted.

2.3

Goals and Success Measurement in CREM

It is not only logical, but also economically sensible to align corporate and real estate strategy, especially with regard to the goals and performance indicators for corporate real estate management. In particular, this is also about targets and their feasibility. The contradictions in the respective value contributions can be identified in particular in terms of quantitative parameters such as the possible return, or of qualitative parameters such as flexibility, i.e. the timely availability and marketability, as well as of levels of satisfaction. A common goal of companies is to increase their profitability. Here, the CREM has the opportunity to make an important contribution to a company’s success. However, the focus here is less on the individual property than on the entirety of a company’s real estate and properties. With regard to the monetary objectives, there are basically three approaches for a professional CREM: • Earning income by recognizing potential for increases in value, and selling and realizing them in the case of properties that are not required for operations • Efficient control of the resources provided (e.g. cost budgets, personnel) by focusing on important, long-term (strategic) or core, business-critical measures • Reduction of expenses through the recognition of cost reduction potentials and their implementation in real estate that is operationally required. However, the particular challenge of CREM is to leverage these potentials without fundamentally changing or otherwise affecting the company’s core business. In order to make these measures sustainable, i.e. make them work in the long term, it is important to find the optimum for land and buildings from:

2.3 Goals and Success Measurement in CREM

• • • •

15

The lowest possible vacancy Expandability Flexibility and adaptability to changes in the company and Ensuring long-term usability for other purposes.

It was already pointed out in Sect. 2.2 that real estate still accounts for 5% to 20% of a company’s fixed assets. In addition, depending on core business sector and company size, real estate costs represent 10% to 20% of a company’s total costs. These are composed of cost types such as capital costs (interest on equity and debt), depreciation, operating costs (building management and facility services), building maintenance costs, administrative costs and taxes (see Fig. 2.4). In addition, for knowledge-intensive companies, they are usually the second largest cost block after personnel costs (Pfnür 2014, p. 22). This makes cost efficiency, i.e. the optimized use of available financial resources in terms of possible output, one of the main goals for professional CREM. Potential savings become particularly obvious when you consider that many companies in the past did not have active real estate and property management or only implemented it professionally to a small extent. The first approaches

Building maintenance costs 7%

Cost of capital (equity & debt) 30%

Operang costs 20%

Taxes 6%

Administrave expenses 7%

Fig. 2.4 Real estate cost types and their distribution

Depreciaon 30%

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Introduction to Corporate Real Estate Management

were mostly made in the operating phase of the property with the implementation of professional facility management. However, this is only the first step on the way to a comprehensive, holistic view of corporate real estate in terms of cost optimization. In principle, the fulfillment of operational and strategic corporate goals in real estate can be supported by a multitude of detailed tasks. Without any claim to comprehensiveness, the following list offers some essential approaches: • • • • • • • • •

• •

Provision of space in line with deadlines, budget and quality Optimization of user satisfaction and effort (cost) Increasing user productivity through better working environments Optimizing usage efficiency (utilization of infrastructures and energy, land use, etc.) Avoidance of vacancies (unused or unnecessary properties) Securing necessary expansion options at minimal costs Generating cash flow (by selling non-essential real estate) Tax optimization leveraging any potential advantages Contract management and creation of contractual framework conditions to enable the following: – Highest possible flexibility – Minimal costs – Minimal liability or payables Balanced risk assessment and risk avoidance Securing long-term usability potential by being as close to the market as possible and being able to be used for other purposes based on: – Chosen location and – Chosen structural design.

A common tool for quantitative measurement of success targets is to derive profitability indicators from the success indicators, whereby profitability is generally understood as the ability to cover the expenses (costs) arising from a business process with corresponding income (earnings). The term return is very often used to express profitability. This is the total annual earnings on invested capital, which is usually expressed as a percentage of the invested capital. For non-property companies, the (comparative) returns that can be achieved from real estate investments usually lag behind the return expectations of the core business. Depending on the type of property and risk profile, returns of between 3% and 8% are customary for classic property investments.

2.3 Goals and Success Measurement in CREM

17

For many corporates, however, return expectations for their core business will be higher than this. These measures of “success” with regard to the return on the property are aimed at the investor. The fundamental question is whether this approach can even be used for a corporate, because its view of the property essentially depends on its usage. This usage is derived from an existing need, which in turn results from the needs of the core business. Ultimately, these define the location of the property, its structural conditions (architecture, interior fittings, etc.) and, hopefully, also the associated commercial and legal aspects. A key qualitative measure of success for CREM is therefore user satisfaction. In direct connection with this, user productivity should also be mentioned as a quantitative parameter. A study by TU Darmstadt found productivity differences of up to 20% (Krupper 2011, p. 26) based solely on the existence of different office space concepts. However, to be able to leverage productivity potentials, changes to traditional land use concepts and thus also to operational processes, hierarchical understandings, personnel concepts based on perceived status symbols (e.g. private offices, parking spaces, etc.) and the availability of IT tools are inevitable. This illustrates another need for feedback between real estate strategies and overall corporate goals. Success in this regard can only be achieved with a holistic approach, in close cooperation with other functional departments such as HR and IT and their specific sub-strategies (see Fig. 2.3). However, it is precisely here that there is also a lot of overlap between the objectives of a professional CREM and a proactive core business. Both internal stakeholders pursue the same goals here. Based on this, it can be said that despite the fundamental strategic guidance by the core business, an alignment between the corporate and real estate strategies is essential for an economically efficient and personnel-effective use of the resource “real estate”, and thus, ultimately, for overall business success. However, it must be reiterated that professional real estate management can only carry out propertyspecific optimization within the framework specified by the core business.

3

Data Management as the Basis of Professional CREM

3.1

Transparency—Every New Beginning is Difficult

Professional management is not possible without a suitable database. Consequently, the basis of all activities in real estate management should be appropriate data transparency. International, heterogeneous company real estate portfolios pose special challenges such as data availability, heterogeneous system landscapes, different measurement systems, different approaches to accounting, etc. The practitioner quickly gets bogged down in the question of which data to collect. Yet all they need to know is what they intend to control as a CRE manager. The definition of future control parameters (output) is an important prerequisite for the definition of the data to be collected (input). However, the right control parameters can only be established if you have created a corresponding real estate strategy based on the corporate strategy (see Fig. 2.3). So the following step-bystep procedure can be followed: 1. 2. 3. 4.

Corporate strategy (core business strategy) Real estate strategy (CREM strategy) CREM control variables (output) Data to be collected (input)

3.2

Less is More—Focused Data Collection

Of course, a real estate manager’s environment is complex and diverse. However, professionalism in dealing with this complexity does not involve developing as many control parameters as possible and, consequently, collecting a large amount

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 T. Glatte, Corporate Real Estate Management, essentials, https://doi.org/10.1007/978-3-658-32222-9_3

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of data. The opposite is the case. In the management of real estate, it is extremely important to focus on the essential, especially if the portfolio is international and heterogeneous in nature. In addition to the procedure outlined in Sect. 3.1, it is also important to define which level of real estate value creation (portfolio management, asset management, property management, building management or facility services—see Fig. 1.1) the data to be collected should belong to. Very few, already holistic and fully mandated CRE departments will need the large variety of operational, tactical and very strategically oriented pieces of information at the same time. But only these types of organizations are really able not only to collect all of this information in the first place, but also to update it. And this is where the greatest challenge lies. Depending on the real estate portfolio, once-off collection of all information may still be feasible if the effort is made. However, every piece of information to be collected should always be questioned with regard to its meaningfulness and sustainability: a) What will this information be used for in the future? b) Who will update this information in the future (“data maintainer”)? c) Does the data maintainer have the professional competence and resources (in particular time) to maintain this data in the future? With the help of these questions, the CRE manager will be able to pare back his probably very long wish list to a realistic level. On the one hand this is unfortunate but on the other hand it is very advantageous. A poorly maintained system is ultimately a “data graveyard”, which is not only unprofessional but also implausible. Therefore, in the course of sub-step (2) Real estate strategy, (see Sect. 3.1) real estate managers who only process partial areas of a comprehensive CREM should realistically assess their starting position and their short- to medium-term targets as to the range of services and real net output ratio (see Sect. 4.3). Only on such a basis should they then determine the type and quantity of information to be collected by the system. It is also important to find an appropriate balance between the quantity of information to be collected and the number of locations to be covered (see Fig. 3.1). The smaller the number of properties covered, the more information that can be reasonably collected for each property. This is of particular interest for systems that focus on the operational tasks of real estate management, i.e. building management and facility services (level (O) in Fig. 3.1).

3.2 Less is More—Focused Data Collection

21

The exact opposite is the case if the primary interest lies in the strategic tasks, i.e. portfolio and asset management (level (S) in Fig. 3.1). A system that is integrated across all levels of value creation must in turn find the balance in order to be controllable overall (level (G) in Fig. 3.1).

Quantity of properties

Number of properties / locations considered

Level of detail of system information

(S)

(G)

(O)

Quantity of information

Fig. 3.1 Funnel model for real estate information systems

4

Portfolio, Organization and Sourcing of Real Estate Services

4.1

The Challenge of Corporate Real Estate

In the previous chapters we saw that the perspective on and handling of real estate in CREM is very different from that of institutional real estate management. The question now is what type of property—or asset class—a CRE manager has to deal with. This can vary widely. It depends on what kind of core business the company has. A bank usually has its own portfolio for headquarters and call centers (office properties), branches (retail properties) and data centers (special properties). An industrial company, in turn, can often encompass a wide range of administrative, research, manufacturing and logistics activities. Ultimately, the CRE manager of such a company could find all sorts of asset classes in their real estate portfolio. The respective complexity of the asset classes varies widely (depending on whether the company’s own property or the property of third parties is used); but in any case, it must be procured, managed, and ultimately disposed in an equally professional way. Figure 4.1 gives an overview of all types of real estate that a CRE manager may have to manage depending on the type of company. It looks at the management complexity of the respective real estate asset classes, whether commercial, technical or infrastructural facilities management (Glatte 2012, p. 35). Note: In the anglo-saxon business environment, technical facilities management is also often referred to “hard services” whilst infrastructural facilities management is also commonly called “soft services”.

A comparison of corporate property purely from an investor perspective is only useful if the property in question is fully marketable in terms of its type and location. However, the marketability of corporate property essentially depends on © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 T. Glatte, Corporate Real Estate Management, essentials, https://doi.org/10.1007/978-3-658-32222-9_4

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Type of property

Portfolio, Organization and Sourcing of Real Estate Services

Facilies Management So Services

Commercial FM

Open spaces & traffic areas

low

Office properes

low

Retail properes

low

Social buildings

low/medium

Logiscs

Research and development

Producon

Warehouses

low

Hazmat warehouses

medium

Laboratory buildings

low

medium

Pilot plants Factory halls Complex producon

Ulies & disposal (power, sewage, water, etc.)

Hard Services

medium low

medium high high

Fig. 4.1 Degree of management complexity of corporate real estate

its ability to be used by third parties. For corporate real estate, this is often the case only to a limited extent. The third-party usability in the case of administrative buildings is comparatively straightforward as long as their location permits office use. For a variety of reasons (pollution control, transport connections, land prices, etc.), industrial and other manufacturing companies are forced to set up and develop locations on the periphery or far outside of urban settlement areas. There are only limited options for alternative uses when production capacities are shifted, resulting in a reduction in site utilization. A reuse or use by a third party is still comparatively easy if the production and storage facilities are standardized. These can be reused—if necessary, with discounts due to various user-specific features in construction, fittings, connection or use of the property. The creation of guidelines regarding customary and thus marketable building and expansion standards for industrial and warehouse facilities would help to reduce the number of nonmarketable and therefore unusable special properties in the company. This would

4.1 The Challenge of Corporate Real Estate

25

be an example of a possible added value to be gained from merging real estate and corporate strategies. While the difficulties arising for third-party usability in production and storage facilities may be easy to understand, they can also apply to other types of property, e.g. office properties. For example, it should always be questioned if it is necessary to erect administrative buildings within production locations or in peripheral business parks instead of office-specific locations. Such office properties can hardly be marketed when vacancies occur and are therefore de facto a special property that is too risky for an external investor. In the end, such properties are a cost block burdening the core business. If a CREM department wants to develop from a passive property manager to a proactive portfolio manager, several other approaches are available. These essentially aim to move the company real estate portfolio itself a little closer to the classic market. Basically, this can be done by choosing a suitable location and a building and development standard that is defined with a view to thirdparty usability. However, in discussions about exactly these aspects, an ambitious CRE manager quickly bumps into the internal “tenant market”. As a differentiated view of the real estate portfolio in Fig. 4.2 shows, this is not justified (Glatte, Entwicklung betrieblicher Immobilien 2014, p. 17). It is certainly right that even from a building law perspective, complex production facilities as well as production-related infrastructures may only be built in designated areas, usually in very peripheral locations. These are usually very closely linked to specific production processes and are therefore almost nonstandardizable. Third-party usability is therefore hardly possible and often not wanted for competitive reasons. However, things are different with other types of property. Even normal workshops and laboratories can be of interest to third parties, provided that they have a suitable commercial or industrial environment. To qualify, however, the buildings must already be adequately positioned when the location is selected, and must be built to be suitable for the market or convertible by simple means. From the outset, this requires the criteria and requirements of the classic real estate market to be incorporated into the choice of location, the factory planning and the final construction planning. However, this requires market knowledge and the insight that real estate represents a long-term investment, but not an investment for eternity—neither from the point of view of the usage concepts nor from the point of view of the use itself. These considerations usually play a very minor role in the core business of a company, if any. After all, business plans with a negative outcome have little prospect of management support. Thus, to a certain extent, the way an industrial company

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Type of property

Portfolio, Organization and Sourcing of Real Estate Services

Classificaon

Standardizability

Simple nonproducon real estate

high

Complex nonproducon real estate

medium

Externalizaon of management

Third-party usability

easy (not crical for core business)

high

limited (somewhat crical for core business)

limited

Open spaces & traffic areas Office properes Retail properes Warehouses Social buildings Laboratory buildings Pilot plants Factory halls Hazmat warehouses Ulies & disposal Complex producon

Produconrelated and producon real estate Special real estate

high

low

difficult (crical for core business)

low

Fig. 4.2 Marketability of corporate real estate

deals with exit scenarios shows the level of maturity of its CREM organization. The aim here is not to reverse the internal “tenant market” into a “landlord market”, but rather to find a sensible balance between the interests of the core business and the real estate situation.

4.2

Challenge CREM Organization

Not only the type and scope of company real estate portfolios differ from company to company. The way how corporate real estate management is implemented also fluctuates widely. At the beginning of the 1990s, particularly the large listed corporations and the science community in Germany turned their attention to this topic. After CREM departments had been established, real estate that was not required for operations had been sold, and some basic structures had been set up, things quietened down again considerably around the topic of “CREM”. In quite a few companies, the real estate departments lead a shadow existence (Uttich 2011)

4.3 Portfolio Versus Organization—Dependencies and Levers

27

that is hard to understand. This is all the more incomprehensible since, as stated above, the fixed property assets and real estate services in many companies are still among the biggest cost factors. CREM organizations operate within their companies in different structures, and with different responsibilities and levels of maturity. The degree of maturity is a function of the (internal) mandate. Only a few CREM departments can claim that they have a full mandate for real estate management in their company in all of the management levels shown in Fig. 1.1. Often, only some aspects of the services of a holistic (corporate) real estate management are dealt with. This might be, for example, transactions or construction work; strategic “advice” in the form of a board-related staff function; operational management of real estate in terms of building management; or the commissioning of such services as a purchased service. Again, the list of possible constellations is as long as you like. Furthermore, there are often regional differences in the mandate within a company. The range and depth of services provided by a CREM department in a company’s home country are often significantly more extensive than abroad.

4.3

Portfolio Versus Organization—Dependencies and Levers

Sections 4.1 and 4.2 concluded that the type and scope of corporate real estate portfolios and the landscape of organizational integration of corporate real estate management within companies are still very heterogeneous. The logical question then is how a uniform and structured approach is possible in the face of such a difficult starting position. This is certainly not easy, but it can be done. Real estate management and thus its processes and systems must be coordinated with the framework conditions of a CRE manager. These are a function of three dimensions: • The type of real estate portfolio to be managed (homogeneous versus heterogeneous) or the scope of the asset classes to be managed (singular, i.e. limited to a single asset class, versus complete portfolio of real estate in the company); • The regional distribution of the real estate portfolio (national versus global); • The range of services and depth of added value of the real estate organization (mandate for sub-areas versus full responsibility).

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Dimensions: (x) = Asset classes (y) = Regional distribution (z) = Performance spectrum

(TL)

(y) Global

(SL)

(TS) (SS) (z)

Local

(A)

Single

Full range

(x)

Strategic orientation (A) = initial position (SS)= short-term CRE strategy (TS)= short-term CRE target (SL)= long-term CRE strategy (TL)= long-term CRE target

Fig. 4.3 Cube model of organizational development in CREM

It should be noted that the business world is in constant motion. This affects not only the market environment of a company, but also the structures of a company itself. In the interests of a structured approach, it is therefore necessary to determine the exact position (“starting position”) in the environment of the three dimensions mentioned above (see Fig. 4.3). Based on the corporate strategy, this will inform the structural and organizational steps to be taken. This is the shortterm CRE strategy. In addition, it is obviously necessary to develop a long-term target, i.e. the long-term CRE strategy. It is important to recognize your own situation, to keep the focus on the essentials and to prepare the process and system landscape for (further) development opportunities. In this context, it must be clearly outlined what the area of responsibility of the CRE manager is with regard to assets to be managed (i.e. land and buildings), real estate services to be provided, and reasonable number of staff to be retained. This informs the control parameters for costs, contractors and staff levels. This must be defined using suitable processes in order to achieve the desired performance. It goes without saying that with sustainable control,

4.4 The Challenge of Globalization

29

Land

Availability

Buildings

Flexibility

Services

Quality

Personnel

Cost/Benefit Ratio

CREM control parameters

CREM responsibility

CREM processes

CREM performance Fig. 4.4 Performance model of corporate real estate management

all influencing factors—area of responsibility, control parameters, processes and performance—mutually influence and modify each other (see Fig. 4.4). Of course, processes cannot replace ground-breaking business ideas and innovation. They are only effective in supporting business and should increase or sustainably secure the company’s success by providing structure and transparency. The integration of processes and systems requires patience and sometimes meticulous attention to detail—virtues that are not always appreciated in today’s business environment. The effort involved in this is often difficult to present and justify in a business case. This is why this form of basic work is often shunned by companies or at least seen in a very critical light (Peyinghaus and Zeitner 2013, p. 16).

4.4

The Challenge of Globalization

Another challenge is globalization, which does not stop at corporate real estate management. In fact, it is an essential driver for professionalizing CREM. More and more companies are active internationally as more than just exporters and

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importers. They also set up branches for sales, logistics, research and production in other countries. This changes the way the CRE manager acts (Hines 1990, p. 46). They often learn to their cost that their area of responsibility literally deals with “fixed” assets, meaning that they are required to travel. They have to deal with other cultures, i.e. different legal systems, business practices, currencies, financing models, payment methods and measurement systems—to name just a few aspects of the list of additional complexities, a list that can be extended at will. The CRE manager then also recognizes the inevitable need to acquire some skills pertaining to the real estate business in the countries in question. In addition, the CRE manager always has to answer the question of which topics are to be dealt with at the level of the overall portfolio (strategic level) and which tasks they should deal with themselves at the tactical and operational level or should even be dealt with by—internal or external—third parties (see Sect. 4.5). This also applies to the feasibility of management concepts. Concepts covered in the specialist literature and implemented in practice often only refer to selected types of real estate, e.g. office, residential and hotel properties. In corporate real estate management, however, the various properties are of different importance for the user, i.e. the core business. Management errors such as heating failure, deficiencies in maintenance, cleaning, etc., have different economic consequences in an administration building than in a research building or even a clean room. “One size fits all”, therefore, will not work, especially with heterogeneous portfolios. The CRE manager has to consider the extent to which the respective properties are critical for the core business. Depending on the risk allocation of the assets, their location and the available service providers and their service profile, customized management concepts may have to be developed.

4.5

Sourcing Real Estate Services

In the course of the organizational development of CREM in the company, the question will also arise regularly as to which services should be provided in-house and which ones should be bought on the market. This will be done via the services in the respective CREM area of responsibility along the value chain “procurement—support—utilization” as well as across the complete vertical integration spectrum (portfolio management—asset management—property management—building management/facility services). There is no single best model for this, just as there is no single best CREM model, generally. Companies and the associated CREM organization must find

4.5 Sourcing Real Estate Services

31

their own best approach and continually adapt it to the external and internal framework conditions (of the company). In principle, however, complete outsourcing of the entire real estate sector to service providers, which is often advocated by service providers and consultants, should be viewed with extreme skepticism. If the company loses the commissioning and assessment competence for a service, this loss of know-how is irreparable and can only be recovered in the long term and at a very high cost. The author’s many years of experience in sourcing real estate services also shows that outsourcing activities can indeed lead to cost advantages. However, the promised improvements in transparency were never achieved, especially in property management; instead, they had to be wrested from the respective service provider.

5

Specific Aspects of Corporate Real Estate Management

5.1

Corporate Social Responsibility and Sustainable Building

For some years now, the general social responsibility of a company, better known as Corporate Social Responsibility (CSR), has played an increasingly important role in the development of real estate. It is difficult to grasp what exactly is behind this apparently all-powerful and all-encompassing term. The European Commission defines CSR as “[…] a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission 2001, p. 366, Chap. 2). The concept and, ultimately, content of the subject and its differentiation from similar subject areas have yet to be established. Even the World Business Council for Sustainable Development (https://wbcsd.org), one of the institutions that intensively promote the topic, accepts that the definition of the concept still has to be developed. In principle, however, it can be stated that corporate social responsibility considers entrepreneurial activities in the overall social environment, thus exposing it to interaction with all relevant stakeholders. It therefore encompasses issues of sustainability, corporate governance and corporate citizenship. The influencing factors and scope of action in the development of a real estate project, in particular its manifold framework conditions, are a good example of the complexities of CSR. This is shown in a simplified form in Fig. 5.1 (Bassen, Jastram and Meyer 2005, pp. 231–236) in. The topic of sustainability (here considered part of corporate social responsibility) has a special role to play from a property management and especially construction engineering point of view

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Stakeholder dialog

Corporate Social Responsibility

Corporate Governance

Economic Responsibility

Corporate Citizenship

Sustainability

Ecological Responsibility

Social Responsibility

Stakeholder dialogue

Fig. 5.1 Opportunities for developing new markets

against the background of sustainable building (“green building”). Again, the terminology and therefore its interpretation are not uniform. Definition of sustainable building according to the US Environmental Protection Agency (EPA o. J.): “Green building (also known as green construction or sustainable building) refers to a structure and using a process that is environmentally responsible and resource-efficient throughout a building’s life-cycle: from siting to design, construction, operation, maintenance, renovation, and demolition. This practice expands and complements the classical building design concerns of economy, utility, durability, and comfort” (U.S. EPA 2016). Definition of sustainable building according to the federal German government (BMI o. J.): “The overarching guiding principle of a future-compatible development policy—based on the three dimensions of sustainability: ecology, economy and socio-culture—represents the starting point for the development of the principles and assessment of sustainable building. This guiding principle simultaneously and equally takes ecological, economic and socio-cultural requirements into account and takes future generations into consideration. In addition,

5.1 Corporate Social Responsibility and Sustainable Building

35

it emphasizes the concomitant individual responsibility of every person and in particular the role of the public sector as a role model” (BMUB Feb 2016, p. 15). This results in a wide range of requirements, which can be divided into three categories: • Ecological dimension of sustainability • Economic dimension of sustainability • Social and cultural dimension of sustainability. According to DIN EN 15643 Sustainability of Buildings—Assessment of the Sustainability of Buildings, the three dimensions must be assessed simultaneously and on an equal footing. A large number of—mostly country-specific—systems for the certification of sustainability in buildings have been established worldwide. This development is positive on the one hand and very problematic on the other. The measurability and resulting comparability of sustainability aspects in real estate is positive, and so is the competition that has now arisen in the real estate industry for buildings that are built and managed in as sustainable a way as possible. When it comes to developments, whether new buildings or existing properties, project developers, investors or users can no longer avoid the question of sustainability. However, the uncontrolled proliferation of the certification systems that has arisen in the meantime is a problem. In many countries there are even several competing systems that are difficult to compare. It is therefore difficult even for experts to keep an overview and ensure comparability. This significantly undermines the actual goal of certification—measurability and comparability. The certification costs are between 20,000 and 100,000 euros or even more for new builds. The fees usually stated in the publications of the certification institutes are often significantly lower. However, they often do not encompass the entire consulting and expert services, which extend from the beginning of the planning phase to construction supervision and acceptance. Therefore, the low costs indicated should be seen more as bait than realistic costing. In addition, follow-up certifications are scheduled at regular intervals during the subsequent management phase. It is therefore obvious that a veritable “certification industry” is being created here, which by means of constant new regulations generates a self-serving continuous demand for certification products. Internationally, there are two widely used certification systems:

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• LEED (Leadership in Energy and Environmental Design) of the Green Building Council in the US (USGBC o. J.) • BREEAM (BRE Environmental Assessment Method) of the Building Research Establishment in the UK (BRE o. J.). There are also numerous national or regional systems of import, including: • DGNB system of the German Society for Sustainable Building (Deutsche Gesellschaft für nachhaltiges Bauen) (DGNB o. J.) • HQE (Haute Qualité Environnementale) of the French alliance HQE-GBC France (HQE o. J.) • GREENSTAR of the Green Building Council of Australia (GBCA o. J.) • MINERGIE of the Swiss association of the same name (Minergie o. J.). Corporate social responsibility in general and sustainability in particular are subject areas that no corporate real estate manager will be able to avoid today— whether in a large corporation or in a medium-sized company. All professionally managed companies have already positioned themselves in this regard and mostly also advertise very actively with company-specific positions on CSR-specific issues. However, these are usually very general and at best relate specifically to activities in the core business. This is fundamentally understandable and correct; after all, it is the core business that determines the guidelines of a company and not the support functions (see Sect. 2.2 in this regard). However, real estate management offers good starting points for the company to position itself proactively and aggressively towards customers and suppliers, its own employees and also society at large. Buildings are visible and “tangible”. The influence of buildings on their users and the surrounding area can be “felt” qualitatively and measured quantitatively. Numerous companies have recognized this and imposed sustainability policies on their own property. On the basis of this, they are actively working on evaluating their own real estate portfolio under sustainability criteria and upgrading it step by step accordingly. Such a real estate sustainability standard—naturally derived from the company’s overarching CSR guidelines—offers a great opportunity to make the often intangible CSR goals very concrete and tangible. An examination of the sustainability standards of large companies such as ABB, BASF, BMW and Siemens showed which aspects could be included here, for example (Erneker and Glatte 2012, p. 99):

5.1 Corporate Social Responsibility and Sustainable Building

37

• Sustainability of the buildings, e.g. through sustainability aspects in siting, use of renewable energies, use of sustainable materials in construction and interior design, efficient building management • Sustainable management of resources, e.g. via monitoring of energy and water consumption, waste disposal systems (recycling), identification of savings measures; measurement of CO2 emissions (carbon footprint) • Lifecycle cost analysis: selection of materials that not only have the lowest manufacturing or procurement costs, but also the best effect over the entire life cycle • Proof of sustainability through certification: • use of common certification systems for new buildings, existing buildings or management. From a company perspective, it is of course important to get the most aggregate and holistic view possible of the property portfolio. There are two possible approaches to this—the top-down approach or the bottom-up approach (Glatte and Schneider 2017, p. 391 ff.). Especially in the case of a heterogeneous real estate portfolio, which applies in the case of most international companies, a simple top-down approach that extrapolates studies on representative properties to the overall portfolio, is not feasible. Therefore, only the bottom-up approach can be followed, which is tedious, but ultimately consistent and the only promising route. This means that property by property and location by location are examined in detail. There are two main factors to consider in this context: a) the technical condition of the property (condition of the building), and b) the strategic relevance of the building for the company (building priority). Only a combination of both factors enables a rational assessment of the building’s sustainability, including from an economically meaningful perspective. This also enables the CRE manager to use their available investment funds in a targeted manner in properties with a high investment requirement, whether due to technical necessities or to strategically justified aspects of the core business.

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5.2

5

Specific Aspects of Corporate Real Estate Management

Corporate Architecture and Corporate Design

Another aspect that should not be neglected for corporate real estate is the question of a group-specific architecture (corporate architecture) or at least grouptypical design criteria (corporate design). The reason for this, especially in larger companies, is the desire for a very specific identity. This corporate identity (CI) is a deliberately used strategic instrument to position the company on the market, in its societal environment, but also towards its own employees. The interesting aspect here is the fact that this is an attempt to convey certain strategic elements such as technology orientation, products, market sectors, basic strategic orientation, but also relationships with employees, customers, suppliers and competitors as well as behavior-controlling standards by means of a clear and uniform appearance. By establishing a team spirit in the workforce, the internal impact of the CI concept is to establish and maintain a specific corporate culture. But the corporate identity is not just a communication concept. Rather, it is an essential component of strategic corporate management and as such an important tool for implementing strategic concepts in day-to-day operations. It consists of three elements: • Corporate behavior • Corporate communication Furthermore, there is usually a very close connection between the corporate identity of a company and its brand identity (corporate branding). The corporate design is basically aimed at the visual appearance of a group, which ideally should be the same both internally and externally. The simplest form is a logo or lettering. Somewhat more sophisticated concepts also aim at uniform typography or company colors. Large corporations have extensive guidelines that regulate the design aspects in detail—from letterheads and advertisements to product and packaging design to architectural design elements of corporate real estate. Ultimately, these must be taken into account when developing a project.

5.3 Working Environments

5.3

Working Environments

5.3.1

The Importance of the Workplace

39

An extensive study by the German Federal Statistical Office in 2015 with 11,000 participants aged 10 years or over showed that we spend around a quarter of our life in different forms of work and education (Statistisches Bundesamt 2015, p. 5). Since children, adolescents and pensioners were included in this study, the share for the working population is of course diluted accordingly. A plausibility check supports this view: assuming a working time of 8–10 hours for the usual working day, we spend 30–40% of our time at the workplace. Deduct from this the usual 6–8 hours of sleep. As a result, we have to recognize that we spend at least half of our waking time in the workplace—and the trend is going up. It is therefore not surprising that both employees and managers have a high interest in planning, designing and managing workplaces. Workplace management is usually understood to mean the continuously updated allocation of resources in terms of the work environment, its users and corporate strategy (Horgen et al. 1999, p. 18). Since all three components—work environment, user and corporate strategy—are constantly changing, it is not surprising that the use of the resources made available, such as space, work desk and work seat, means of communication such as telephone or computer, meeting rooms, etc., needs to be adjusted correspondingly. In the age of communication, the intensive exchange of information as a productivity factor takes center stage. This goes hand in hand with changing working models based on the incessant and ubiquitous availability of all necessary information. The boundaries of employment and leisure in a classic sense—still neatly separated in the above study—are becoming increasingly blurred. Today, even the average office worker spends only 30% to 55% of his working time at their desk (Andersen and Peter 2017, p. 16). The rest of the time they spend in formal or informal meetings of all kinds or traveling. Increasing internationalization leads to an ever-increasing need for travel and thus to even longer absence from the office, especially in management and sales functions—and this despite ever better communication options. These options are becoming ever more important due to increasing absence, and the specification requirements of office space for times of presence are reduced to providing a space with the opportunity to exchange ideas with colleagues, business partners, project teams, and the use of the company infrastructure. However, it is becoming increasingly clear that our working environment—little physical movement, constant disturbances from our surroundings,

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hectic pace, tight deadlines—have a significant impact on our health (Wingerter and Glatte 2014).

5.3.2

Modern Workplace Management

How can the changed framework conditions and the resulting challenges be met? As with all other CREM tasks, the insight here is that corporate real estate management derives its guidelines and guardrails from the corporate strategy and the requirements of the core business, subjecting these to an alignment with corporate support functions (see Sect. 2.2). However, “corporate strategy” should not be confused with the personal views of individual managers, particularly with regard to the design of their own workplace (as individual and representative as possible). This is exactly what modern workplace management is not about. Instead, functionality, interactivity and flexibility are more important. It goes without saying that modern and communicative working environments should be designed as openly as possible. Cubicle offices quickly lead to isolation and loss of information exchange. On the other hand, open office landscapes called “open-plan offices” have had a very negative image among employees in the past. The underlying concepts were mostly driven by a very one-sided view of space efficiency. Sustainable, successful office landscapes are not created like colorful pictures—because anyone can be “colorful”—but should be developed on the basis of on an empirical, statistical, mathematical and scientific analysis adhering to professional standards. Work processes, communication, space efficiency, costeffectiveness and employee health must be methodically examined. This gives a character sketch of the actual situation, a functional overview of the office landscape, so to speak (Wingerter 2013, p. 148).

5.3.3

Types of Office

The most common office types are briefly introduced in Table 5.1 below and then explained in more detail. Basically, it is not the task of this book to assess the individual types of office workplace. Nevertheless, the pros and cons of the individual types will be briefly discussed. An individual office (also called “cell office”) offers various advantages from the point of view of the individual user. One can concentrate in the individual

5.3 Working Environments

41

office because there are few interruptions. Temperature, sun protection and lighting can be individually operated or controlled. There are no eavesdroppers to confidential conversations. You can “spread out” without paying any attention to others. However, there are also significant disadvantages. Communication and cooperation are demonstrably more complex in an individual office. Therefore, this office type is absolutely unsuitable for teamwork and for collaborative and communicative work requirements. Multi-person offices have proven to be advantageous for several employees with a similar area of responsibility (e.g. marketing, accounting). This enables good and easy exchange of information. Representing one another is also easier. However, concentrated work is often difficult due to the “permanent noise level”. Multi-person offices are valued as long as the other colleagues are on a business trip. Anyone who has ever sat in such an office and made a phone call at the same time as their colleagues will confirm this. Multi-person offices therefore come with a certain potential for conflict and stress. The combination office is designed to create a synthesis between concentrated work and communication. Concentrated work in the individual office and occasional teamwork in the community zone are easy to implement. Targeted communication as required is possible and privacy is guaranteed. However, the disadvantage is the extremely high space requirement in relation to the number of workplaces and a low flexibility regarding organizational changes. Team offices can often be found in departments and larger teams, i.e. especially when lively communication is desired or necessary. A group office is usually structured with so-called partitioning systems (wall cabinets, partial screening of workplaces, etc.). This type of office is particularly advantageous in terms of its greater flexibility in workplace design. New employees can be integrated into the structure with little effort. Easier communication is possible. Area efficiency can be increased. However, there are the same disadvantages as in a multi-person office. As indicated above, open-plan offices have fallen into much disrepute. Nevertheless, in addition to high space efficiency, they also offer many options for a transparent and collaborative work environment—provided sufficient retreat and communication areas have been made available. Business clubs are a relatively new type of office. The concept of business clubs arose from the need to make better use of expensive office space through flexible use, after increasing replacement of people-driven work by automated processing often left many offices empty for days on end. Business clubs often provide the spatial environment for desk sharing. A spatial model for the business clubs are the business lounges in airports and train stations, which offer coffee

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tables, desks and informal seating groups next to each other for relaxing, working and conferencing. That is enough as a meeting point for members in different professions, roles and daily routines connected by nothing but social affiliation to an institution that promotes personal success. Basically, three models can be distinguished here (Leimbach Sept. 12, 2018): • Business center: The focus here is on private offices (mainly individual offices) in a decidedly upscale, high-quality environment with a very highperformance range of services. The target group is essentially small and individual companies with a classic or traditional outlook. • Hybrid model: This form relies on a mix of open office space and private offices in a trendy design and targets a combination of different user groups, focusing in particular on corporates. • Co-working (strictu sensu): Co-working is often used as an umbrella term for all forms of business clubs. In a narrower sense, however, it only refers to providers with a very high proportion of open and communal areas in a trendy design. These areas are currently in particular demand from start-ups and freelancers. Home offices have different motivations. On the one hand, companies want to offer their employees the opportunity to better combine family and work. This is particularly appreciated by employees with children and relatives in need of care. Furthermore, long commutes can thus be avoided—mostly benefitting the productive working time. At the same time, a workplace at home also requires a significantly increased communication effort on the part of the employee concerned and his or her colleagues in order to compensate for the missing information (especially from the informal networks within an organization). Ultimately, a home office only makes sense if the company also reduces the effectively provided office space to the same extent and the employee communicates and networks proactively. If excessively applied, however, there is a risk that employees with home offices will become increasingly alienated from the company. The IT company YAHOO, for example, found this to be a problem. In June 2013, the then CEO Marissa Mayer reintroduced compulsory presence in the company with the following message: “Yahoos, to be the absolute best place to work, communication and cooperation are important, so we have to work side by side. (…) We have to be a Yahoo, and that starts with being physically together” (Schultz 2013). However, there can be no general answer for the “best” workplace concept. Instead, the respective office concept should be tailored to the needs of the users. This applies in particular to their presence and working methods (Fig. 5.2).

5.3 Working Environments

5.3.4

43

Influence of Changes in the World of Work on Future CREM

Developments in the field of work environments and the resulting challenges show that corporate real estate management alone cannot offer the solutions. It must be assumed that interaction, particularly with IT and HR departments, will become ever closer. In its study “Corporate Real Estate 2020”, the industry association CoreNet Global concludes that these three support areas in particular will grow ever closer together (CoreNet Global 2012, p. 17 ff.). Corporate real estate management will provide the space and organize its management. IT will offer the corresponding communication options that will enable work and exchange of information from virtually anywhere in the world. HR, in turn, will have to provide the legal and organizational framework (employment contracts, company agreements for flexible working time concepts, remuneration rules, coaching for managers towards other management styles, etc.).

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Table 5.1 Office types and their description Office type

Description

Individual office

The individual office is a one-person office, i.e. with one workstation

Multi-person office

The multi-person office offers space for two to four people. In many more traditional companies there is still a mixture of individual and multi-person offices—also known as cubicle offices

Combination office

The combination office is a combination of individual offices (or multi-person offices) with open zones that are used jointly (meeting zone, community zone, etc.). In a combination office, the individual offices usually have transparent walls to the common areas, with the individual offices being placed along the outside of the building

Team office

In particular, team offices are rooms for up to 10, sometimes up to 20 employees

Open-plan office

There is no clear definition for open-plan offices. This usually means an office with more than 10 workplaces, whereby the individual workplaces are often separated by partitions. Such partitions may be e.g. cabinets, which usually do not extend to the ceiling

Non-territorial office In a non-territorial office, workplaces are used by all employees either spontaneously or by prior appointment. Nobody has a permanent workplace (desk sharing). Each employee has their roller container for their personal belongings and chooses their workplace according to the task at hand Business club

Instead of personal workplaces, business clubs offer a variety of workplaces that are used temporarily depending on the activities and style of work. Instead of a fixed workplace or desk, the employee chooses exactly the place of work that suits their current activity and best serves their productivity. The role of the personal workplace as a home is assumed by the employee’s membership in a spatially and socially manageable neighborhood, the club, which with its informally designed atmosphere is very different from the traditional office environment. The term “co-working” often appears in this context. This term is explained below in connection with the different models of business clubs

(Home office)

The home office is actually not an office type, but the relocation of the original workplace from the company to the employee’s personal residence

temporary

45

Combined office, non-territorial office, coworking strictu sensu

Business centre

Hybrid business club permanent

Presence

(at a specific workplace)

5.3 Working Environments

Team office, open-plan office

Individual (cell) office, multi-person office

cooperative

autonomous

Mode of operation (work activity)

Fig. 5.2 Office concepts as a function of user requirements

6

Summary—The (Bumpy) Road to Becoming a CRE Manager

Corporate real estate management has developed further in recent years, adjusting to the requirements of globalization. The requirements for the management of corporate real estate vary from company to company with regard to the real estate portfolio and the asset classes to be managed, their regional distribution, as well as the range of services and the depth of vertical integration of the CREM organization. The type and scope of real estate management control and its management systems are also a function of this. A key aspect is the realization that, from a purely business point of view, a company property has the status of an item of equipment or resource for the core business. Consequently, corporate real estate management is an in-house support process. Just as the goals of the CREM in the company have to be based on the targets of the core business, the real estate management control systems have to be informed by the CREM goals. These goals change with the level of maturity of the CREM organization. So, in a first step, the CRE manager should determine the status quo of the CREM situation in the company and then establish immediate, short-term goals and a long-term vision. The approaches to this are varied and very company-specific. Based on this, a gradual further development of organization, structures, processes and supporting systems is advisable. In practice, two directions of development are common. Either a small, strategically oriented organization is established in a first step to introducing governance by providing, in addition to a portfolio overview, technical support, in particular for fundamental portfolio decisions, and by introducing processes that are based on corporate-wide real estate (top-down approach). Or, as can often be seen, the competence framework of a strong local FM organization—usually at the group headquarters or at the main plant—is gradually being expanded with the ultimate goal of complete responsibility within the group. © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 T. Glatte, Corporate Real Estate Management, essentials, https://doi.org/10.1007/978-3-658-32222-9_6

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Summary—The (Bumpy) Road to Becoming a CRE Manager

A gradual introduction and further development of the system landscape for data management is also to be recommended. When designing the system, the focus must first be on the output. Then the input variables must be defined. However, it is strongly recommended to keep the number of input variables low in order to ensure that they can be kept up-to-date with a reasonable level of maintenance. There is no silver bullet for the establishment and development of corporate real estate management in a company. A variety of essential parameters and very heterogeneous constellations in different companies, but also within the company itself, make it necessary to configure the respective CRE structure individually (Kämpf-Dern and Pfnür 2014, p. 97 ff.). This structure must also be continuously adapted to the internal, the macro-economic, and possibly also the societal framework. But this is precisely where the job becomes interesting. Ultimately, it is up to the responsible CRE manager not to lose sight of the long-term corporate and CRE goals, and to take one step at a time with a little courage, a lot of skill and patience, and some opportunism. Occasional setbacks are the rule in practice and therefore part of the overall process.

What you can learn from this essential

• Corporate Real Estate Management (CREM) means all property-related activities of a company whose core business is not concerned with real estate. • Therefore, all strategic and operational aspects have to be subordinated to the core business interests of the company concerned. There is, therefore, no ideal, typical approach for CREM, but rather a very heterogeneous expression of CREM activities between different companies. • With approximately 3 trillion euros in real estate assets in Germany, corporate real estate is a major economic factor. • Basically, the focus is not on the return on real estate, but on a multitude of user aspects, as well as derived real estate goals and their success measurement. • Professional CREM is necessary because the real estate costs are one of the largest cost items within a company. Real estate also accounts for 5–20% of a company’s fixed assets. • Managing real estate based on the framework conditions of the traditional real estate market increases the third-party usability of properties and thus their value. Otherwise, corporate real estate quickly becomes special real estate and is no longer usable as a real estate asset once it is no longer required for business. • In principle, CREM tasks can encompass the entire real estate life cycle “procurement—management—utilization” and all levels of value creation from strategic to tactical to operational aspects. • CREM organizations are usually set up step-by-step, either bottom-up by expanding a mandate for an operational FM organization or top-down by extending the remit of strategic departments.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 T. Glatte, Corporate Real Estate Management, essentials, https://doi.org/10.1007/978-3-658-32222-9

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What you can learn from this essential

• Outsourcing CREM services is an individual decision. However, complete outsourcing is irreparable. • Design and development of the world of work is an integral CREM approach. Due to changes in the world of work, the area of responsibility of CREM will be even more closely intertwined with IT and HR in the future.

References

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