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Emerald Group Publishing Limited
Article Type: Editorial From: Journal of Corporate Real Estate, Volume 15, Issue 3/4
The European Real Estate Society (ERES) Annual Conference in June 2013 covered a wide range of topics and highlighted the breadth of real estate. However, corporate real estate (CRE) remains the “Cinderella of the industry, with CRE papers representing a small proportion of the total at the conference. This is not a criticism of ERES, the programme reflects the position of CRE within the world of real estate and one that needs to be changed. We will be running a special edition again under Assistant Professor Rianne Appel-Meulenbroek of Eindhoven University of Technology of CRE papers from ERES.
A significant step forward for JCRE is its the inclusion into Scopus, one of the largest abstract and citation databases. The direct feed from the journal into Scopus will help us expand our readership and appeal to academics for submitting papers. The comment we received from Scopus was that:
[…] this is a high quality niche journal which is relevant to the researchers in this field. The journal is already well cited by other publications. This journal is good addition to the Scopus coverage.
Conferences are often as much about what is discussed outside the formal sessions as what is presented. One of those discussion points was the relationship between facilities management and CRE. In particular, are they covering the same issues but just under different banners or are they two different things? One common differentiation is that CRE covers the building and strategy, whilst FM deals with the delivery of services. From an organisational perspective whether CRE is part of FM or FM part of CRE is generally one of organisational preference and it often comes down to the technical background of the person running the CRE team.
So does it really matter? To an extent, no it does not matter. What really matters is the position of the CRE/FM (or FM/CRE) team within the business. I would suggest that CRE is a more encompassing term than FM, and less of a “nuts and bolts image than FM. How can one look holistically at a property or a portfolio without an understanding of the detail of the other? Where does the line get drawn between the building fabric and the services in it? Where does the workplace fit within this division? That being said is “CRE the right term anyway? Does it really give clarity on what is covered?
Allied to that is the perennial question as to why have human resources (HR) and IT both managed to get to the top table when CRE has not? Did HR get there because of the increase in the amount and complexity of legislation around the people part of the business? Was it because of the risks to the business about labour disputes that raised HRs profile? Where did raising productivity and the high cost of people fit into the equation? What changed personnel to human resources, and with it a shift from an administrative function to boardroom representation? Similar questions arise about the change of IT from a backroom function to the top table. Was the IT director the person the board deferred to because they did not understand the technology but felt it was important? Did the high costs of infrastructure, such as IT, cabling, servers, computers, etc. and risks around specific IT projects mean that there was a need to have someone who could navigate the whole area for the board?
CRE remains a big cost item, whether freehold or leasehold, once all the costs associated with occupation are capitalised the level of investment is significant. On top of that it creates the fabric and forms the physical envelope for the broader investment of the business in its people; in its equipment and in its image/brand. As such it also carries risk for the business, consider the potential impact of CRE on the business if it goes wrong, with business disruption alone. All of which suggests that CRE remains an under estimated area of importance to the business.
That raises the question why? Does the “C-Suite fail to see these points, and just focus on the cost side, not the broader role that property plays? There are clear examples of businesses where property has a significant role in attracting talent to the organisation. Do we need to show explicitly how CRE adds value to the bottom line and to the shareholders before there is a change? Hence, would a change of name from CRE help because it provides the wrong image in the same way that FM often leads people into the thought process around catering and cleaning?
This is a debate that needs to be had to ensure that CRE has the right voice within the boardroom. Part of that is also to ensure a better balance in the academic world of real estate and to increase the proportion of academics involved in CRE. Allied to that is the broadening of the areas that are looked at by CRE specialists. It is a much harder area to obtain data than for investors. I have just completed the first phase of research on CRE and UK business. Part of that involved trying to obtain information from organisations and that proved very difficult. Yet the research of published accounts showed that the commitment in rent alone for UK business is £382 bn, equivalent to 79 percent of profit before interest and tax (PBIT) for each company. For some sectors the figure is significantly more, for example retail is 594 percent, in effect six years profits committed to real estate rent (CORE Consult, 2013). On top of that are the running costs plus capital investment, the research also shows how inflexible certain sectors are with their real estate.
And what of the future, in particular, the impact on business of climate change and changing attitudes to work on CRE? Commercial property is assessed as accounting for 18 percent of the UK carbon footprint (Carbon Trust, 2013) but to that you need to add in the carbon relating to transport of people to and from their workplace, the embedded carbon in existing buildings, the carbon cost of their removal, as well as carbon in new buildings, etc. How will CRE deal with the pressures from governments on this? Will the demand side for property change the way that real estate is developed?
Irrespective of the cause of the change, as there are those that believe that changes are just part of the natural cycle, the trends are clear and as they continue the consequences are going to start impacting on CRE decisions. For example, unpublished research from the University of Bristol shows that in Brazil the effect of the change in climate will lead to a ten-fold increase in the incidence of Dengue Fever by 2100 (Cooke, 2013). The impact of climate change has already seen a case of dengue fever in Greece, and other similar diseases are extending their footprint globally. Not only will decisions on CRE have to consider potential effects of more extreme weather but also the impact of mosquitos and the like in decision criteria.
All of this flows to through to the question that has been posed to the Editorial Advisory Board of JCRE – what topics should we be discussing in the journal? The feedback has provided a wide range of subjects and the intention is to develop that list with feedback from the readers and I would welcome that input from you. CRE is a wide-ranging subject and covers an extensive range of different types of buildings – retail, offices, industrial, warehousing and logistics, data centres, etc. I welcome your input into the debate and for articles for the journal, from both academics and practitioners in the field.
I would also encourage you to submit papers to the journal, it does cover a broad range of subjects, be you an academic or a practitioner, or someone who operates in both fields. In this edition of the journal we have a range of subject matter. The article on the lean office concept considers what the concept means for researchers and practitioners and what is needed for further research in the field. We look at how business can create value with open space, flexible offices with different organisational and management practices, and it sets the scene for further work in the area. A study of 5,358 office employees has provided the base for looking at the perception of leadership can be influenced by office design. Finally we look at how CRE can reinforce Brand, a very significant part of any business, and promote and strengthen the corporate identity.
We then have two practice papers the first shows the results of a survey of 639 CRE executives from across the globe and identifies five categories of risk. The second practice paper looks at the technology, media and telecommunications (TMT) sector. This is across the global hubs for TMT and considers how the sector is reacting to changing characteristics of employees in driving the amount and nature of space being taken.
CORE Consult (2013), “The elephant in the room, available at: http://core-consult.co.uk/resources.phpCarbon Trust (2013), “Press release ‘Savills and Carbon Trust join forces to boost energy efficiency for commercial property occupiers’, available at: http://www.carbontrust.com/about-us/press/2012/06/savills-and-carbon-trust-join-forces-to-boost-energy-efficiency-for-commercial-property-occupiers/ (accessed 1 October 2013)
Cooke, J.A. (2013), Dissertation (unpublished), University of Bristol