SPECIAL REPORT: O'Mara on Figuring Out the Corporate Real Estate Puzzle
"Organizations hate making real estate decisions; they hate it more than anything," said Martha O'Mara (pictured), managing director of Boston-based Corporate Portfolio Analytics, earlier this week to a full room at the October luncheon meeting of the Chicago chapter of CoreNet, the national association for corporate real estate executives. "The business environment is always changing, but real estate is relatively fixed. It's going to be around to remind everyone what an idiot you were if you make a bad decision," she added.
That's where corporate real estate executives can make a difference, continued O'Mara, who is also author of the book Strategy and Place, which grew out of 10 years of research on corporate real estate conducted by O'Mara and others at Harvard University. "Corporate real estate has to support a company's competitive advantage--help by making it faster, better and smarter in doing business. But it's a balancing act--matching the real estate needs of a company, which are always changing, with the supply in a market or many markets."
O'Mara discussed these two overarching considerations, demand and supply, noting that in many cases it's quite difficult to figure out what a company really needs (eg: the demand side of the equation). "There are a lot of variables," she said. "What kind of real estate does it take to compete, and where? What will future labor needs be? Will headcount grow or contract?"
In some ways, assessing a local real estate market is easier. But finding good data can still be tricky. "Applying market intelligence is crucial, but you need independent sources of information," she noted. "It's important because few companies seem to realize the hidden costs of paying over market for real estate. But every buck you hand to a landlord is one that would go right to the bottom line."
Sometimes corporate real estate decisions are counterintuitive, and corporate real estate executives need to be willing to make those decisions, and back them up with data. As an example, O'Mara cited the case of a client that had a fairly high internal vacancy rate, "so their policy was 'No New Leases'," she said. "But because the markets they operated in were beginning to rebound, we determined that if they renewed their leases right away, they'd save half a million dollars a year in the coming years. That got their attention. You have to pay attention to supply."
