Be Purposeful: Aligning CRE’s Mission to Enterprise Strategy

Corporate real estate’s mission has always been important. Housing people and business operations (whether office, retail, distribution, or manufacturing) is critical to nearly every organization, rendering real estate an essential link between business strategy and execution.

For many, real estate has been such a ubiquitous element of business operations that it’s been treated as a passive enabler—something that just happens, but leaders don’t think much about. But in the last five years, that mindset changed. The pandemic proved that a large portion of knowledge workers could work remotely, while the rise of e-commerce challenged our notions of how customers buy and their expectations of how fast goods should arrive. Shifting labor markets, a drastic increase of extreme weather events and biomanufacturing advancements changed the calculation on where (and how efficiently) goods can be produced.

The C-suite has taken note; real estate leaders are now often at the table as organizations contemplate strategy, which means that they’re also accountable for key elements of a strategy’s success or failure. That requires a much deeper understanding of the organizational strategy and associated priorities.

While every organization is slightly different in this regard, many enterprise priorities fall thematically into four areas of focus, each of which has the potential for significant and consequential real estate implications:

• People and organizational connectivity
• Technology and innovation
• Growth and agility
• Resiliency and sustainability

In the context of real estate planning and strategy these are complex priorities to solve for, with significant investment dollars at stake. But they are too often poorly translated or overly generalized as performance directives to “Bring people back to the office,” “Decouple capital investment in tech and RE,” “Optimize the portfolio/reduce cost,” “Reduce the environmental impact of RE.”

These are overly narrow asks of real estate teams, with anything but simple solutions.

Despite this complexity, the capable real estate leader executes on these asks. The purposeful leader, however, executes on the goals behind the asks. And that requires first taking a step back.

Consider, for example, “bringing people back to the office.” Anyone who has tried this in the last few years knows that it is not an easy task. Leaders have become increasingly creative in their approach—making it easier to get to the office and stay there; exploring new attractive amenities; assigning people to desks or offices even though their occupancy levels may not warrant it; establishing expectations through policies and mandates; etc. Success has been limited and expensive.

But consider the goal behind the ask. Leaders don’t want to fill up desks so that everyone feels better about real estate spend. Instead, they are likely focused on leveraging a common place (the office) to create meaningful connections between people.

If this is the true objective, then the number of possible solutions or interventions increases considerably. In addition to bringing people back to the office, the organization must also consider how it enables distributed teams to thrive; understand internal social and professional networks and areas for improvement; support cross-team interaction; and consider how it engages in, and with, the broader community.

This expansion of purpose also gives decision making additional clarity. If the organizing principle is to create meaningful connections, then all decisions must pass this test. Amenities that don’t serve to connect people, for example, probably aren’t worth the investment.

The same is true of other common priorities:

• Decoupling capital investment in technology and real estate is less about when the dollars hit the books, but more likely about providing a seamless and high-performing RE and IT infrastructure that enables business effectiveness. This requires having an accurate picture of organizational assets and their utilization; the ability to mine organizational data to identify gaps and make connections; and establishing a venue for the business to display innovations.
• Optimizing a portfolio is not entirely about cost savings, but more importantly about maintaining maximum flexibility for the enterprise in the face of uncertainty and transformational change. This requires aligning on both short- and long-term priorities; establishing and regularly updating a talent strategy that informs location decisions; and building a CRE org that knows and can evolve with the business.
• Reducing the environmental impact of real estate is not just about being green, but about future proofing the business by mitigating risk. This requires planning for physical resiliency; reducing regulatory risk and compliance costs; and proactively developing a comprehensive sustainability strategy that will measure progress along the way.

In understanding the goal behind the ask, three things become immediately clear:

1. The optimal solutions do not fall exclusively within the purview of CRE; they lie at the intersection of many domains within the enterprise. Partnership across functional and business units is vital.
2. Benchmarks can be useful points of reference, but are not a replacement for understanding the nuance of a specific organization. Organization-specific data and targets are essential for establishing a baseline and measuring ongoing success.
3. Change is the only constant. The underlying objectives of connecting people, providing a seamless business infrastructure, maximizing flexibility and mitigating risks may remain constant enterprise priorities but the tactics to achieve them will evolve. Building an internal change capability will pay dividends over time.

Taking a purposeful approach to real estate strategy starts with asking open-ended questions: What is the underlying objective? Why is this a priority for the business? What other changes/interventions/investments are required to make it successful? Who else needs to be involved? How will we measure success?

The core goals of the enterprise may well differ from those discussed above. Establishing what they are is the first step. Once established, everything from scenario planning to business case development should have greater clarity—allowing teams to move with speed and confidence. By aligning CRE’s mission to enterprise strategy, real estate shifts from being a passive enabler of business strategy to an active contributor to business outcomes.

Content in this article was presented during the CBRE Institute Global Forum in March 2024.