From our Thought Leader Partner, CBRE.

Ten Strategies for Creating Smaller, Better-optimized Portfolios

For real estate leaders, understanding how business demands help shape an intelligent portfolio strategy requires asking informed questions about the core business drivers. This proven diagnostic process allows for effective supply-side portfolio strategies for the future.

Two CBRE occupier leaders, Whitley Collins, Global President of Advisory & Transactions, and Lenny Beaudoin, Global Head of Workplace Strategy, share a top-ten list of key priorities real estate leaders and business executives must align on to ensure a successful portfolio strategy.

10. Gaining Alignment

Aligning corporate real estate strategies with the needs of various stakeholders, including business leaders, CEOs, CFOs, CHROs and employees, presents many challenges. The pandemic brought about new complexities, with more leaders weighing in on real estate decisions as employees desire both flexibility and office presence. To optimize a real estate portfolio, real estate leaders must be strategic partners, contributing to their organization’s competitive advantage.

Figure 1: Top Five Goals of CRE Teams from 2021-2023

9. Stop the Mandates

Mandates alone are ineffective in promoting workplace attendance and can alienate employees. Creating an appealing and beneficial work environment is essential. According to Gensler’s U.S. Workplace Survey, only 19% of U.S. workers want to work away from the office full time, but their office experiences need to be more meaningful. Employers can learn from retail companies—whose foot traffic depends on creating environments that attract customers to their space—and make their workplace a magnetic and meaningful experience.

8. Align Labor & Location Strategies

Alignment of labor and location strategies in business is often discussed, but rarely implemented effectively—particularly at the executive level. Labor costs constitute 80% of a company's expenses; thus, increasing labor efficiencies can have a much more significant impact on the bottom line compared to real estate expense. Access to talent is also critical, with emerging markets becoming hotspots for talent and capital investment. Companies should also consider funding from states and municipalities that is often available to attract new businesses and jobs. Lastly, real estate strategies should consider integrating supply chain, retail analytics and customer data analysis.

Figure 2: Top Organizational Expenses

7. Develop a Compelling Value Proposition

To encourage employees to return to the office, one global financial organization used a unique approach to increase attendance: develop a compelling value proposition to illustrate the benefits of working in the office, including fostering a sense of belonging, collaboration, learning and mentoring. The result was a flexible policy focused on resonating with individual employees and teams. Recognizing the importance of reaching employees where they are, the company communicated its message through social media instead of traditional channels such as email or other internal memorandums.

Figure 3: Components of a Compelling Workplace Value Proposition

6. Explore Alternative Financial Structures

Within capital projects a CFO must consider alternative financial structures alongside multiple factors, including cost reductions, investing wisely in assets, innovatively funding capital projects, preserving capital and increasing free cash flow and earnings per share. Methods for funding big capital projects can include a revolving line of credit, a credit tenant lease, synthetic leases and developer build-to-suits. These methods use credit, preserve cash and provide new ways of funding. Involving an organization's CFO in these discussions and decisions is critical when exploring alternative financial structures.

Figure 4: Alternative Financial Structures

5. Create Vibrancy

Creating a vibrant and lively office environment has a direct impact on office utilization. According to CBRE Workplace & Occupancy Analytics, if office utilization is less than 45%, it is likely that employees won't come to the office—as it feels desolate, rather than vibrant. Recently, CBRE’s CEO challenged the organization to take a new approach to our office design: Create vibrant, connected office environments that feel at least two-thirds full all the time. Design should also allow for days when the office is over capacity, with flexible furniture standards and varied spaces to cater to different ways of working, and recognize that people are returning to the office and using the space in diverse ways. Applying these strategies will create an immediate sense of vibrancy when a new space opens—rather than years in the future.

4. Turn the Tables with Owners

With $2 trillion of commercial property debt expiring over the next three years, power is shifting from landlords to tenants—a trend not seen in 35 years. This shift may result in loss of ownership by many landlords, making tenant occupancy more valuable than ever, as it can determine whether a building owner can maintain their equity. Tenants should be aware of the financial status of their building and leverage that knowledge to negotiate for more lease flexibility and enhanced workplace experience amenities.

Figure 5: Commercial Debt Maturation 2024 - 2027

3. Take a Holistic Approach

Creating a comprehensive amenity package to attract and retain talent requires a multi-prong strategy that includes location, labor priorities, portfolio strategy and user-experience research. These often-fragmented elements in real estate organizations must be well-aligned for optimal success. Success will include hiring the right team to deliver the desired solution, including change management, workplace experience and smart facilities management. Organizations should emphasize the importance of creating an exceptional guest relationship experience, which requires training and onboarding the right team members.

Figure 6: Components of a Comprehensive Amenity Package

2. Customize Scorecards

Customizing business analytics and reports to meet the specific needs of different stakeholders is a best practice for alignment and understanding. A well-respected leader at a Global Accounting Firm learned from personal experience that a one-size-fits-all approach to presenting data can lead to wasted effort and disregarded analysis. The key is to consult each stakeholder's specific reports and their usefulness, ensuring tools are applicable. The changing needs of employees in an evolving work environment suggest that these reports reflect both business and employee needs and accountability.

1. Chief Places Officer

The future of real estate will likely include an evolution of the traditional corporate real estate executive into a Chief Places Officer. This new role would prioritize employees' experience in the workplace, treating them much like consumers, and would require superior business command, financial acumen, collaboration skills and visionary thinking. This predicted shift will enable such executives to lead the future of work within their respective organizations rather than merely reacting to decisions and changes.

Figure 7: Traits of a Chief Places Officer