1
Best Practice, Best Fit, Best Model? Strategic
configurations of Corporate Real Estate
Management in Europe
European Real Estate Society Conference
2013 Vienna, Austria, July 5th 2013 Dr. Annette
Kämpf-Dern Prof. Dr. Andreas Pfnür
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Best Practice, Best Fit, Best Model?
Strategic configurations of CREM in
EuropeAGENDA

1. Introduction and Research Question regarding a
   CREM conceptWhat is CREM and how should a CREM
   management concept look like?

II. Framework Literature Overview and the CREM
Map

1. Research Design Exploring the most advanced
   using CA-QDA

1. Findings Some Best Practice-Principles, but
   heterogeneous designs

1. Discussion Best Fit-Designs that need further
   research to identify systematics of
   well-functioning configurations

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Wide consensus about what CREM generally is
aboutCREM definition
I. Intro

• Purpose Providing the strategic direction and
  supervision that ensures that land and building
  matters are dealt with so that they operate
  efficiently and effectively.Thorncroft (1965)
  Stapleton (1986) RICS (2008)
• Function Establishing and maintaining a close
  match between an organizations business and
  property strategies. Bon (1994)
• Activities Forecasting, planning, directing,
  coordinating and controlling real estate
  activities necessary to provide (acquire),
  operate (use) or liquidate (dispose) real estate
  assets.Thorncroft (1965) Stapleton (1986)
  Kaganova et al. (2006) Kämpf-Dern and Pfnür
  (2009)
• Objects Managed are buildings/parcels of land,
  building clusters or portfolios of buildings and
  land holdings. Bon (1994) Ching
• Application Corporates whose business is not
  real estate. Bon (1994) Pfnür (2002)

Definition used Corporate Real Estate Management
(CREM) denotes the planning, decision,
organization, implementation and controlling of
all those real estate activities necessary to
provide, operate or liquidate real estate from
all perspectives (the owner, the user and the
producer) of corporates whose business is not
real estate. The goal of CREM is to support the
overall corporate strategy acknowledging
user-oriented (cost-benefit-ratio), financial
(capital invested) as well as operative aspects.
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Yet, tasks to be performed can differ
considerablyOverview of CREM tasks
I. Intro
CRE Management Tasks Governance, Portfolio
Management, Asset Management, Operative RE
Facility Management
CRE Core Tasks (Services)

• Supply
• Leasing
• Acquisition
• Project Development

• Usage/Operations
• Technical
• Infrastructural
• Commercial
• Services

• Recovery
• Letting
• Sale
• Project Development

Interaction with Core Business and other support
functions Communications, IT, HR, Accounting,
Legal,
Source Own graph based on Management Model St.
Gallen Hartmann/Lohse/Pfnür (2007), p. 8f.
Kämpf-Dern/Pfnür (2009), p. 26 DIN EN 15221
Facility Management
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Focus of Corporate Real Estate Management moves
From task manager to strategically relevant
function
I. Intro
MANAGEMENT TASKS Def. of policies, objectives
standards, systems set-up, controlling
improvement ? Governance Assessment/determination
of requirements, portfolio planning
controlling ? Portfolio Management Strat.
planning, organizing controlling building
clusters/individual buildings ? Asset
Management Operative (day-to-day) planning,
organizing controlling tasks ? RE Facility
Management
CORE TASKS

• Supply
• Leasing
• Acquisition
• Project Development

• Usage/Operations
• Technical Services
• Infrastruct. Services
• Commercial Services

• Recovery
• Letting
• Sale
• Project Development

SUPPORT TASKS Communications, IT, HR, Accounting,
Legal,
Source Own graph based on Management Model St.
Gallen Hartmann/Lohse/Pfnür (2007), p. 8f.
Kämpf-Dern/Pfnür (2009), p. 26
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Moreover CREM tasks can be in one, two, or
three perspectives
I. Intro
Source Kämpf-Dern/Pfnür
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Summarized Breadth and depth of CREM in
corporates and over time varies
considerablyCREM responsibility/influence areas
I. Intro
Strategic level
II.
IV.
Behavioral/intangible orientation
Financial/tangible orientation
I.
III.
Operative level
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So What is a good1 CREM system? How can CREM
be institutionalized2, a CREM concept
look?Research question
I. Intro

• What we see Set-ups that are highly diverse in
  every aspect !
• What we want to know What are the relevant
  determinants for CREM institutionalization? How
  are they interrelated?Does a super ordinate
  plan for CREM exist?
• What we are looking for A systematic,
  theory-based recommendation

A CREM Management Concept
Guiding on CREM strategies, structures,
processes, qualifications, culture, KPIs,
1) Effective and efficient 2) Institutionalizatio
n of CRE Management means the whole complex of
measures that are necessary to develop and
implement a real estate strategy that fulfils the
purpose and goals of CREM. (Pfnür 2002)
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Majority of CREM research deals with parts of
CRE management setup none with the
wholeOverview of CRE management
institutionalization research (selection)
II. Frameworks
Business goals and context ? CREM goals

• Lundstrom (1993)
• Nourse et al. (1993)
• Lindholm et al. (2006)
• Lindholm (2008)
• Hartmann et al. (2010)

Which design to make ALL parts together be
effective and efficient? ? Holistic approach
needed! (also Veale 1989)
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CREM-Map proposes CREM institutionalization
parameters targets, strategies, organization
controlling systemInstitutionalization framework
II. Frameworks
Sector, regulations, competition,
External corporateenvironment of interaction
CREM-influence of stakeholders
Company targets strategies
CREM-history mandate
Size, international-ization, portfolio, ...
Corporate-management
CREM
CREM-targets
Degree of integration into the corporate
strategy
CREM-strategy
Shape andoperationalization
CREM-controlling
Controlinglsystem
Width and depth of the content
Real estate division
User(BUs, staff)
Ownership rate
Externalservicers
CREM-organization
Centralization
Process-management
Sourcing
Organizational structure
HR/culture
Internal corporate environment of the CREM
Source Kämpf-Dern/Pfnür
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CREM research approach needs to be
considerablydifferent to majority of established
business researchComparison of situation and
approach rationalization
III. Research
Majority of business economics research
CRE management research

• New/young function that touches multiple
  disciplines simultaneously (e.g. finance,
  building management, production, IT, HR, ..)
• Needs to consider three equally important
  perspectives ? high complexity
• Needs to adapt/establish theories? theory
  generating

• Usually within one established discipline/
  function (e.g. finance, marketing, sales,
  production, )
• Considers one or two perspectives
• Can build on established theories?
  theory/hypotheses testing

• ? Why? How?-Questions
• System analysis
• Explorative research methods (e.g. case studies,
  fuzzy cluster analyses, primary data)
• Analysis of leading/trendsetting companies

• ? What? How much/many?-Questions
• Correlations, Structural equation analysis
• Quantitative research methods (e.g. large scale
  surveys, dyadic surveys, secondary data)
• Analysis of large number of average/ comparable
  individuals/companies

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Research Design Explorative CREM-ResearchUnits
of analysis Large European corporates
III. Research

• Comparison of the institutional designs of the
  Corporate Real Estate Management from European
  large-scale companies (case studies), notably
• guiding target system and typical strategies
• integration of the CREM into company organization
  and organizational CREM-configuration
• CREM-relevant framework of the company
• CREM control system

Target of the research
Reference Companies

• Selected by the following criteria
• advanced stage of CREM development
• great quantity of existing space and
  heterogeneous type of use (office-, retail-
  and/or service space)
• willingness to collaborate

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10 European companies with highly diverse
context parameters participatingCase study
approach
III. Research
Context-Parameters Characteristics Characteristics Characteristics Characteristics Characteristics
Industry Telecommunication Telecommunication FinancialServices Production/Logistics Production/Logistics
Business portfolio structure Office Logistics Retail Technology Industrial
Size internationality Homeland Several countries Europe Global
Background experience with crises(Burning Platforms) (Formerly) state owned, no crisis Private, no crisis (Formerly) state owned, crisis Private, crisis
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2
3
Office retail 2 Office
retail technology 5
Office
logistics respectively industrial 3
1
3
2
4
2
1
3
4
(DT, SC)
(AL)
(DP, FT, TS)
(T, ABB, CB, SI)
X Number of companies by major characteristics
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Heterogeneity of sample and in-depth-informationr
equire alternative method of analysisQDA comes
from Social Sciences, in business rather
innovative
III. Research
Computer-Aided Qualitative Data Analysis (CA-QDA)
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Research results documented in Case Vignettes
used to identify/compare general principles
influential parametersVignette-Example
Telecommunication company
III. Research
CREM-Map Topics Individual specification
Context Organization Industry Background Portfolio Structure Size Internationality Telecom formerly state owned huge diverse and international RE portfolio
Context CREM Experience, History Mandate Long-term experience partly burning platform mandate global partner, (yet focus on home country) central control
Targets/ Strategy Corporate objectives strategies CREM-targets and strategies kind of fixation/communication Among others reduce costs through standardization and efficiency increaseMaximize ROCE minimize RE costs Written form communicated extensively
Targets CREM strategy development and strategy operationalization Cost reduction Operating user cost increase cash / reduce capital employed add value /maximize of RE not core business relevant any more
Strategy Strategy width depth Primarily financial orientation (strategic operational)
Strategy Ownership rate Target Minimize!
Organization Positioning of CREM executive 2nd level reports to CFO
Organization Centralization Organizational Structure RE Portfolio Management CentralizedRE Asset Management Centralized (partly regional)PrM/REFM Local (Operations), Centralized (Monitoring Controlling)
Organization Sourcing Model Outsourcing of REFM RES more outsourcing intended
Control Kind/degree of transparency Very high objects/contracts/costs in home country (HC) medium space utilization (HC), objects/costs international (INT) low contracts and space utilization (InN)
Control Center type Control systems (budgeting, transfer pricing) Revenue, center Carefree total rent
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2
3
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7
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9
10
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Source Results of interviews
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Diverse bundles of objectives and prioritizations
Examples
IV. Findings
Real Estate USER perspective
Real Estate INVESTOR perspective
Become best employer
Add value / maximize return from real estate
Increase core business productivity
Increase cash-balance/ cash
Reduce user costs
Improve sus-tainability/ecology
Reduce operating costs
ProfessionalizeCREM internally
Legend
Very important
Corporate 1 Corporate 2
Real Estate PRODUCER perspective
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... resulting in very different, but all
well-performing constellations of
institutionalization parametersExamples
IV. Findings
Mandate Efficient ser-vice contractor Consultant Last Call Consultant Last Call Global Partner,central control Global Partner,central control CREM BU
Center type Cost centre Revenue centre Revenue centre Profit centre Profit centre Investment centre
Target system strategy prior. MAX ROCE MIN real estate costs MIN real estate costs MIN cumulative costs MIN cumulative costs MAX core business
Target-ownership rate Overall min! Commodity min! Specifically higher Commodity min! Specifically higher Commodity min! Specifically higher Commodity min! Specifically higher Overall gt 65
CREM-board Finance Service Service HR HR BU/Operations
Organizational structure/sourcingmodel Full-outsourcing Managing AgentREAM, REFM OutsourcingREFM RES OutsourcingREFM RES Managing Agent REFM RES Integrated,traditional
Control of users Carefree total rent Price element systems Price element systems Transfer of third-party costs Transfer of third-party costs Global CREM-budget
Produktionsunternehmen. Core business specific
RE high need for flexibility high degree of
own usage
FS-Companies (Retail). Predominantly
commodity-usage. corporate identity is important
(Customers staff).
Telco 1 Private background. commodity-real
estate, mobile communications. growth strategy,
international.
Telco 2 State-owned background. real estate-mix
(many arent necessary anymore). present core
business is decreasing.
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Guiding principles can be identified,
butspecification of design parameters
varySummary from observations (selection)
V. Discussion
CREM-Map Best practice? Principles(universally valid trends increasing effectiveness) Specification of individual design parameterdepends on ... / varies with ...

Targets/ Strategy Distinctively derived from corporate objectives, corporate strategies and CREM-targets written fixation and extensive communication Content and focal points of corporate target system as well as time frame planned for
. .
Strategy Understand business provide integrated workplace Individual business needs corporate culture
. .
Orga Maximal reasonable bundling of similar tasks, internal/external outsourcing Size, CREM professionalism, experience with outsourcing
. .
Control . .
Source Results of interviews
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Conclusion Hypothesis Not one Best Model
Instead Best Fit-Approach neededFit of
Vision/Mission/Targets, Situation, Design
Parameters
V. Discussion
Source On the basis of Kämpf-Dern (2010)
Organisation des Immobilienmanagements als
Professional Service, p. 69
Next step research Which parameter
constellations make a best fit? Theoretical
foundation Configuration framework (Mintzberg,
Miller/Friesen, etc.)
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Next step Specifying and testing emerged
hypotheses regarding well-performing CREM
configurationsInitial hypotheses regarding CREM
institutionalization
V. Discussion
CREM-Map Questions of research Hypotheses regarding institutionalization

Targets/Strategy When choose which superior orientation/ positioning? Positioning depends mainly on industry portfolio structure positioning drives priorities of professionalizing activities
. .
Strategy Requirements of/ impact on space efficiency/effectiveness? Transparency of business strategies, requirements behavior major prerequisite for space efficiency (costs) productivity optimization
. .
Orga Degree, type control of outsourcing? Case-by-case-subcontracting if existing management competence national portfolio otherwise trend to general contractor
. .
Control . .
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CREM management concept not to be constituted on
best model, but on best fit configurationSumm
ary Outlook
V. Discussion
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Contact information
Dr. Annette Kämpf-Dern Head of Real Estate
Management Project Development FBI Tel. 49
(6151) 16-5264 Fax [phone] Email kaem
pf-dern_at_bwl.tu-darmstadt.de
Prof. Dr. Andreas Pfnür Head of FBI -
Forschungscenter Betriebliche Immobilienwirtschaf
t Tel. [phone] Fax 49 (6151)
16-4417 Email pfnuer_at_bwl.tu-darmstadt.de