When it comes to taking a strategic view of how property is performing for a business, how well are property and facilities managers advised by their consultants? Do they get the benefit of truly objective professional advice? How does the senior management function ensure that its property consultants are truly working in the best interests of the company? Is it the responsibility of facilities management to make sure that property strategy is fully in tune with broader organisational issues and that wider business opportunities and market trends are being captured to optimise property decisions? How can senior management ensure that there is there sufficient coordination between external consultants? How can they be confident of achieving the best premises solution for the business?

The importance of having a clearly defined property strategy aligned to the business

Investment decisions in property should be driven by the principle that any operational property strategy should dovetail with the overall organisational strategy of the business in order to achieve an integrated sustainable and beneficial solution.

Why have a property strategy?

Business today is operating in a fast-changing world and the only certainty is change itself. Property is often considered only as an asset on the balance sheet, an overhead on the profit and loss account, or treated in isolation as a factor of production rather than a business tool.

In the absence of appropriate advice and expertise, property andfacilities managers are often left trying to find an urgent property solution into which to fit the business, rather than looking for a property solution tailored to longer term business needs.

The risk is therefore of a short-term compromise, entailing inefficiencies and unforeseen costs and difficulties which will ultimately consume management time and resources unnecessarily in the future.

Alternatively, if no strategy exists, valuable opportunities which arise may be missed.

Consultants or agents?

It would appear that the property and construction markets are not always focussed on providing occupiers with the best long-term value. The property market in particular is driven by the hope of rising values or transferring risk to others, whereas industry needs cost stability and management of risk by those best placed to deal with it. The changes sought by government to provide greater flexibility in the property leasing market are still largely unknown or disregarded by both the property industry and commerce alike.

Furthermore, the traditional remuneration structure employed by many property consultants and agents is geared to property value and not to the benefit of the client. This dynamic exacerbates the problem of focus within the market place.

With remuneration based on the property value of any ‘deal’, agents quantify the financial value of their advice in property terms because their focus is primarily transaction driven. This is not unreasonable as their remit is often simply to satisfy the occupier’s perceived requirements, rather than to work with them to identify the long term needs for the organisation.

However, business needs are becoming more complex in property terms and many forward looking businesses are realising that the property transaction is now only one part of the overall accommodation infrastructure and plant solution. They realise the importance of achieving the right solution - one that unlocks the value of the business potential, improves productivity, minimises risk and contains cost to an affordable level. To achieve this requires an objective, strategic view of property options that takes into account and integrates with future organisational strategy and performance. The challenge to facilities management and to their advisers is to consider property within the wider context of the business drivers, HR considerations, evolution in IT capability and what this means in terms of cost, future use of space and organisational culture.

Workplace changes demand a coordinated management response

With increasing competition in the market place, and more affordable and workable IT solutions, the future workplace will continue to evolve and provide greater opportunities for businesses to manage their property needs effectively. This will demand a much greater crossover between the different management functions of Operations, Human Resources, Technology, Finance and Property.

This change demands that departmental silos be broken down and interests merged to consider the future of workplace as an entirety, not just the future of Technology or Human Resources or Property. This will in turn require management to think laterally about how they can achieve better use and co-ordination of resources. This is where outsourced property advice can be advantageous in terms of releasing management time and resources and mitigating risk in the decision-making process, provided that the correct brief and appropriate interface is established between the internal client and external adviser.

Outsourcing

Total Property Outsourcing has certainly evolved following the experiences encountered under the first and second generation outsourcing contracts. We are now in a phase where businesses have become more intelligent and informed about their high-level needs. However, the Total Property Outsourcing models need to evolve further if they are to be seen to be capable of matching property solutions fully to business needs.

The onus is not solely on the outsourced provider however to develop their operating model. In any outsourcing arrangement, businesses need to be clear as to what they want and what risk they wish to/are prepared to transfer and at what cost. There is now a far better understanding of the risks involved and how to transfer that risk, if appropriate, particularly at the brief development and contract negotiation stages. Businesses must establish their own internal processes, including client account management and performance measures, prior to any contract negotiations with preferred bidders.

Need for greater focus on business not just property objectives

Not only do the present outsourcing providers need to rethink how they respond to the evolving market place, but also so do the traditional property advisers, whether in house or external. New models and service platforms aligned to clearly defined business objectives are required, not simply property Key Performance Indicators. Establishing what can and will be provided and equally what will not be provided, will provide clarity and focus to the Outsourcing Contract at all levels and allow the Contract to withstand scrutiny in due course.

The new operating models need to support the business strategy and no one size will fit all. Each business will have its own unique set of performance drivers. Understanding the business and its objectives will be key if the right performance measures are to be established. This will require an early partnership based on confidentiality and teamwork which requires trust to be established between the client business, the potential outsourcer and their respective advisers. This will, in turn, allow a focussed, effective long-term solution to be developed based on knowledge, risk and profit share.


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Author Profile

Andrew Pegg BSc (Hons) MRICS

Andrew is Managing Director of Midas Corporate Consulting who are business property advisors working exclusively with occupiers of business property. Andrew has over 18 years experience of working in the public, private, corporate and not for profit sectors, both in house and as a consultant.

The last 10 years have been spent working exclusively on developing property solutions for occupier organisations, helping to identify how they can improve their performance and profitability through the effective use and management of property and employed resources.

His experience includes applying commercial overview and logic to site acquisition and master planning, identifying development opportunities and strategies to exit problematic sites, advising on optimum value creation and cost savings as part of rationalisation processes.

Andrew is a Member Royal Institution of Chartered Surveyors’ Management Consultancy Faculty and Assessor of Professional Competence and has a BSc (Hons) in Land Management.