CFO, IBM Study Details Corporate Real Estate’s Rising Profile

With the recovering economy fueling broad-based growth, commercial real estate will play a larger role in corporate expenditures, according to a report presented by CFO Research and IBM yesterday at CoreNet Global’s North American Summit in Washington, D.C.

Commercial real estate is moving higher up on the balance sheet in corporate America. With the recovering economy fueling broad-based growth, commercial real estate will play a larger role in corporate expenditures, according to Working Smart: Value Management for Corporate Real Estate, a report presented by CFO Research and IBM yesterday at CoreNet Global’s North American Summit in Washington, D.C.

CFO/IBM surveyed 150 senior financial executives, and a whopping 47 percent indicated that they expect changes in the scope of their company’s operations to result in a rising need for space and increased real estate expenses over the next three years. The response is telling, as the survey polled top executives at companies with annual revenues exceeding $1 billion.

CFO and IBM put the results in perspective. “In the past, real estate may have been treated almost as an afterthought in a company’s business planning,” the report notes. “Today, it’s likely that the CFOs who relegate real estate to the back office do so at their own peril.”

Approximately 36 percent of the survey participants anticipate an increase in the number of real estate assets they occupy in North America, so the recovering office and industrial sectors in the U.S. and Canada can expect an added boost. But the growth in demand won’t be limited to the borders of this continent. Roughly 32 percent of respondents are looking to expand in China, and 28 percent indicated they will increase their number of assets in Central and South America (not including Mexico).

The survey also reflects the impact of real estate and corporate growth on one another. The executives noted that they will look to real estate strategies to bring their facility usage in line with economic conditions and changing work practices. They are “right-sizing” their portfolios. Fifty percent of respondents named the reducing operations and occupancy costs as one of the top three objectives for corporate real estate, and 47 percent cited improving real estate utilization as a top priority.

“The most surprising finding in the survey was the equity between cost reduction and value optimization–indicating a shift in focus from expense management to return on assets,” John Clark, director of IBM’s smarter infrastructure program, told Commercial Property Executive. As CFO and IBM note in the report, while CRE ranks as one of the top four costs of business, only 49 percent of workspaces are in use at any given time.

A takeaway from the study was summed up by Jeff Weidenborner, executive managing director of corporate solutions with commercial real estate services firm Colliers International. In the report, Weidenborner admonishes corporate leadership teams to “become smart about your real estate,” which, he explains, means “aligning your workspaces with the way you do business in a changing world.”