CRE Global Survey 2011 Final

8/6/2019 CRE Global Survey 2011 Final

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Opportunity Emerges from Crisis

Global Corporate Real Estate Survey 2011

In partnership with


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Jones Lang LaSalle

The challenges facing CRE are signi cant.

CRE leaders who address these challenges

head on and who think and invest in

developing CRE talent, recruiting key talent

from the industry, or from outside traditional

boundaries, will be those operating at the

vanguard of the industry. New thinking is

required and the rewards for delivering such

will be signi cant.

Survey respondents rmly believe that

transformations in the role and structure

of the CRE function are underway and will

intensify over the next three years. We

concur. We believe that this period is a

pivotal time for CRE in terms of elevating the

awareness of CRE inside the organization

and with this awareness, the realization of

the potential strategic contribution of the

overall function.

IntroductionWe are delighted to introduce Jones Lang

LaSalles inaugural Global Corporate

Real Estate Survey, providing insight

from within the industry about the future

path, challenges and opportunities facing

corporate real estate (CRE). With over 500

CRE executive respondents globally, this

survey has captured data not previously

presented in any of our research.

The corporate operating environment has

hardened over the last 36 months. CRE

teams have been required to respond with

greater agility, expediency and improved

productivity. They have increasingly done so

by working closely with service providers,

and throughout the crisis, we have been

working with clients across geographies and

sectors to help them deliver sizeable real

estate cost savings.

This survey represents the rst global

attempt to identify the future challenges

facing the CRE industry and their likely

consequences over the next three years.

We sincerely thank those of you who shared

your thoughts and perspectives. Your input

has helped form a clear picture of where

next for CRE.

Going forward, we will address many of the

speci c challenges raised within this report

in more detail via our continuing thought

leadership program, which we will deliver to

you throughout 2011 and beyond.

Opportunity Emerges from Crisis

Stu rt Hicks Americas

J h F rrest

Asia Paci c

Vincent Lotte er Europe, Middle East and Africa


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1Higher em s pr uctivity:

CRE teams are required to be

more relevant and resourceful,

enabling CRE leaders to further enhance

productivity and ef ciency

Having been placed in the eye of the storm

during the GFC, CRE teams now experience

more scrutiny from internal stakeholders,

increased demand for real-time reporting,

and tougher performance targets. This

should help CRE teams be better prepared

to address returning growth, as well as the

continued uncertainty in some sectors and

markets.

Driving improved productivity via the

implementation of more strategic real

estate initiatives will de ne best-in-class

CRE organizations. A shift from short-

term, survival tactics towards medium-

term, strategic initiatives aimed at driving

productivity enhancements is both possible

and required.

Executive SummaryThe Global Financial Crisis (GFC) generated four overarchingglobal trendsimpacting the future state for CRE, which are summarized here

and expanded further throughout the report:

2 B l ci g the u l f rces f gr wth right-sizi g:CRE organizations are exposed to complex targets, such as dealing with

the contrary pressures of growth and

right-sizing

Charged by corporate leadership to deliver

sizeable cost savings, CRE teams embarked

on a series of short-term tactical real estate

plays focused exclusively on driving direct

cost savings from real estate portfolios. This

forced a step change in the form, function

and structure of the CRE organizations

engagement with leadership.

A key challenge for CRE teams will be to

deliver a platform that enables the business

to pursue select growth opportunities, often

in markets that lack transparency, while

simultaneously right-sizing CRE portfolios

within mature markets.

Pr gressi g t w r sp rt erships:CRE teams are moving towardsmore sophisticated partnership models

To meet the challenges of the next three

years, CRE teams will need help from

outside. Evolution along the outsourcing

curve will be necessary to provide capacity

for CRE leaders to elevate the function

within the organization.

For those already engaged with the market,

a re-evaluation of existing partnerships with

key service providers may be undertaken

to ensure value and bene ts are beingextracted to the satisfaction of higher levels

of the organization.


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Resh pi g CRE structures skills: A new talent requirement isemerging, resulting from a tougher

operational environment, forcing CRE

leaders to rethink team structuresand skills

CRE teams were exposed during the

economic uncertainty as the C-suite

gained a better appreciation of real estate

fundamentals and the costs associated with

real estate portfolios. While this presents

new, tougher challenges for CRE teams,

it also creates an opportunity for greater

engagement.

CRE leaders should consider re-evaluating

their existing teams and skills. They must

be prepared to redesign team structures

in order to reduce focus on tactical (more

easily outsourced) activities. Greater

attention on driving sustained relationships

with business leaders will facilitate better

long-term alignment between business and

CRE strategies. Either through investment

in up-skilling existing staff or acquiring freshtalent including talent from both within the

industry and possibly outside the traditional

boundaries CRE leaders should broaden

the set of skills residing in their organizations

today.

Over the next three years, the challenges

of managing CRE will intensify. Strong and

sustained interest from senior business

leaders in real estate costs and strategyrepresents an unparalleled opportunity

to elevate the CRE function and its

contribution even further. Along with this,

CRE professionals have an unprecedented

opportunity to accelerate their careers.

Five keys t CRE success:

CRE teams will need to change in

order to be relevant and responsive

to their business needs. There are

ve fundamental strategies that can

drive change and adaptation in the

CRE function as outcomes from our

global survey:

Generate a long-term plan for theevolution of the CRE team that

supports and facilitates the wider

business growth.

Place a strong focus on real

estate strategies that drive

enhanced productivity and are

highly ef cient and align with top

business goals.

Make the most of the serviceprovider market to nd partners

that help increase capacity and

capability to tackle the twin

pressures of right-sizing, while

pursuing selective growth.

Re-focus and restructure the CRE

team both in response to growing

scrutiny from senior business

leaders and in order to drive amore strategic agenda.

Focus on talent investing in

current CRE teams tapping

talent from within the industry,

accessing talent from outside

the traditional boundaries to

ensure the CRE function is suited

to engaging and managing the

raised expectations of an informedC-suite.

1.

2.

3.

4.

5.


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Global Trend #1: Higher demands on productivity

Throughout the GFC, CRE teams were focused on delivering short-term tactics

to generate direct cost savings and/or generate capital from the sale of surplus

assets, in support of wider corporate survival strategies.

Corporate leaders are more aware of real estate portfolio costs and will continue

to set tough performance targets for CRE teams. This requires greater focus on

strategic action as CRE leaders report being exposed and elevated to a higher

discussion within the organization.

CRE teams should pursue more strategic initiatives in order to meet these toughtargets. Reducing uncertainty and using the increasingly available investment

capital smartly will assist. Key among these strategic initiatives will be the effort to

improve workplace ef ciency, mobility and productivity.

Key St tistics97% of respondents reacted to theGFC via one or more tactical realestate plays

85% believe that the CRE functionhas developed greater visibility andengagement with senior businessleaders in response to economicuncertainty

91% believe that they now havegreater ability to in uence decisionsand strategies within the wider business

81% maintain that they had beenplaced under greater scrutiny bythe wider business, with the sameproportion being tasked with moredif cult performance targets

75% are now required to report tosenior business leaders on portfoliostatus and costs with increasedregularity, with 78% being asked toarticulate the true costs of the realestate portfolio to the wider businesson demand

CRE Implic ti sImprove your ability to respond inreal time to demands from senior management and anticipate changingbusiness dynamics. Seek necessaryinvestment to be able to quantify andqualify the portfolio at any given timethrough effective reporting tools.

Adopt a scenario planning approachtowards CRE strategy formation thatgives the business options to acteffectively over the short, medium andlong term. Be clear about the role,remit and structure of the CRE teamwithin each of these scenarios.

Establish a workplace mobility/productivity strategy. Be preparedto use the changing operationalcontext for CRE to drive this intothe business, overcome resistanceand sell the bene ts of change in

both hard quanti able ( nancial andproductivity metrics) bene ts and softqualitative (talent) terms. A partnershipwith Human Resources will fortify thediscussion.

1

2

3


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Jones Lang LaSalle

CRE st s t the fr t-li e f c rp r te c st s vi g, pti gsh rt-term t ctic l resp ses

As global corporations responded to

tightening nancial conditions and shrinking

revenues, attention predictably turned

quickly towards real estate, which typically

accounts for 7-12% of a business total

operating cost base. This pressure was

rmly felt by CRE teams across the worldwith 97% of survey respondents supporting

their business with one or more tactical real

estate plays to reduce cost (Fig 1).

Prep re ess is evi e t, but s re cti t curre t sh rtc mi gs During the GFC, more than half of our

respondents took the opportunity to review

existing real estate strategies and revise or

devise new plans for implementation. This

suggests a return to the basics of portfolio

planning with 57% seeking to gather

portfolio and lease information in order

to inform strategic decision making.

Pre-crisis, some CRE teams were

insuf ciently equipped to readily provide

portfolio metrics or identify opportunities.

In the future, speed and information will be

crucial as economic uncertainty lingers.

Pl i g h riz s re l g typic lly l ck i sight i t

lter tive sce ri s str tegies

The wave of uncertainty ushered in by theGFC is entirely at odds with the typical

planning horizon for most CRE strategies.

Fifty-four percent of our respondents had a

CRE planning horizon of more than three

years, while just 5% had a horizon of up

to one year. While lease structures and

negotiation periods around leasing events

typically preclude an extremely short-term

strategic focus, a planning horizon of threeor more years has often been unable to

deliver the immediate added value and

strategic guidance that businesses required

during the crisis.

Portfolio/lease gathering to aidinformed decision making 57%

Preparing/revising CRE plansfor future implementation 57%

Taking out cost from the portfolio 72%

Consolidating into fewer buildings 73%

Disposal of surplus space throughsub-letting

55%

Fig 1 >>T p 5 str tegies pte i resp se t the Gl b l Fi ci l Crisis

BaSE: 316 RESPondEnTS

Which of the following corporate real estate strategies did your organizationimplement to cope with the global nancial crisis?


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Survey results also illustrate that mostCRE strategies developed over this lengthy

planning horizon pay little attention to the

direction and shape of the CRE function

itself. A large proportion of respondents

struggled to articulate effectively what

the role, remit and structure of their team

will be three years from now. There is

an opportunity for CRE leaders to start

thinking differently and to move away fromthe tactical, everyday actions encouraged

by lease structures. Offering up future

scenarios and a menu of potential responses

(together with the broad implications of these

responses) will be at the heart of making

a more valuable, distinguished and truly

strategic contribution to the wider business

and its growth.

Leveraging covenant/landlordrelationships to achieve exibility

Exiting non-core markets andlimiting exposure

Monetizing owned assets

Preparing/revising strategicreal estate plans for future

implementation

Upgrading of workplace/space

8%

8%

8%

10%

16%

Fig 2 >>T p 5 str tegies th t resp e ts w ul h ve like t h ve pte but i t


Which of the following strategies would you have liked to implement but did not?

Internal resistance

Unfavorable market conditions for implementing disposal strategies

Economic uncertainty

Capital expenditure constraints

Uncertainty around the futureshape and size of the business

26%

26%

36%

42%

44%

Fig 3 >>T p 5 c str i ts up cti


What factors limited your ability to execute those strategies that you would haveliked to have?


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Jones Lang LaSalle

alter tive str tegies re twell f rme r utes timpleme t ti re see sc str i e Our survey asked respondents about

those strategies they would have liked

to have implemented in response to the

GFC but were unable. A summary of these

strategies is shown inFig 2. Only a very

small number of respondents were able toidentify alternative routes of action limiting

innovative thinking and action within CRE.

There were real constraints to the delivery of more strategic action as recognized inFig 3.

The sense of underlying uncertainty appears

to have served as a substantial brake.

However, as some semblance of stability

returns and con dence levels improve,

the majority of these constraints are being

removed.

GFC leg cies re str g h vei cre se the pressure bei gpl ce up CRE te ms The capacity to develop more exible and

valuable CRE strategies is dependent

upon effective and regular engagement

with business leadership. Results from

this survey suggest that this dialogue is

emerging and provides a platform for a

step-change in the role, remit, and structureof the CRE function going forward. Survey

respondents were asked for their views on

the likelihood of the emergence of future

operational scenarios and a large proportion

of respondents were aware of these

scenarios emerging within their business

and day-to-day activities(Fig 4).

Sce ri H s t will

t h ppe

H s t h ppe ebut will i the ext

3 ye rs

H s p rtlyh ppe e

H sh ppe e t l rge exte t

CRE function gains greater visibility and ability to in uence business decisions 7% 8% 42% 43%

CRE function is placed under greater scrutiny by the wider business 10% 9% 45% 36%

CRE function has far greater visibility and engagement with senior business leaders 4% 4% 40% 51%

CRE function has greater and earlier insight into potential changes to the wider business

6% 12% 48% 34%

CRE function is given more dif cult targets / key performance indicators 6% 12% 38% 43%

CRE function is called upon to report more frequently on portfolio status / issues 11% 14% 36% 39%

CRE function is charged with reworking the CRE strategy 10% 15% 34% 40%

CRE function is tasked with enhancing portfolio data and understanding 8% 11% 34% 47%

CRE function is required to be able to articulate the true costs of the real estateportfolio to the wider business on demand

5% 17% 34% 44%

Fig 4 >>The likelih f tr sf rm ti sce ri s i the CRE fu cti p st GFC


These are some possible legacies of the global nancial crisis on the role of the corporate real estate team. In your opinion, to whatdegree have they taken place in your organization?


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10 Global Corporate Real Estate Survey 2011

Today, the CRE function has greater visibilitywithin the business than it has had at any

other time. This visibility is a route to greater

engagement that is further enhanced by

senior business leaders now having an

active interest in real estate, a growing

understanding of real estate portfolio costs

and a desire to work this area of operations

harder and smarter. This provides an

opportunity for the CRE community toengage and make a greater contribution.

W rkpl ce m bility pr uctivity will be key successr ute f r CRE i this ch gi gclim te This contribution can be made through

a more intense focus upon transforming

the nature and culture of the workplace.

Seventy-seven percent of survey

respondents regard the need to attract

talent, the quest for enhanced productivity,

the right-sizing of the portfolio for a new

Fig 5 >>St tus f resp e ts curre t ppr ch t w rkpl ce m bility


How would you describe your organizations current approach to workplace mobility(i.e. ability to work from multiple places)?

25%

13%

41%

14%7%

Limited or partial program has beenimplemented

Comprehensive program is in placeand underway

Workplace mobility program is in theplanning phase

Plan has been proposed but not yetscoped out or developed

No plans underway at this time


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Jones Lang LaSalle 11

organizational reality or a desire to changethe culture and nature of work as top

in uences on future real estate strategies.

Creating more ef cient workspace that

is conducive to modern work styles and

receptive to the work-style demands of

knowledge workers i.e., to make the

workplace more productive will assist

CRE leaders in building additional value

for their businesses.Fig 5shows that the

current level of implementation for workplace

mobility programs can be best described as

patchy. More comprehensive programs can

assist organizations to meet required targets.

The barriers to implementation, outlined in

Fig 6, need to be addressed and overcome

in partnership with senior business leaders

if improved workplace productivity is to be

achieved.

Maintaining organizational culture

Technological de ciencies

Lack of executive buy-in

Resistance/fear of change

Management and/or employeeengagement

17%

17%

39%

44%

44%

Fig 6 >>Perceive gre test c str i ts t the pti f w rkpl ce m bility pr gr ms


In your opinion, what limits the adoption of workplace mobility in your organization?


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Key St tistics39% of respondents forecast anincrease in the total size of their globalreal estate portfolio over the next threeyears, while 31% predict a reductionRespondents forecast their portfoliogrowth to be strongest in North Asiawith a 60% net growth in portfolio sizepredicted over the next three years,followed by Latin America (34%) andCentral and Eastern Europe (34%)

The nance sector is forecast to growmost notably in North Asia with 63%of respondents predicting portfoliogrowth. The technology sector is alsopredicting portfolio growth in North Asia(67%), Latin America (44%) and SE Asia (44%)

CRE Implic ti sThe varied global growth trajectorydoes not lend itself to a one size tsall approach and CRE leaders willneed to be selective, innovative andrun a number of strategies in parallel.

CRE leaders will need to ensureteams are effectively structured andskilled to tackle the twin requirementsof driving growth and right-sizing.

Emerging and opaque marketswill challenge CRE teams tobuild a knowledge base quickly.Understanding of market practice,orthodoxies, and conditions will beessential for CRE teams to presentdeliverable options to their business,

be able to communicate risks and giveguidance on realistic lead times.

1

2

3

Respondents are seeing the return of growth pressures within their businesses,

but in select geographies. These growth areas typically coincide with opaque real

estate markets which present operational challenges and where we advocate

using locally adept and in-situ real estate professionals who understand market

nuances.

Net portfolio growth is anticipated to be strongest in the Asia-Paci c region and in

particular North Asia, driven essentially by the growth of China.

In contrast, net portfolio growth is predicted to be at or negative across North

America and Western Europe as corporate occupiers seek to rationalize or

consolidate portfolios often enabled by workplace mobility programs.

Global Trend #2: Balancing the dual forces of growth and right-sizing


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a retur i g gr wth y mic willin uence real estate strategy Survey respondents identi ed a growth

dynamic returning to their businesses over

the next three years. Growth was the

standout issue shaping respondents futurereal estate strategies (Fig 7).

V ri ce i gr wth r tes is high will f rce c rp r te ccupiers

t m ke selecti s Projected GDP growth rates across the

world show a tremendous variance(Fig 8).

Corporate occupiers are prioritizing targeted

opportunities in their attempts to bene t

from the return to a more stable economic

climate. However, the speci c location of

the selected growth presents a challenge

and will add to the pressure already being

felt by CRE teams. Growth most likely will

be pursued in rapidly emerging markets and

therefore concentrated in markets where

local real estate expertise is most valuable.

China 9.0

India 8.6

Brazil 5.4

Russia 3.7

Australia 3.1

United States 3.1

United Kingdom 2.3

Germany 2.1

France 2.0

Fig 8 >>Select GdP gr wth r tes 2011-14 (% p )

Source: Global Insight, January 2011

Fig 7 >>The most in uential factor shaping future real estate strategy

Upgrading the quality of space

Rationalizing/consolidating space

Uncertainty and risk minimization

Cost pressures

Growth

4%

5%

7%

11%

35%

Attracting talent 4%


As we emerge from the global nancial crisis, which of the following will bemost in uential in shaping your current and future (3 years from now) realestate strategy?


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This selectivity in growth is represented inFig 9, which illustrates where respondents

expect to see net growth in portfolio sizes

over the next three years.

Net growth is strongest in the Asia-Paci c

region. Three sub-regions dominate with a

number of respondents predicting portfolio

growth (for a listing of which countries are

included in regional breakouts, see page 25):

North Asia (primarily China) 60%

South Asia (primarily India) 43%

South East Asia 37%

In the EMEA region this same Eastwardsand Southwards shift is evident. Strongportfolio growth is predicted for Central andEastern Europe (34%) and the Middle East(24%).

In the Americas the growth dynamic isSouthwards, in the Latin America region(34%).

The emerging market dynamic is apparent

and the opportunities presented by the BRIC

nations are being responded to by global

businesses particularly in the absence of

strong economic growth forecasts within the

more mature sub-regions of the world.

1.

2.

3.

Pr vi i g the pl tf rm f r gr wthprese ts ch lle ge The challenge facing corporate occupiers is

the relative lack of transparency and varying

degrees of maturity around real estate.

It is revealing to compare the previous

growth map(Fig 9)withFig 10, drawn from

Jones Lang LaSalles most recent Real

Estate Transparency Survey, which shows

the varying levels of market transparencyacross the world. It is clear that the markets

in which respondents are pursuing growth

are also the markets that have low levels of

transparency.

Where opaqueness exists, CRE

organizations may experience:

Slower speed-to-market

Higher barriers to entry

Cost and complexity around routes tomarket exit

The need to deliver the platform for growth

in real estate markets places pressure on

CRE teams over the medium term. CRE

teams need to enable the pursuit of growth,

but the wider business may be ill-informed

about the practicalities of expanding within

an opaque, emerging market. Entering

emerging markets is not new, and ensuring

CRE teams are equipped with options and

clarity around cost and risk should enable

them to meet the broader company growth

objectives.

1.

2.

3.

L wer gr wth r tes i m turem rkets pl ce w w r pressure

p rtf li size Respondents suggest that in the United

States and Western Europe overall portfolio

size will remain at or reduce over the next

three years. This downsizing has already

been seen in these mature Western markets.

Over the last 18-24 months, corporate

occupiers have sought to drive consolidationwithin their portfolios and release surplus

space back into the market hence driving

vacancy rates in Europe and the United

States, for example, to new record high

levels.

Going forward, there will be a push to drive

better utilization rates within consolidated

portfolios, further dampening demand for

additional of ce space in mature markets.Utilization rates currently run at around

40%, which represents a huge cost and

inef ciency to corporate occupiers. This will

be a further powerful stimulus for strategic

real estate initiatives that aim to drive a more

ef cient and productive workplace.


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High Transparency

Transparent

Semi-Transparent

LowTransparency

Not Covered

Opaque


Note: Respondents provided views on likely portfolio growth at a sub-regional level. Results therefore mask clear differentials within sub-regions and are often in uenced by the presence of a strong emerging market. Projected growth in North Asia, for example, will be in uencedby the rise of China and does not suggest similar levels of portfolio growth in Japan.

Negative Net Portfolio Growth

Stability (0% Net Growth)

0-10% Net Portfolio Growth


50%+ Net Portfolio Growth


Not Covered

Fig 9 >>net p rtf li gr wth ver ext 3 ye rs

Fig 10 >>Gl b l Re l Est te M rket tr sp re cy


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Global Trend # : Progressing towards partnerships

Key St tistics23% of respondents were unable toarticulate their likely model of corporatereal estate services three years fromnow67% currently deliver CRE services viaa hybrid model this will rise to 70%over the next three years

24% deliver CRE services entirely in-house but this will reduce to less thana fth over the next three years

9% currently adopt a fully outsourcedmodel of service provision, rising to11% by 2014 70% will do so via anexclusive partnership arrangement

41% of those adopting a hybriddelivery model outsource propertymanagement; 34% also outsourcetransactional services to the market

72% of those adopting a hybriddelivery model retain portfolio strategywork in-house

CRE Implic ti sUndertake a skills audit of your existing real estate team. Identify gapsin your capability to respond to tasksgiven by your stakeholders.

Consider relationships that sharegoals, risks as well as rewards whereyou can achieve a true alignment of interests. Be clear on what you needfrom your service provider both nowand in the future and undertake athorough review of what the marketcan offer.

Evaluate current relationships in termsof the value delivered to ensure thatthe relationship remains relevant toimmediate circumstances and futurestrategy.

1

2

3

Hybrid delivery models, where services are delivered through a combination of

an in-house team and outsourced real estate service providers, will increase in

popularity over the next three years. While well established in the US, this trend

is growing stronger among EMEA corporates where tactical functions, such as

transaction services, have the greatest tendency to be outsourced.

Those currently operating a fully-outsourced model, or seeking to do so over

the next three years, anticipate developing fewer but stronger and deeper

relationships with service providers.

With a push for CRE to be more strategic around how they engage for real estate

services, CRE leaders should focus on their future delivery model. Currently,

nearly a quarter of respondents are unable to categorize their likely model three

years from now.


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Gl b lly there is m veme tt w r s p rt erships with servicepr vi ers s fully i -h use

elivery m els imi ish, rivi ggr wth f hybri fully-

uts urce m els ver the extthree ye rs Nearly a quarter of all respondents were

unable to articulate a clear vision of how

their real estate services will be delivered

in 2014. This inability is underpinned by a

range of potential factors:

Lack of understanding of the wider businessstrategy

Inability to see a clear future given the fogof uncertainty

Lack of understanding within CRE teams asto market options

Inertia in thinking about how to do thingsdifferently and bring about change

Even though CRE planning horizons aregenerally three years, there is little apparent

associated thinking around how the CRE

team needs to evolve and draw on the

external market in order to boost capability,

capacity and ultimately, productivity. Unless

clear long-term strategies about future CRE

service delivery are developed, there is a

risk that CRE will be seen as ineffective,

weak and hindering the evolution of thebusiness through a lack of innovation.

Currently, real estate services are most

typically delivered through a hybrid model

that combines in-house capabilities with

injections of additional capacity and

capability from external service providers on

a geographical or functional basis, or both

(Fig 11). Sixty-seven percent of respondents

currently adopt this model of delivery, risingto 70% by 2014.

Growing adoption of the hybrid modelover the next three years will come at the

expense of purely in-house service delivery.

This is unsurprising given the twin pressures

to facilitate both growth and right-sizing

and the inevitable resource pressure that

this generates. As CRE teams are required

to implement strategic programs aimed at

driving increased workplace productivity,

a turn to the market will be required to tapexpertise and best practice. Twenty-four

percent of respondents globally deliver

services in-house today, but this is predicted

to reduce to 19% three years from now.

On a global basis we will also see some

corporate occupiers evolve further up the

outsourcing curve and shed the hybrid model

to be fully outsourced. There is variation

in this trend both geographically and bysector, with US-domiciled corporations

Fig 11 >>Re l est te service elivery m els w 3 ye rs fr m w

19%

24% 67%

70%

9%

11%

Now

3 years from now

Fully in-house Hybrid Fully outsourced


Which of the following best describes how your organization structures its corporatereal estate needs at present and how it will do so three years from now?


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and the technology sector being particularly

strong proponents. Nine percent of corporate

occupiers presently adopt a fully outsourced

model with this rising to 11% over the next

three years. A key constraint to greater

adoption of this model is the high level

of decentralization currently evident in

organizational and CRE structures. This can

lead to fragmentation and issues of control

that are complex for an external partner to

manage.

Th se evel pi g hybri eliverym els te t uts urce t ctic lc mp e ts with str tegiceleme ts bei g ret i ei -h use

Acknowledging that the hybrid delivery

model is most prevalent, our survey also

assesses which real estate functions are

currently outsourced and which were

retained in-house(Fig 12). More outsourcing

occurs with tactical or process-driven

functions such as transaction services or

property management. The motivation will

often be geographical coverage, resources,

expertise and also the instantly accessible

knowledge of market conditions, practices

and opportunities held within the service

provider community. Strategic functions,

such as portfolio strategy, have a tendency

to be retained in-house.

Source: Jones Lang LaSalle, 2010

out-t sk

Rel ti ship

Many vendorsPrice basedon scopeCommoditizedproductOne-off contract

Task-based,relationshipdrivenGenericproduct /serviceCost focusExpandedactivity

V a

l u e

/ B e n e

f t s

Time / Degree of Change

Preferre

ContractualrelationshipDe ned scopeMutual trustRecurringactivity

alli ce

More exclusiveagreementHigher degreeof trust andcollaboration(CRE, IT, HR)Focus on valueadd and mutualadvantageSenior managementinteraction

Str tegic alli ce

Supplier collaboration

Higher level of commitmentand investmentLonger-termstrategic valueaddSenior managementengagement

Equity

Common equityownershipCommon goalsCommon risks /rewardsLong-term

M els f r p rt eri g


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Those operating a fully-outsourced deliverymodel or who are planning to do so within

the next three years are moving towards

fewer and deeper partnership relationships

with service providers. Those respondents

adopting a fully-outsourced model were

further assessed in terms of the nature of

their current relationships and how these

are likely to evolve over a three year window

(Fig 13).

We asked respondents to classify their

fully-outsourced delivery model as involving

either a preferred vendor panel; as an

exclusive agreement either geographically

or functionally with a vendor; or as an

exclusive partnership-based relationship in

which goals, risks and rewards are shared

by both service provider and client.

Half of those with a fully-outsourced model

presently adopted this partnership model as

a means of fully leveraging service provider

platforms and innovation. Critically, this is

forecast to rise to 70% of those adopting

a fully-outsourced model by 2014. This

suggests an advanced market that is moving

towards the development of stronger, deeper

relationships with fewer partners.

Fig 12 >>Re l est te fu cti s prese tly elivere i -h use r uts urce i hybrielivery m el

7% 59% 34%

12% 59% 29%

23% 48% 29%

72% 24% 3%

20% 39% 41%

34% 53% 13%

TransactionServices

PM/Designand Build etc

Portfolio andFacilities

Management

Portfolio Strategy

PropertyManagement

Energy/Sustainability

Services

In-house Mixed Outsourced


How would you best describe the current organization of speci c CRE tasks?

Fig 13 >>The structure f rel ti ships with fully uts urce service pr vi ers b thw 3 ye rs fr m w

12% 38% 50%

8% 22% 70%

Now

3 years from now

Outsourced topreferred vendors

via select panel

Outsourced to avendor with anexclusive agreement

Outsourced toexclusive partner or multiple partners withshared goals, risksand rewards


What type of outsourcing do you currently practice or plan to practice three yearsfrom now?


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Global Trend # : Reshaping CRE structures

and skills

Key St tistics63% of respondents have a directreporting line into the C-suite

73% anticipate the CRE function tobecome highly centralized, driven by acore regional or global team within thenext three years

31% have seen no further investmentin the CRE function since GFC and donot anticipate this to change

41% saw no reduction in headcountwithin their CRE function during theGFC and do not expect future cuts

24% anticipate their teams will undergotalent upgrades within the next three

years74% have turned to service providersto provide innovative solutions tochallenges emerging out of the GFC,with a further 15% expecting to do sowithin the next three years

CRE Implic ti sIdentify other sectors outside of realestate that have a need for the typesof engagement and relationshipmanagement skills required bring innew thinking and methods to elevatethe existing team.

Generate a long-term plan for theevolution of the CRE team thatsupports and facilitates broader business growth strategy, anticipatesneeds and delivery constraints andensures that capability is aligned withchanging needs. Post a skills audit

to identify skills and capability gaps,and drive required change within your team so that core requirements areprioritized.

As non-real estate professionals takethe helm, there is a need to raise their understanding to ensure that CRE isaccurately represented at the boardlevel. Be able to summarize issuesfacing your portfolio, your team andyour ability to deliver.

1

2

3

The intensity and pressure being placed on CRE leaders is such that the

restructuring and re-skilling of CRE teams is becoming more urgent. Speci c skills

to drive a more strategic real estate agenda are required and generate the need to

invest in current CRE skills and possibly seek talent from both outside the industry

and from service providers.

Decentralization in many organizations is a constraint in delivering more ef cient,

strategic and consistent real estate services. Respondents anticipate a shifttowards greater centralization and the establishment of core regional or global

teams within the next three years.

Overall organizational structures are attening and CRE leaders are becoming

located within wider support or shared service functions being headed by non-real

estate professionals.


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Existi g CRE structures cr ssthe gl be re mixe withfu cti lity, fte ece tr lize

i s me c ses t eve withi e ic te CRE ep rtme t

The structure and situation of the CRE

function within the wider business varies

among our survey participants. While

there will always be idiosyncrasies based

on legacy issues, underlying businessstructures and the varying effects of the

GFC on the size and shape of corporate

occupiers, the diversity in CRE team

structures is signi cant.

One emerging structure that respondents

identi ed was the rise of a wider operational

or a shared service department under the

overall leadership of a Chief Operating

Of cer. The ultimate oversight of CRE by

someone drawn from a different operational

background may expose the function

to some different thinking. Consider the

evolution of technology outsourcing since

the mid-1990s and what could be learned

from leaders that have experienced that

market and its evolution as a possible route

to innovation and improving skills of current

CRE teams (Fig 14).

Fig 14 >>L c ti f the CRE le er withi the c rp r te ccupier structure

47% 3% 17%18% 1% 7% 2% 5%

Dedicated CREDepartment

Procurement Administration/Shared Services

Supply Chain/Logistics

CorporateOf ce/GeneralManagement

Technology Human Resources Finance


Under which department does the person who leads corporate real estate sit in?


22/28


The majority of CRE leaders currentlyreport to the C-suite(Fig 15). The growing

cost consciousness of corporate occupiers

is bringing CRE teams increasingly into

reporting alignment with Chief Financial

Of cers and nance departments. This will

likely intensify when proposed changes

to global lease accounting standards are

implemented in 2013* as property will have

an instant balance sheet impact and thus willbecome more central to corporate nancial

well-being.

With retur t ptimism gr wth, there is c cer ver thestructure skills f the CREfu cti s future re i ess We posited a number of future scenarios

in terms of potential CRE structures and

asked respondents to assess the likelihood

of these scenarios emerging over the next

three years (Fig 16). The structural scenario

that was most likely to occur according to

respondents is a shift towards more highly

centralized real estate functions, which are

driven by core regional or global teams,

thus shifting in-house talent requirements.

Encouragingly, given the size of the task

facing CRE teams in a post GFC era, thereis not anticipated to be a strong reduction in

the headcount size of CRE teams over the

next three years.*Gl b l Le se acc u ti g Ch ges

The US Financial Accounting Standards Board (FASB) and its counterpart, the International Accounting Standards Board (IASB), have proposed changes to global lease accountingtreatment that will fundamentally alter the impact of leases on organizations income statementsand balance sheets. While the new rules are not expected to go into effect until at least 2013,given the need to report two prior years comparative information, companies will need to beginto prepare immediately, particularly those businesses that draw heavily on lease arrangements.

For more information about the changes, please visit our Jones Lang LaSalle website, LeaseAccountingChanges.com.

Sce ri Me V lue cr ss the survey

CRE function to become highly centralized and driven by a coreglobal team

3.4

CRE function to be overseen by the CFO/COO as an operationalpart of the business

2.9

CRE team to be split into different functional roles and structured/managed globally

2.7

CRE function to be reduced in size 2.6

Fig 16 >>Me sc res f r future sce ri s f r CRE structures ver ll s mple bykey sect rs

1 = Will de nitely not happen5 = Will de nitely happenMean values exclude those respondents who believe scenarios already occurring

Fig 15 >>Se i rity f CRE le ers rep rti g li e


What level in the organization does the CRE lead report to?

26%

10%

63%

1%

C-suite

Managerial level

Executive level

Operational level


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There have been some reductions in humanresources during the GFC with 24% of

respondents noting a reduction in headcount

during this time. Going forward, the dominant

themes seem to be those of investment

and, more signi cantly, of the upgrading of

talent. Forty-four percent of respondents

have witnessed some additional investment

into the CRE function, directly or indirectly,

with a further 25% anticipating investmentwithin the next three years. Similarly, 54%

of respondents point to upgrades in terms

of talent within their teams and a quarter

anticipate further improvements in this area

over the next three years. The key issues

are where that investment is made and

which talent is brought into the CRE function.

Investment should be prioritized toappropriately drive the reshaping of teams to

focus more time and effort towards engaging

with senior business leaders. CRE teams

need to better manage those initiatives that

reinforce the crucial productivity agenda that

is central to effective portfolio management.

Reporting higher in the organization is a

key driver for CRE to get more strategic

and either start or expand their outsourcedrelationships.

As the drive towards placing, as a minimum,

tactical real estate delivery with outsourced

service providers continues, the need

for strong technical real estate skills may

diminish. Greater importance should be

placed on attracting new talent that has

a track record of building and developingstrong inter-personal relationships with

senior business leaders. This is both a

challenge and opportunity for CRE teams

as this provides a catalyst with which to

enhance skill sets and accelerate career

paths.

The new environment is one that brings

greater scrutiny, pressure and challenges

direct from the C-suite. Being able to

respond and engage with these leaders in

a language they can relate to will serve to

elevate the reputation of the CRE function,

build con dence and showcase the added

value that CRE teams undoubtedly bring to

their organizations.

Busi ess a vis r

S luti Cre t r

Pr gr m I v t r

P rt er

M ger f outc mes

Re l Est te Expert

or er T ker

Pr ject Executer

Pr vi er

Ve r Cust mersG -Betwee


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About the survey


This report summarizes the results of JonesLang LaSalles inauguralGlobal Corporate

Real Estate Survey . The survey was

conducted between August and November

2010.

Over 500 responses were obtained from

CRE leaders across the world via a

combination of face-to-face interviews,

phone interviews and a web-based survey

tool. All respondents addressed the same

standardized questions, although face-

to-face interviews clearly enabled greater

elaboration of key points. These extended

points have been used in our analysis and

have assisted greatly in structuring this

report.

As is evident from gures to the left, our

survey responses were well balanced

and re ective of the views of CRE leaders

drawn from a diverse range of sectors and

domicile and operational locations, as well

as companies of varied size.

Jones Lang LaSalle used Harris Interactive

to help collect, compile and segment the

resulting data.

For the nal analysis, we used responses

from companies with 5,000+ employees

which totalled 343 out of the 504 responses

received.

>>d micile L c ti

7%

18%

5%

18%

52%

Americas

EMEA

Asia Pacific(excluding Australia)

Australia

Not Specified

>>C mp y Size by number f Empl yees

5,001 10,000

10,001 50,000

50,001 100,000

More than 100,000

20%

15%

30%

35%

>>Sect r

Banking and Finance

Technology/Telecom

Manufacturing/Industrial

Professional Services

Others

9%

19%

11%

30%

31%


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ab ut the auth rs

dr Lee Elli tt Head of Corporate Research, Europe, Middle East and Africa (EMEA)[email protected]+44 0 20 3147 1206

Based in London, and with more than a decade of property research experience, Lee isresponsible for delivery of Jones Lang LaSalles corporate research program in EMEA. He isalso responsible for delivering insight into occupier markets and corporate real estate trendsat a global level.

L ure Pic riell Head of Corporate Research, [email protected]+1 617 531 4208

Based in Boston, Lauren is responsible for the strategic development and implementation of the corporate research program in the Americas. She works closely with clients and leveragesher in-depth understanding of the of ce market to provide occupiers with a competitiveadvantage in the marketplace.

H lly Y gHead of Strategic Marketing, Asia Paci c [email protected] +65 6494 3844

Based in Singapore, Holly heads a team of marketing and strategy specialists, includingJones Lang LaSalles corporate research program for Asia Paci c region. She has spentmore than nine years working in corporate real estate and has over twenty years of experience researching and reporting on corporate audiences, trends, and behaviors.

Further suggeste re i gs fr m J es L g L S lle c be ccesse vi ur website t j esl gl s lle.c m

Best Laid Plans: Key considerations for portfolio planning, 2010

Lifting your game: Scenario planning for real estate, 2010

Global Real Estate Transparency Index (GRETI) - Mapping the World of Transparency - Uncertainty and Risk in Real Estate, 2010

EMEA Occupier Conditions - Quarterly Market Publication

United States Of ce Occupier Outlook - Quarterly Market Publication

Asia Property Market Digest - Quarterly Market Publication

Real Estate Standards Global IndexMaking CRE Partnerships Work in Asia Paci c, 2010

Better by Design CRE Structures, 2011

Asia Paci c Corporate Real Estate Impact Survey (CREIS), 2003-2005

#1 What Corporates Want

#2 Faster, Better, Cheaper

#3 Turning the Corner

#4 Reducing Real Estate Costs - New Motives, Old Objectives



27/28

ack wle geme tsJones Lang LaSalle gratefully acknowledges the assistance of those corporate real estate professionals

who participated in this survey. We are also grateful to Thomson Reuters Real Estate team who are our

partners for this project. For more information, go to www.reutersrealestate.com.

We welcome any feedback on the published results in order to continue to improve future editions

and make them as meaningful as possible for our readers. If you have any comments or would like to

participate in future surveys, please email [email protected].

ab ut J es L g L S lle

Jones Lang LaSalle (NYSE:JLL) is a nancial and professional services rm specializing in real estate.

The rm offers integrated services delivered by expert teams worldwide to clients seeking increased

value by owning, occupying or investing in real estate. With 2009 global revenue USD2.5 billion, Jones

Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate

of ces. The rm is an industry leader in property and corporate facility management services, with a

portfolio of approximately 1.6 billion sq ft worldwide. LaSalle Investment Management, the companys

investment management business, is one of the worlds largest and most diverse in real estate with

approximately USD40 billion of assets under management.

ab ut J es L g L S lle C rp r te S luti s

As a pioneer of the corporate real estate offering, our platform provides unmatched services across

a single project, country or global portfolio. Our commitment to shaping our business around helping

our clients improve their productivity and by delivering on our promises keeps us at the forefront of

our industry. Our global platform of transactions, lease administration, project and facility management

services is backed by our expertise in strategic consulting, workplace and portfolio strategy to provide

an end-to-end service offering.

With over 30,000 employees focused on serving business globally, we manage over 600 million sq ft

of facilities and 52,000 leases, and complete more than 4,450 projects and 13,000 transactions every

year. We have the experience and scale to drive greater ef ciency, risk management and sustainability

for our clients across the globe.

ab ut Th ms Reuters

Thomson Reuters is the worlds leading source of intelligent information for businesses and

professionals. We combine industry expertise with innovative technology to deliver critical information to

leading decision makers in the nancial, legal, tax and accounting, healthcare and science and media

markets, powered by the worlds most trusted news organization. With headquarters in New York and

major operations in London and Eagan, Minnesota, Thomson Reuters employs 55,000 people and

operates in over 100 countries.



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