Aligning Real Estate and business goal

"The concept of aligning real estate and business goals is of paramount importance.


Since a corporation's cost of occupancy is its largest fixed operating cost, real estate alignment means two things:


(1) Driving down costs in existing facility operations,
and


(2) Planning ahead to minimize the initial costs for new
occupancy.


Space planning and the accurate growth projections, for instance, will do much to drive down and stabilize long-term real estate costs.


Alignment is like two parallel lines. If the lines illustrate the alignment between real estate and the business and the length of the lines illustrates time, then any small diversion in either the real estate or business direction today can create a huge gap three, five or seven years out.


Obviously, a failure to implement a good strategic plan will result in poor decision making. The more transactions made outside the context of the client's entire portfolio, the more poor decisions will be made and the more misaligned the client's portfolio will be in the future.


Corporate real estate managers need to check alignment frequently because it's easier to expand or contract incrementally than it is to sublease or otherwise dispose of excess space. On the flip side, you lose any leverage if you're forced into decisions during expansion.
Often, CRE managers will lease space reactively and end up wildly misaligned especially in de-centralized environments. One client I worked with underwent several mergers and found themselves with eight leases of varying sizes in one relatively small city. They knew of their problem but they didn't know how to relate. See www.houstonrealtyadvisors.net