Proptech Collaborations

All of that is ripe for change, however, as the use of PropTech by corporate occupiers with significant real estate portfolios promises to empower CRE departments, enabling them to wield influence and proactively improve decision-making within their businesses. Not everyone is capitalizing on PropTech’s potential to put more effective property and asset management at the forefront, but those that do are giving their organizations a competitive edge and gaining clout in the boardroom.

Bringing CRE & FM to the forefront

Often, organizations focus only on the cost and resource requirements of managing real estate and facilities without fully appreciating how it can fundamentally drive strategic and operational success. Consequently, CRE and FM strategies are not aligned with broader business objectives.

Consider retail. Here is a prime example of how business success — or potentially failure — is often defined exclusively by sales, and yet property can make or break the selling process and shape margins. Indeed, locations, dimensions, lease terms, presentation, the way properties are managed, their upkeep and the way space is utilized all shape the way the business functions and how customers perceive and interact with the brand.

The same scenario applies to any corporate occupier with a sizeable or high-value real estate portfolio. Real estate and the way it’s managed can, in fact, have a significant impact on business. Furthermore, when CRE and FM teams embrace their role in driving success for an organization, they can establish a critical, strategic leadership position within their enterprise.

Where property teams are empowered and working in collaboration with other departments — such as finance or business development — they are able to provide analysis on occupancy rates and return on investment (ROI), help to manage and influence rent costs and inform strategic decision-making on investment in both under- and over-performing units. What’s more, CRE and FM teams can enhance the workplace, providing data-driven insights to C-suite executives regarding property operations and building environment and offering choices that can shape and encourage better employee interaction, collaboration and productivity.

Overcoming silos to enable collaboration & joined-up thinking

Too many organizations are hamstrung by a silo mentality that strangles collaboration and leads to massive inefficiencies. This may be a result of long-standing personnel who are vehemently opposed to change, inflexible management structure that resists new ideas and processes, or simply the spread of operations across different geographies and business functions. When a silo mentality becomes entrenched, individual resistance to change presents a major hurdle to achieving transparency and cooperative working across departments, which hinders productive collaboration and shared strategy.

For CRE and FM departments specifically, there has historically been a clear distinction between property and finance despite a few joint interests such as ensuring payment of the correct rents. If a finance decision is taken without visibility into accurate property data, then that department is making significant judgements without having to hand all the information it should be considering and, as a result, not working effectively together towards a shared objective.

The same sort of disconnect applies to many big international organizations’ regional operations, which may be dispersed and run separately – and can even be separate subsidiaries and legal entities. This can lead to local teams following and instilling their own processes, eventually coming to operate as something of an individual business. In these cases, there is every chance that multiple systems result in duplication — both in terms of the information being produced and the effort required to manage it.

One company that MRI has worked with is a corporate occupier with a presence in more than 70 countries managing approximately 10,000 leases globally – covering both property and assets. As the company grew, there were conflicting processes being employed to manage a diverse property portfolio. Inefficiencies were also rife as similar, or in some cases identical, tasks were undertaken in different individual countries and regions. For example, the company processed lease payments manually, which took on average one day per month in each country – costing in excess of US$130,000 globally.

The good news from a CRE and FM perspective is that cutting-edge PropTech solutions helped this company to act in a more informed, collaborative and unified way. This result offers a lesson to others in the space. A historically disjointed approach – whether by geography or function – is an obstacle to having a shared corporate vision and meeting common objectives that no organization can afford in today’s connected world. The whole company across all business units, individuals and partners, should be pulling towards the same goals and be united in delivering one mission. That is the path to success.

PropTech & smart data

Another way to pave the path toward success is with data. Property technology can empower CRE and FM teams across divisions and geographies to use data to gain insights that can enable stronger cooperation with other business units, inform better decisions, streamline processes and demonstrate the positive impact these can have.

The problem is many large corporate occupiers deploy numerous software solutions to manage an array of business processes across finance, human resources (HR), CRE, FM and other functions as a result of siloed operations. Often this is nobody’s fault, but simply the function of software being inherited within a disjointed business culture. The reality is in a digital global marketplace, this is an antiquated approach that puts them at a competitive disadvantage. It does not offer the freedom and flexibility to link and integrate property management and CAFM solutions with other technologies as the company grows.

For real estate and facilities management, many companies opt to utilize third-party CRE and FM technology solutions that can address these issues. As with any enterprise technology platform, communication and integration remain critical. Having a PropTech system that is connected across an organization – and can even be integrated with other third-party applications – solves the problem of different departments using different systems, which leads to sub-optimal decision making and lack of data integrity.

Indeed, disparate, incompatible technologies offer no way of creating a single version of the truth. The result is a lack of visibility, which creates blind spots in the decision-making process, as key data points such as maintenance costs, occupancy levels, lease start/end dates, break clauses, rent reviews, rent-free periods and other financial information become limited or unavailable to some teams. Integrated and connected PropTech systems arm companies to take a more unified and linked-up approach – with applications that employ machine learning and AI for lease abstraction, for instance, yielding deeper insights that will enable better business decisions in CRE and FM.

A consequence of employing PropTech to enable greater collaboration across regions and departments is that an organization’s way of working becomes proactive rather than reactive. So where once, for example, every time an asset required maintenance, the company would fix it – but there was no method of continual analysis into the performance of that asset, and no modelling of the data to show how replacement of that asset might actually reduce the financial burden in the long term – now integrated CRE and CAFM applications allow corporate occupiers to drill down to underlying insights, employing easy-to-interpret visual presentations and taking action based on the analytics.

To make fast and informed decisions, businesses need to have all the pertinent information to hand in a clear, concise format, and PropTech allows that. And the better connected PropTech is with other solutions – such as IOT, customer relationship management (CRM), enterprise resource planning (ERP), accounts payable and HR applications – the more it unlocks barriers to productive communication and collaboration.

Coping with changing business demands

Using PropTech to unlock the potential of data is more important than ever, as generating a consolidated – and transparent – view of the company is now a fundamental requirement rather than an option.

Indeed, company leaders need real-time visibility of the combined financial position and to report on, for example, future lease payments globally, or the total liability of assets worldwide. Not only is this information crucial for business intelligence but, under new IFRS 16 or ASC 842 accounting standards, there are risks and potential penalties for not accurately disclosing these liabilities on the company balance sheet – with an audit trail to prevent putting the company at risk of not meeting its compliance obligations.

Benefits extend beyond compliance. When recommendations are required from the team by the C-suite for a potential purchase, investment or cost reduction, the team can leverage PropTech to provide the supporting evidence to inform executive decisions. In fact, the absence of collaboration between the CRE department and others would hamper the strategic decision-making process across the business. For example, if they were unable to provide combined data across the property portfolio, FM and finance, when a company wins contracts in a new territory, it would struggle to determine the location of new warehouses.

In addition, the CRE teams put themselves in a position to bring about significant efficiencies and process enhancements for lease management. A collaborative platform — with input from property, FM, finance and other departments — can help to manage a lease under negotiation, produce information relating to the impact of that lease on the balance sheet (in this case under IFRS16) and provide analysis of what would happen to a portfolio if the number of leases either increases or reduces. This is no longer just good business practice – it’s required.

Understanding that CRE & FM are not just services, but sources of knowledge & insight

Seeing CRE and FM as more than a support function but as a force within the business to drive strategic initiatives is becoming increasingly important to overall business success. Increasingly, the traditionally isolated position of these divisions is shifting to one of openness to the point where corporate real estate and facilities management are becoming the enabler of collaboration within the overall organization. More than ever, businesses — especially those that occupy physical space — must be agile enough to react to changing market conditions, whether to maximize opportunities or limit the damage of downturns.

More and more, CRE departments are being asked to inform direction and strategy — in some cases even leading decision-making. Occupiers across retail, office, industrial and more are cognizant of accessibility to amenities, the proximity of transport networks, internal fit-out and decoration and other elements that influence not just consumer satisfaction, but also employee satisfaction. Deployment of complete integrated workplace management systems (IWMS) to cover the full spectrum of CRE management, capital projects, FM, the workplace brand, maintenance/asset management and sustainability and energy performance is becoming increasingly more common. The result is property teams who are more pivotal than ever when it comes to collaborating across regions and departments to make better strategic decisions for major corporate occupiers.