Consolidation in the Corporate Real Estate Office Leads to Conflict

Consolidation in the Corporate Real Estate Office Leads to Conflict

CoreNet Global Study Indicates Room at the Top While Outsourcing Continues Unabated

ATLANTA, Sept. 18 /PRNewswire/ — A few top managers and a dwindling number of junior executives run corporate real estate (CRE) departments at major companies, according to results of a CoreNet Global study, being released today. CRE departments continue to rapidly centralize, according to a new study of organizational structures by the world's largest association of corporate real estate and workplace executives.

The study by CoreNet Global's Applied Research Center, “Corporate Real Estate Trends in Organizational Structure,” points the finger at globalization and outsourcing for the centralization of corporate real estate. The study, based on a survey of 50 top corporate real estate executives, finds:

    — There are wide variations in sizes of CRE department staffs
    — Outsourced organizations still need senior managers inside
    — Increased centralization is more for cost reduction and less for
       driving mission
    — Conflict arises between centralization and the need for flexibility and
       speed
While there are extreme examples of CRE departments being run by 10 or fewer people, the norm is a somewhat larger staff. While there has been outsourcing of some tactical functions like facilities management or leasing, the study says there's been more of a “mid-sizing,” then a downsizing of corporate real estate departments.

“The evolutionary cycle of the corporate real estate department is in overdrive,” notes Eric Bowles, Director of Global Research for CoreNet Global. “We predicted with 2004's Corporate Real Estate 2010 report that centralization would occur, but globalization and outsourcing has greatly accelerated its occurrence,” Bowles added.

Rapid globalization and increased pressure to outsource have left many organizations with divergent choices, the study says: reduce and control cost, while being flexible with leasing, workplace development and location strategies.

“Centralization has tied the hands of many companies which on the one hand want to be innovative, flexible and progressive, but on the other face the cold reality of cost control and efficiency,” Bowles said. “Many are struggling to find the right balance,” he added.

The findings of the study are based on surveys of 56 of 112 invited experts in the corporate real estate industry. The experts are comprised 89% by end users, and 11% service providers. Ninety-four percent of the end users are from Fortune 500 companies.

CoreNet Global members manage US $1.2 trillion in worldwide corporate assets consisting of owned and leased office, industrial and other space. With 7,000 members representing large corporations around the world, CoreNet Global (www.corenetglobal.org) operates in five global regions: Asia, Australia, Europe, Latin America and North America, including Canada.

SOURCE CoreNet Global

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