Is the much discussed agility of corporate real estate visible in practice? An empirical study of the relationship between business metrics and surplus property
Abstract
Very little work has been undertaken on the consequences of economic recession on Corporate Real Estate (CRE) and its realignment following strategy changes. Only those CRE portfolios with short term leases have a dynamic alignment capability allowing them to readily adjust to change. For those with longer leases this leads to the creation of a surplus property provision (SPP). This paper analyses the relationship between SPP and metrics for business and CRE through a period of significant change, by examining company annual reports using a distributed time lag auto-regression model. The results show an inverse relationship between SPP and profits but a positive relationship with both turnover and employment, suggesting that declining profits trigger the re-shaping of CRE. SPP is used to provide portfolio flexibility because of the lack of dynamic alignment capability. SPP increases as the commitment to short leases (<5 years) increases. The estimated time for SPP to revert to zero ranges from 3 to 9 years, but one category, financial services, is continuing to increase its liability. CRE agility has yet to be visible in the financial reports of companies, suggesting its impact remains limited, indicating the relationship between business parameters and CRE is more complicated than envisaged.
Keyword : corporate real estate, CRE dynamic alignment, surplus property provisions, agility, restructuring
How to Cite
Cooke, H., Appel-Meulenbroek, R., & Arentze, T. (2019). Is the much discussed agility of corporate real estate visible in practice? An empirical study of the relationship between business metrics and surplus property. International Journal of Strategic Property Management, 23(4), 227-243. https://doi.org/10.3846/ijspm.2019.8029
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Avis, M., & Dent, P. (2004). The strategic management of surplus property in the NHS. Property Management, 22(4), 303-317. https://doi.org/10.1108/02637470410558161
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. https://doi.org/10.1177/014920639101700108
Bingham, C. B., Eisenhardt, K. M., & Furr, N. R. (2011). Which strategy when? MIT Sloan Management Review (Fall), 1-12.
Cooke, H. (2004). FRS12: guidance on implementation for corporate real estate managers. Journal of Corporate Real Estate, 6(4), 309-324. https://doi.org/10.1108/14630010410812450
Cooke, H., & Appel-Meulenbroek, R. (2015). Impact of corporate real estate on UK business. In Proceedings of the 22nd ERES Conference, 24–27 June 2015. Istanbul, Turkey. https://doi.org/10.15396/eres2015_89
Cooke, H., & Foster, A. L. (2016, August). Breaking up is hard to do. Estates Gazette, 27.
Cooke, H., & Woodhead, S. (2008). Break strategy – the key to breaking out. Journal of Corporate Real Estate, 10(2), 110-120. https://doi.org/10.1108/14630010810905615
CoStar. (2012). Oxford agrees Cisco Green Park surrender. Retrieved from http://www.costar.co.uk/en/assets/news/2012/July/Oxford-agrees-Cisco-Green-Park-surrender/
de Vries, J. C., de Jonge, H., & van der Voordt, T. J. M. (2008). Impact of real estate interventions on organisational performance. Journal of Corporate Real Estate, 10(3), 208-223. https://doi.org/10.1108/14630010810922094
de Winter, J. C. F. (2013). Using the Students’ t-test with extremely small sample sizes. Practical Assessment, Research & Evaluation, 18(10), 1-12.
Gale, J., & Case, F. (1989). A study of corporate real estate resource management. Journal of Real Estate Research, 4(3), 23-34
Gibler, K. M., & Lindholm, A.-L. (2012). A test of corporate real estate strategies and operating decisions in support of core business strategies. Journal of Property Research, 29(10), 25-48. https://doi.org/10.1080/09599916.2011.608470
Gibson, V. A., & Lizieri, C. M. (1999). New business practices and the corporate property portfolio: how responsive is the UK property market? Journal of Property Research, 16(3), 201-218. https://doi.org/10.1080/095999199368111
Greenhalgh, P. (2008). An examination of business occupiers relocation decision making: distinguishing small & large firm behaviour. Journal of Property Research, 25(2), 107-126. https://doi.org/10.1080/09599910802605368
Guardian. (2016). UK productivity gap widens to worst level since records began 18 February 2016. Retrieved from https://www.theguardian.com/business/2016/feb/18/uk-productivity-gap-widens-to-worst-level-since-records-began
Haynes, B., & Nunnington, N. (2010). Corporate real estate asset management: strategy and implementation. Oxford: EG Books. https://doi.org/10.4324/9780080965222
Heywood, C. (2011). Approaches to aligning corporate real estate and organisational strategy. In Proceedings of the 18th ERES
Conference, 15–18 June 2011. Eindhoven, The Netherlands.Heywood, C., & Arkesteijn, M. (2017). Alignment and theory in corporate real estate alignment models. International Journal of Strategic Property Management, 21(2), 144-158. https://doi.org/10.3846/1648715X.2016.1255274
Heywood, C., & Arkesteijn, M. (2018). Analysing fourteen graphical representations of corporate real estate alignment models. Journal of Corporate Real Estate, 20(1), 16-40. https://doi.org/10.1108/JCRE-02-2017-0005
IAS37. (2001). International Accounting Standard 37: Provisions, contingent liabilities and contingent assets. London: International Accounting Standards Board.
Jensen, P. A., van der Voordt, T., & Coenen, C. (Eds.) (2012). The added value of facilities management: concepts, findings and perspectives. Lyngby, Denmark: Centre for Facilities Management & Polyteknisk Forlag.
Joroff, M., & Becker, F. (2017, March). Exploiting change and uncertainty to drive corporate value. The Leader, 32-35.
Kämpf-Dern, A., & Pfnür, A. (2014). Best practice, best model, best fit. Journal of Corporate Real Estate, 16(2), 97-125. https://doi.org/10.1108/JCRE-09-2013-0027
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard. Boston: Harvard Business School Press.
Kay, J. (2010). Obliquity. London: Profile Books.
Kim, W. C., & Maugborgne, R. (2015). Blue ocean strategy (expanded ed.). Boston: Harvard Business School.
Krumm, P. J. M. M., & de Vries, J. (2003). Value creation through the management of corporate real estate. Journal of Property Investment & Finance, 21(1), 61-72. https://doi.org/10.1108/14635780310468310
Lindholm, A.-L., Gibler, K. M., & Levainen, K. I. (2006). Modeling the value-adding attributes of real estate to the wealth maximization of the firm. Journal of Real Estate Research, 28(4), 445-475.
Lizieri, C. M. (2003). Occupier requirements in commercial real estate markets. Urban Studies, 40(5-6), 1151-1169. https://doi.org/10.1080/0042098032000074353
MacIntosh, R., & MacLean, D. (2015). Strategic management – strategists at work. London: Palgrave.
Maiona, M. (2013). The revised lease accounting proposals: Aesop’s fables revisited. Corporate Real Estate Journal, 3(1), 53-74.
McGrath, R. G. (2013). The end of competitive advantage. Boston: Harvard Business Review Press.
Mintzberg, H., Ahlstrand, B., & Lampel, J. (2009). Strategy Safari (2nd ed.). Harlow: FT Prentice Hall.
Neely, A., & Bourne, M. (2000). Why measurement initiatives fail. Measuring Business Excellence, 4(4), 3-7. https://doi.org/10.1108/13683040010362283
Nourse, H. O., & Roulac, S. E. (1993). Linking real estate decisions to corporate strategy. Journal of Real Estate Research, 8(4), 475-494.
Nunnington, N., & Haynes, B. P. (2011). Examining the building selection decision-making process within corporate relocations. Journal of Corporate Real Estate, 13(2), 109-121. https://doi.org/10.1108/14630011111136821
O’Mara, M. A. (1999). Strategy and place: managing corporate real estate and facilities for competitive advantage. New York: The Free Press.
Porter, M. E. (1985). Competitive advantage. New York: Free Press (extended edition in 1998 of the 1985 original).
Reeves, M., Levin, S., & Ueda, D. (2016, January−February). The biology of corporate survival. Harvard Business Review, 47-55.
Riratanaphong, C., & Van der Voordt, T. (2015). Measuring the added value of workplace change: performance measurement in theory and practice. Facilities, 33(11/12), 773-792. https://doi.org/10.1108/F-12-2014-0095
Roulac, S. E. (2001). Corporate property strategy is integral to corporate business strategy. Journal of Real Estate Research, 22(1/2), 129-151.
Van der Voordt, T., Jensen, P. A., Hoendervanger, J. G., & Bergsma, F. (2016). Value adding management (VAM) of buildings and facility services in four steps. Corporate Real Estate Journal, 6(1), 42-56.
Worthington, A. C., & West, T. (2001). Economic value added: a review of the theoretical and empirical literature. Asian Review of Accounting, 19(9), 67-86. https://doi.org/10.1108/eb060736