The purpose of a corporate real estate function is to provide the space that a company uses to execute its business strategy. This is not to be confused with business models focused on investing in real estate as a separate profit seeking venture. Corporate real estate is about providing space for people, products, customers, and systems to operate securely and effectively around the world. In this way, it is typically a cost center to the company.
CRE in this way is an enabling function. The space provided enables the company to run which implies some minimum level of quality and planning to ensure that the operations are productive. It’s possible to build the cheapest, tightest office 60 minutes away from even the most nearby of employees and call it a business model, but no one would call it productive. Similarly, it’s possible to buy the latest skyscraper in downtown Manhattan and build out the top few floors as a shrine to past profitability, but no one would call that productive either. The sweetspot lies somewhere far between these extremes.
Many experts in our field come from the wild west of commercial brokerages. They cut their teeth in sales and transactions doing their best to do deals between corporate occupiers and landlords. Their money came from the market and their strongest relationships were almost always on the market side. Over time these experts migrated to the corporate side for a variety of reasons but often do not leave their market biases behind. They look at the market as a proxy for their portfolio and seek to maximize their market positions. They negotiate fantastic incentives on every lease, they get the best rate for their space, they even bring in top tier project managers and vendors to build the space in a cost effective way. The project is delivered and they claim victory.
Often this approach leads to pyrrhic victory. They have beautiful, market driven space that it turns out has limited relationship back to how the business operates. For the next few years, the business tries their best to make it work but ultimately it’s best to move to a new site once the lease finally expires. Hopefully by this point, the lead has a better grasp on the needs of the portfolio versus the market and, if so, maybe the next space works better.
All this as a way of saying that commercial and corporate real estate are two very different worlds, with different tools, and different needs but for some reason people like to blend them as if they are one in the same.