Real estate faces seismic changes

Copyright: David Lawson 1996

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Seismologists can routinely forecast calamities such as earthquakes and volcanic eruptions. Why, then, are casualty rates so high? The problem is, some people ignore the warnings. It is hard to believe that solid ground can disappear under your feet. Something similar may be happening in the property industry. Further warnings have emerged  over the last few weeks of major economic and social shifts  which could shake buildings and their servants to the core.

  The role of property is fundamentally changing as occupiers come under pressure to cut costs and examine  the possibility of new working conditions,  according to a raft of new research. On the plus side, real estate is finally being taken seriously as a business asset worthy of a place in strategic planning. Property professionals are also more common in  senior management positions. But there are worries  that this process still has a long way to go - and could be reversed. Some professionals may also find themselves sidelined

  'We are living in a risk society,' says an investigation by the Henley Centre for Milliken, Europe's largest carpet manufacturer, published last week. Businesses are being forced to maximise returns from all their assets - including bricks and mortar. That has brought the possibility of practices such as 'hot desking' in from the realms of science fiction. General uncertainty about what the economic future holds has also made businesses realise the need for specifying flexible space which can be switched between uses.

  'Demands on property are not as simple as they were,' is one masterly understatement by another study of European business leaders. 'In a period where there is fundamental questioning of business practices, there are many implications for the management and co-ordination of corporate real estate activities,' says a report for the International Development and Research Council (IDRC).

  Both reach similar conclusions: space management must play a bigger part in overall business development, becoming  a strategic rather than an operational issue. That implies a more senior role for property professionals, where instead of responding to demands  they play a critical role in business process re-engineering.

  Progress has already been made,  according to yet another recent study comparing resource management in the UK, France and Spain. About 60% of businesses in the three countries include real estate in business plans, says a report by Prof Martin Avis and Virginia Gibson at Oxford Brookes and Reading universities. Property professionals are also moving into senior management.

  The IDRC study confirms this among Europe's top companies, where 70% include real estate costs and benefits in business planning and more than half property managers report directly to chief executives or finance directors.

   'The role of real estate management is splitting,' says Peter Jenkins of Ernst & Young, which carried out the IDRC research and sponsored the work by Avis and Gibson. 'On the one level are tasks such as keeping buildings working, while  a more exciting parallel role is  developing involving strategic planning. This involves real estate being an enabler for business re-engineering rather than merely reacting to demands'

  These changes may not be as welcome as they first seem, however. Property professionals do not necessarily have the skills required to compete higher up the ladder. 'It may be that bodies like the IDRC will have to introduce new forms of training,' says Jenkins.

 Avis and Gibson point out that  the UK is far better  served with property managers than Spain and France, which lack the same education systems. But their research shows professionals need to take a closer interest in wider business needs, a message which also comes out of the IDRC report.

   'Strategic decisions  are not property-based  decisions,' says Jenkins. 'Business plans impact on property rather than vice versa. That means strategy-makers do not need real estate skills. They just tell real estate people what they want.'

  That is a slightly different tack from the Henley report, which sees facilities managers becoming strategic advisers. This would bring together often-dispersed skills such as surveying, design and finance. It would also overcome problems where junior staff are often asked to solve crucial questions such as future floorspace planning when almost half did not even know how much they already had.

  Some property professionals  have already absorbed the message that upwards may mean outwards, however.  'Many  I speak to have changed their career perceptions. They see themselves moving up the scale but out of property and into more general business management,' says Jenkins.

   This movement up the scale could have profound affects on property teams. 'As professionals move more into strategy roles, the operational side will change,' says Jenkins. 'Much of this will be outsourced and managers will turn into checkers. That has implications on the size and quality of staff required.'

  Or will it? As president of IDRC Europe, Peter Ball takes a proprietorial pride  in the Ernst & Young pilot study; as a practising property manager for Philips, however, he carries a more world-weary air.

  'Corporate real estate's status tends to vary with the corporate performance. If a company  is profitable, CRE  is ignored: if  struggling, buildings get attention.

 'The sad fact is that many do not maintain progress once they become profitable. Property professionals who get to the top may have to dig themselves in to ensure they are not pushed back down again.'


The Milliken Report: Space Futures  (Henley Centre) - Milliken Carpet 01942 826073

CRE2000 European Survey (IDRC/Ernst & Young) - Ernst & Young 0171 931 3242

Real Estate Resource Management Comparisons (Avis & Gibson) - Price £62. GTI publishers 01491 826262

The Ten Commandments of Space ( Henley Centre)

1. Think strategically: Genuine space management is a strategic role. Used well, space generates revenue and motivates staff. Innovative companies as whether space is used efficiently and effectively.

2. Plan for uncertainty: Space cannot be 'future-proofed' when tastes and technology is changing at an alarming rate. It should be comprehensively appraised in the annual planning cycle.

3. Reduce, reuse, recycle: Almost 95% of companies in the survey believe better use of existing space is more important than creating new space. Improvements in technology allow freeing of redundant space and reallocation to more productive uses.

4. Chameleon space: Flexibility is paramount. Chameleon space is adaptable. Interior design should be functional and unobtrusive enough to cope with different uses.

5. Consult staff: Workforces have been scarred by the last five years' cuts. Involving them in decisions about new work spaces gives them a sense of control. Employers need to rebuild trust as they evolve into learning, multi-skilled organisations. But beware of staff becoming too attached to space, as this  reduces flexibility.

6. Talk to the customer:  Only one in 10 businesses involve their customers in space decision making. Yet the winners in a static market are those who understand end-user needs.

7.Feminise:  The future is female. They suite flexible, service-based jobs. Female attributes of friendliness, efficiency and understanding are increasingly valued. Women perform better in education. Yet space is too often designed by and for men. More women should be employed as architects, designers and facilities managers. Only 9% of managers who gave names in our survey were female.

8. Design for the least able:  Space must adapt to suit an  ageing population, as this will include active affluent consumers rather than stereotypes of the elderly. The disabled, women who are pregnant or with young children and even exceptionally tall and wide people should also be considered. The best design is simple for all to use.

9. Security: Demand for access must be balanced with fear of crime. Light, open areas with good visibility and ease of exit are vital.

10. The stage, not the play: Emphasis has shifted from how space looks to what goes on within it - from decor to ambience. This cannot be manufactured. It is a manifestation of a company's culture. Interiors should support people, not overwhelm them.