The role of real estate Department of Building Service Engineering by alicejenny


The role of real estate
                                                               The paper reports on the main findings from
assets in supporting the                                       a research study that covered a multi-sector
fulfilment of corporate                                        survey of five industrial and commercial
business plans:                                                sectors in the UK (Then, 1996). The primary
                                                               focus of this paper is the physical resource
key organisational                                             base that supports any business ± the
variables for an                                               corporate operational real estate assets. What
integrated resource                                            is clear from the comprehensive literature
                                                               review conducted[1] is that there is a lack of
management                                                     an integrating framework for considering the
framework                                                      likely impact and implications of business
                                                               management trends and strategic
Danny Shiem-Shin Then                                          management decisions on the provision, and
                                                               subsequent ongoing management, of this
The author                                                     corporate resource.
Danny Shiem-Shin Then is Associate Professor in                   In order to achieve the much-needed
Strategic Asset Management and Facilities Management,          alignment between business strategic
Queensland University of Technology, School of                 direction, organisational structure, work
Construction Management and Property, Brisbane,                processes and the enabling physical
Australia.                                                     environment, the organisation's strategic
                                                               intent must clearly reflect the facilities
Keywords                                                       dimensions in its strategic business plans. In
Real estate, Assets management, Surveys                        this respect, the literature review highlighted
                                                               three emerging themes, which point to the
Abstract                                                       need for further research:
The focus of the research was to provide a business
                                                               (1) the need to link real estate/facilities
perspective to the role of real estate assets in supporting         decisions to corporate strategy;
the fulfilment of corporate business plans. Based on a         (2) the need to proactively manage functional
comprehensive survey of published literature and a series           space as a business resource.
of in-depth interviews of corporate real estate/facilities     (3) the need for the development of
managers, an integrating resource management                        conceptual models and frameworks to
framework was developed to model the nature of                      integrate business resource management
interactions between strategic business planning and                to the provision and management of the
operational asset management in an organisational
                                                                    corporate operational assets and
setting. The study supports the view that research efforts
                                                                    associated facilities support services, in
aimed at improving management effectiveness of the
operational real estate asset base must be channelled to
                                                                    their business settings.
provide frameworks or models that promote                      The above emerging themes, in turn, lead to
understanding to all parties involved in the process, from     at least three requirements in real estate asset
a knowledge base that aims to define better: the
                                                               management in any organisational setting:
operational requirements of core business(es); the key
                                                               (1) The requirement for an appropriate
real estate and facilities service attributes; and options
                                                                    linking mechanism for considering
evaluation to meet dynamic changes.
                                                                    facilities implications of business
                                                                    decisions by promoting meaningful
Electronic access
                                                                    dialogue between business corporate
The research register for this journal is available at              planners and real estate/facilities
The current issue and full text archive of this journal is     (2) The requirement for management
available at                                                        processes to monitor the strategic
                                                               The author would like to acknowledge the
                                                               assistance given by a number of individuals from
Facilities                                                     organisations that participated in the study. Their
Volume 18 . Number 7/8 . 2000 . pp. 273±280                    contribution in time and comments are greatly
# MCB University Press . ISSN 0263-2772                        appreciated.
              The role of real estate assets                              Facilities
                Danny Shiem-Shin Then                      Volume 18 . Number 7/8 . 2000 . 273±280

    relevance of facilities requirements and       implementation of an integrated resource
    monitoring their performance-in-use over       management framework (Then, 1998).
(3) The requirement of appropriate skills and
    competencies within the real estate/           The context of real estate asset
    facilities function to monitor and             management (REAM)
    continuously review procurement policies
    and strategies to take advantage of            For the purpose of this paper, REAM is
    advances in technological development          defined as the area of interface between
    and market offering from the supply side.      strategic business planning and operational
                                                   asset management. The term has the
A three-part analysis was adopted to meet the
                                                   advantage of encapsulating three key aspects
separate requirements of data analysis for
                                                   (real estate, assets, management) that, taken
each of the above research propositions. The
                                                   together, influence the perceptions of the
overall methodology framework of the re-
                                                   main stakeholders that bring the physical
search undertaken is summarised in Figure 1
                                                   assets (i.e. buildings) into being and their
(Then, 1999a).
                                                   management over time.
   The inputs from the practice element have
                                                      Both the literature review and practice
relied on a comprehensive review of published
                                                   evidence from the case studies indicate that
case studies and interviews covering a period
                                                   there is a need to consider facilities provision
of 15 years of major journals in property (real
                                                   plans in conjunction with the other business
estate) management and facilities
                                                   resources like human resources and
management in North America, Europe. This
                                                   technology. A proactive management model
is then supplemented by the case studies
                                                   of the corporate real estate resource
conducted as part of this investigation.
                                                   necessitates a constant two-way dialogue:
   The case studies organisations consist of the
                                                   from strategic management ± the strategic
following sectors:
                                                   intentions and direction of where the
.    manufacturing sector (n = 4)
                                                   company is going; from operational
.    banks and financial services (n = 11)
                                                   management ± the best way of achieving the
.    professional services ± offices (n = 7)
                                                   desired outcome in resource terms and their
.    utilities/distribution companies (n = 4)
                                                   ongoing management. The conceptual
This paper reports on the outcomes in              framework that justifies the need for a
relation to items (1) and (2) above. Item (3)      constant dialogue between strategic
above is the subject of another paper, which       management and operational management is
deals with competency requirements in the          illustrated in Figures 2 and 3.

Figure 1 Research methodology and framework

                                  The role of real estate assets                            Facilities
                                    Danny Shiem-Shin Then                    Volume 18 . Number 7/8 . 2000 . 273±280

Figure 2 Conceptual representation of current practice               overlapping concerns (Cole, 1994) from
                                                                     strategic management and operational
                                                                     management can be reconciled to provide an
                                                                     optimum solution to apparent conflicting
                                                                     goals seen in isolation from either perspective.
                                                                     The effectiveness of REAM relies on the
                                                                     regular flow of information: localised
                                                                     information built up from the bottom of the
                                                                     operational structure, and business
                                                                     information brought down from the core
                                                                     business end of the organisation. A schematic
                                                                     illustration of the proposed model is
                                                                     illustrated in Figure 4.

Figure 3 Justification for REAM

                                                                     Proposed integrating management

                                                                     REAM provides the strategic link between
                                                                     strategic business planning and operational
                                                                     asset management. In the context of any
                                                                     organisation or business unit, the focus of
                                                                     REAM is to reconcile the demand for, and
                                                                     supply of, the real estate asset base and
                                                                     associated facilities support services essential
                                                                     for the delivery of its core products or
                                                                     services. Simply expressed, the principal role
                 Figure 2 is a conceptual representation of          of REAM is to support the core business of
                 current practice of REAM in many                    the organisation it is serving. In economic
                 organisations. A key requirement of a               terms, REAM provides a suitable platform
                 proactive model is not only to raise the            for:
                 awareness of the two sides to the strategic         .    defining and quantifying the demand
                 importance of closely aligning the real estate           emanating from strategic business
                 resource to the corporate strategic intent, but          direction in terms of operational needs of
                 also to establish channels of formal                     facilities and support services to support
                 communication that keep both parties fully               core business activities;
                 informed of the external market and its likely      .    defining the supply in terms of the
                 implications on the corporate real estate asset          necessary physical asset base and
                 base.                                                    appropriate service levels from the service
                   Figure 3 illustrates the use of the strategic          delivery perspective and their
                 facilities brief (SFB) and the service levels            management over time; and
                 brief (SLB) as the vehicles for promoting and       .    matching supply to demand over time as
                 maintaining this crucial interface between               a continuous process of maintaining
                 strategic management decisions and                       relevance in terms of an appropriate
                 operational management decisions.                        physical resource structure to support the
                   A critical barrier to the success of REAM is           corporate strategic intent.
                 access to the right information from business
                 units, as well as from the facilities operations.   Simply stated, REAM fulfils a much-needed
                 Establishing the existence of useful                intermediate role between strategic
                 information within the business units, and          management and operational management in
                 gaining access to this information on a regular     any organisation. Representation in REAM
                 basis, are often problematic but critical for       should consist of strategic inputs from
                 effective actions. In this respect one of the key   executive management staff responsible for
                 roles of REAM is to act as the informed             strategic business planning, and senior
                 interface (Carder, 1995) where the                  management staff from the facilities
                 The role of real estate assets                                           Facilities
                   Danny Shiem-Shin Then                                   Volume 18 . Number 7/8 . 2000 . 273±280

Figure 4 The role of strategic facilities brief and service levels brief

management or property services                                 define and quantify the appropriate support
management department.                                          services and their performance within the
   The derivation of a corporate strategic                      physical-working environment supporting the
choice without integrating the real estate and                  activities of the core business.
operational dimensions clearly contributes to                      Figure 5 proposes a feasible expectation of a
sub-optimum solutions in many                                   desirable outcome which integrates decisions
organisations, reducing the role of the real                    at the level of making strategic choices, with
estate/facilities function to one of reacting to                the economics of facilities provision and
business units demands.                                         management as an important business
   From the above discussions, it is clear that                 resource. The outcome is well thought out
an integrating framework for REAM must be                       and evaluated supporting facilities strategies
built on creating a continuous dialogue                         that continuously meet the business
between the strategic management of core                        requirements through flexibility in supply and
business development and operational                            fitness for purpose.
management of business resources. As                               The strategic inputs are the expressed
illustrated in Figure 3, two key instruments                    intentions of the corporate strategy for core
and processes are proposed to bring about a                     business development in the short to medium
formal and continuous dialogue:                                 term. The role of the SFB is to attempt to
(1) Strategic facilities brief;                                 ensure that any investments in physical
(2) Service level brief.                                        resource terms result in the delivery of
                                                                appropriate facilities to support the fulfilment
The strategic facilities brief (SFB) is an                      of the business plans. The source of the
output statement or document that defines                       strategic inputs is business information. The
the operational needs emanating from the                        role of SLB is to ensure that the appropriate
organisation's business plans. The principal                    facilities support services are delivered for the
purpose of SFB is to define a corporate guide                   level of operational assets as defined by SFB.
which outlines key facilities attributes and                    Similarly, the tactical inputs from operational
physical service performance criteria required                  management should contribute to the
to fulfil the organisation's deliverables in                    strategic evaluation of potential capital
products and services, as dictated by the                       investments that result in altering the capacity
business plans.                                                 of the physical assets. The source of the
  The service levels brief (SLB) represents                     tactical inputs is facilities information.
the definition of acceptable environmental                         The interactions between the SFB and SLB
performance levels in respect of the physical                   are necessary to ensure proper matching of
asset base and facilities support services                      demand for facilities to support strategic
requirements as defined by the deliverables of                  business development and supply of
SFB. The principal purpose of the SLB is to                     appropriate facilities-related support services
                The role of real estate assets                                    Facilities
                  Danny Shiem-Shin Then                            Volume 18 . Number 7/8 . 2000 . 273±280

Figure 5 REAM as the emerging response to generating supporting stratgies

to support the implementation of the desired             It is important to point out that underpinning
business plans. Proactive management of the              any decisions in facilities provision is the
corporate real estate resource demands clear             constant interplay between the pulls from
strategic direction from senior management               three key resource drivers: those of people,
and clear measurable deliverables from                   technology and the workplace environment
operational management.                                  (property).
   Figure 6 illustrates the critical interfaces
between facilities provision and facilities
services management within an organisational             Key organisational variables
context. The objective is to identify the
                                                         The last section provides the dynamic
crucial interfaces and to identify the drivers'
                                                         background upon which the role of the
motivating actions at three identifiable levels
                                                         operational real estate assets within
in terms of real estate asset management; i.e.
                                                         organisations must evolve to accommodate
corporate level, estate level and building level.
                                                         changes in the marketplace. The desired
   The corporate level is concerned with the
                                                         outcome from REAM in terms of real estate
adequacy of the real estate assets as a business
                                                         resource is an appropriate portfolio structure
resource, to fulfil strategic objectives. The
                                                         that is aligned with the organisation's business
estate level then interprets this strategic intent       operational requirements. Buildings and land,
in terms of implications on the current                  as physical assets, are relatively static
operational real estate portfolio, i.e. facilities       products. Effective matching of demand for,
provision. The building level primary concern            and supply of, functional accommodation and
is with meeting users' requirements on an                associated support services to meet
ongoing basis, while at the same time                    operational requirements in a dynamic
minimising disruptions while taking actions to           business environment demands the
adjust to the next ``steady state'' as a                 management of the real estate assets as a
consequent of the strategic response initiated           dynamic integrated process. The realisation
at the corporate level.                                  of an integrated approach necessitates a

Figure 6 Business drivers and affordability drivers

               The role of real estate assets                            Facilities
                 Danny Shiem-Shin Then                    Volume 18 . Number 7/8 . 2000 . 273±280

formal planning framework that must cater         real estate assets. Results from the case
for the cultural, procedural and existing         studies conducted largely support this model
knowledge base of the organisation                proposition.
  Three measures have been chosen for
evaluating the performance of REAM within         An integrated resource management
an organisation. The choice of the measures is    framework
driven by the need to measure how
organisations respond to managing their           Figure 8 illustrates the dynamic capabilities of
operational real estate assets as a business      the model framework to review strategic
resource. Figure 7 illustrates a model that       relevance against the competitive realities of
proposes that the performance of REAM can         the business environment within which it
be evaluated in terms of three key                operates, as well as measuring operational
organisational variables:                         management effectiveness and efficiency
(1) Structure: organisational set-up for          against best practice externally. The business
     operational real estate provision and        imperative from a resource management
     facilities services management.              perspective is to align the appropriate
(2) Processes: the systems and procedures for     supporting facilities strategies to the current
     the management of the delivery of            strategic business plans.
     operational assets and their associated         Effective matching of demand for, and
     facilities support services.                 supply of, functional accommodation and
(3) Competencies: the necessary skills required   associated support services to meet
     for an efficient and effective delivery      operational requirements in a dynamic
     system ± both in-house and bought-in         business environment demands the
     expertise.                                   management of the real estate assets as a
The performance of REAM is seen as the            dynamic integrated management process.
outcome whereby the above three                   The realisation of an integrated approach
organisational variables of structure,            necessitates a formal planning framework that
processes and competencies must work in           must cater for the cultural, procedural and
concert (Table I). The underlying research        existing knowledge base of the organisation
proposition is that any mismatch between the      concerned. Ultimately, the practice of REAM
three organisational variables in any             is concerned with the delivery of the enabling
organisation is likely to lead to a situation     workplace environment, the optimum
where the solutions generated are sub-            functional space that supports the business
optimum in the utilisation of the operational     processes and human resources.

Figure 7 REAM ± key organisational variables

                                  The role of real estate assets                                         Facilities
                                     Danny Shiem-Shin Then                                Volume 18 . Number 7/8 . 2000 . 273±280

Table I Principal areas of data collection ± case study organisations
Organisational variables              Data elements
Measures:                             Organisation structure (critical linkages)
  Positioning of RE/FM role             positioning of real estate/facilities service department within overall organisation set-up
  Strategic awareness                     (strategic awareness)
  Strategic readiness                   who is responsible for the corporate asset mandate?
                                      Role of operational assets (current perceptions)
                                        corporate perception (board level)
                                        senior management perception (business units)
                                        operational staff perception (service provider)
                                        degree and level of interactions between parties
Measures:                             Systems and procedures (current practices)
  Nature and extent of                  assessment of portfolio requirements (demand forecasting)
    dialogue between                    assessment of asset maintenance & renewal demand (life-cycle management)
    business planning and               costing and budgetary practices
    facilities planning                 procurement strategies
  Performance management              Performance monitoring
                                        assets' performance (physical, functional and financial)
                                        asset management performance (process effectiveness)
Measures:                             Information support (knowledge base)
  Quality of asset information           current in-house skills base
  Level of evaluation                    evidence of comprehensive asset register and reliability
                                         evidence of information management ± data capture, analysis and reporting at operational,
                                           managerial and strategic levels
                                         ability to forecast and conduct scenario simulation to aid decision making, level of strategic

                  Figure 8 An integrated resource management framework

                  The raison d'etre of REAM is to meet the                     aspiration to continuously add value by
                  business challenges that confront the                        providing appropriate and innovative
                  organisation it is supporting, as an enabler in              ``facilities solutions'' to business challenges
                  the first instance. In the long term, a more                 through the skilful manipulation of all
                  sustainable role must be to build upon an                    business resources ± the optimum balance
               The role of real estate assets                                        Facilities
                  Danny Shiem-Shin Then                               Volume 18 . Number 7/8 . 2000 . 273±280

Figure 9 Context of REAM ± summary

between people, physical assets and                               Graham Bannock & Partners Ltd, commissioned by
technology.                                                       Hillier Parker (1994), Property in the Board Room ±
                                                                  A New Perspective.
                                                                  Avis, M. and Gibson, V. (1995), Real Estate
                                                                  Resource Management, GTI.
Conclusion                                                        Gallup, commissioned by Workplace Management
                                                                  (1996), Shaping the Workplace for Profit.
The conceptual models and frameworks                              The Henley Centre, commissioned by Milliken
                                                                  Carpet (1996), The Milliken Report: Space Futures.
presented in this paper represent the
                                                                  Arthur Andersen (1995) Wasted Assets? A Survey of
consolidation of influences from theory and                       Corporate Real Estate in Europe.
practice, the objective being to understand
and explain the nature of the problem and
logically justify the crucial need for an
informed interface between strategic business
management and operational asset                            Carder, P. (1995), ``Knowledge-based FM: managing
management. Figure 9 represents an attempt                        performance at the workplace interface'', Facilities,
to summarise the causes-responses-impact                          Vol. 13 No. 12, November, p. 8.
                                                            Cole, G.A. (1994), Strategic Management, DP Publications
relationship that accounts for the justification                  Ltd, p. 10.
and conceptual development of real estate                   Then, D.S-S. (1996), ``A study of organisational response
asset management.                                                 to the management of operational property assets
                                                                  and facilities support services as a business resource
                                                                  ± real estate asset management'', unpublished
                                                                  thesis, Heriot-Watt University, Edinburgh.
Note                                                        Then, D.S-S. (1998), ``Corporate leadership in real estate
                                                                  and facilities management'', in Quah, L.K. (Ed.),
  1 For a summary of the literature review of                     Proceedings of CIB W70 International Symposium
    management of operational property in UK and                  on Facilities Management and Maintenance ± The
    Europe, please refer to Facilities Vol 17, Number 12/         Way Ahead into the Millennium, Singapore,
    13, 1999, pp 465. Major survey reports reviewed               November, pp. A9-A16.
    include:                                                Then, D.S-S. (1999a), ``Bridging the gap between strategic
    Avis, M., Gibson, V. and Watts, J. (1989), Managing           business planning and facilities provision and
    Operational Property Assets, GTI.                             management: implications on competency and
    Debenham Tewson Research (1992), The Role of                  training at management levels'', Property and
    Property ± Managing Cost and Releasing Value.                 Construction Education and Research, Proceedings
    Oxford Brooks University and University of Reading            of the 3rd and 4th International Electronic AUBEA
    (1993), Property Management Performance                       Conferences 1997-98, pp. 73-81.
    Monitoring, GTI.                                        Then, D.S-S. (1999b), ``An integrated resource
    Ernst & Young (1993), The Property Cycle ± The                management view of facilities management'',
    Management Issue.                                             Facilities, Vol. 17 Nos. 12/13, December, pp. 462-9.


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