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Cost Reduction Returns As The Top Objective Driving Commercial Real Estate Management Strategies

The recent Verdantix 2021 global survey of 285 real estate executives revealed that a seismic shift is emerging in real estate strategies. Reducing real estate costs is now the top objective driving commercial real estate strategies, with 53% of respondents rating it as either their first or second most important objective over the next three years. This is in stark contrast to the past four years’ worth of survey results, where either talent attraction or improving occupant wellbeing was the top objective.

For the past four years, cost-cutting has been deprioritized in real estate management as firms invested in employee engagement programmes with the aim of driving better productivity. Even in 2020 at the height of the pandemic, employee engagement remained a major focal point as executives wanted to ensure staff members remained highly productive while working remotely. Today the shift in strategic thinking results from the ongoing economic uncertainty in the face of new virus variants, pressure on the facilities function to deliver savings and the threat of rising inflation on the horizon.

A more detailed review of the survey data shows facility executives are launching multiple new cost reduction programmes. For example, 55% of respondents are planning or evaluating whether to downsize their portfolio size because of COVID-19. Moreover, 54% are planning or evaluating whether to exit leases early, and 50% are also planning or evaluating whether to sublease surplus space. In addition, 41% of firms told us reducing their energy expenditure is a major focus for the next 12 months.

Going forward, smart building technology vendors will be under greater pressure to demonstrate realistic and fast returns for their products. Pitching a product narrowly on employee engagement benefits will not work in today’s era focused on cost reduction. We recommend that firms build quantitative business cases and ROI calculators to help customers build watertight businesses cases aligned to cost control objectives. Making these tools realistic and credible will help customers gain buy-in from important internal stakeholders before technology projects can get signed off.

To learn more about the dynamics shaping current and future commercial real estate strategies in enterprise corporates, sign up to our upcoming webinar, taking place on Thursday 30 September 2021, Smart Building Technology: Where Is The Market Heading In 2022?

 

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Ibrahim Yate

Senior Analyst, Verdantix
Verdantix
Verdantix

Ibrahim is a Senior Analyst in the Verdantix Smart Buildings practice, which he joined in 2016. His current agenda covers innovation in software and hardware solutions for space management, workplace management, and workplace systems integration. Ibrahim holds an MSc from Imperial College London and MA from Cambridge University.