< Previous8 JULY 2019 SI T E S E L E C T IO N by John Salustri In my early days covering the commercial real estate market, I interviewed the head of facilities for a major manufacturer headquartered in Pittsburgh. The name of the company is off the record: You can be sure of that. He told a tale of being alerted on Good Friday that a new unit was moving into HQ on Monday. The manager rallied his forces and created the new unit’s spaces over Easter weekend … only to be told on Monday that the consolidation had been scrapped. And therein lies one of the major pitfalls of a siloed facilities department, detached from corporate real estate and, through a breakdown in communication, out of sync. The perils of such situations extend far beyond a lost weekend. Siloed organizations run the risk of ongoing redundancies of costs as well as strategy, and a tougher time nailing down performance metrics. Siloed departments can work, and indeed, there are challenges inherent in centralization as much as in separation. But as you’re about to read, many of the risks of unification occur upfront, in the set-up, and they can be addressed with clever change-management strategies. The risks of silos are ever-present. Let’s explore the rationale of integration, the challenges of both models and listen to some advice that can help IAMC members mitigate risks, whatever their internal organization looks like. The Joys of Integration “Typically, the rationale for integration is to create a more coordinated approach across the real estate and facilities life cycle,” says Griffin James, senior manager at Deloitte Consulting LLP in Boston. Part of James’ charge is to help clients working on their corporate real estate/ facilities operating models. Integration, he says, “addresses interdependencies across performance indicators, strategic initiatives and operations. There’s also a cost and consistency aspect to that relationship, in terms of staffing, outsourcing practices and the definition and assignment of services. A center-led approach can support all of those objectives.” “When you bring the various functional components together,” says Todd Clark, VP of global facility services for Scientific Games in Las Vegas, “you have the ability to do deeper dives into performance metrics, allowing you to see what does or doesn’t work well. It’s also easier to implement standards and to add value by such measures as leveraging your spending with preferred providers.” That’s exactly what Clark did for Scientific Games, one of the largest providers of gaming equipment and services in the world. Among other products, its 4.5 million sq. ft. of global facilities produce 44 billion scratch-off lottery tickets annually. They centralized real estate, design & construction, facilities management, environmental health and safety, sustainability and other functions rather than “limit our ability to be more strategic and proactive. If you perform only one function, you’re a one-trick pony, and it’s hard to add a lot of value.” Ditto government contractor Sierra Nevada Should CRE & FM Be Siloed Functions? Cornerstone is another great way to network right from your desk at work. Get your password. Log on and check the discussion threads a couple of times a day. If you can contribute to a discussion, don’t hesitate to do so. You may be the only one with the particular insights that could solve another member’s problem. Cornerstone is a great way to get your name out there as someone with valuable ideas and experience. Lastly, IAMC is a quiet but very effective CRE jobs network. If your department is hiring, get the word out over Cornerstone. If you’re looking for a new situation, you also can use Cornerstone. I recommend you focus your communication toward those members most likely to have the job you seek. The group to which you send can be very finely tuned. If you’re not sure how, reach out to a staff person for assistance. They’ll be glad to help. In conclusion, I encourage you to view IAMC is as a career management tool. You or your company are paying the dues. It’s there waiting for you to use for your professional benefit and advantage. Best regards, Charles Waltz Chair, IAMC Board of Directors10 JULY 2019 SI T E S E L E C T IO N Corp. Under new management a few years back, SNC also consolidated, explains Herndon, Virginia–based Corporate Real Estate and Facilities Manager William Glass. “It was a natural development,” he says, “a rationale that all these functions are part of the cradle-to-grave uses of a building. They all fit under a corporate real estate umbrella because they’re all part of that asset.” Glass reports to the head of finance, a connection that, in turn, “gets us into the C-suite.” Consolidation brought a clear delineation of reporting lines up the ladder. Or as Glass puts it: “There’s only one throat to choke.” But standardization and cost considerations aside, siloed organizations — despite the negative connotation of that word — have a place in the corporate org chart … with an asterisk. “Certain types of companies purposefully operate that way,” says James. “For example, conglomerates that acquire and divest frequently. In these situations, there can be reasons to keep certain types of functions siloed by site or by business unit. It can work.” And now for the asterisk: “But I would at least look for some level of practice-sharing or an influence model,” he adds. “Are there internal experts or advisors who can coordinate across sites, even if those reporting lines stay separate?” If so, he says, it’s critical that these influencers have credibility across business lines to aid engagement as well as an understanding of local need. For the sake of consistency, clarity and frankly, politics, those advisors from HQ need to be “top performers who can be out front on capabilities, strategies and standards,” he says. “The credibility of any center-led messaging is really critical.” The Integration Continuum The choice to integrate or not is very corporation-specific, far from a one-size-fits- all issue. “Company and cultural context are important,” James says, “and we typically take that into consideration.” James says that as companies grow in experience, they tend also to grow simultaneously toward centralization. “They start driving toward consistency and integration not only of people and processes but also of necessary technologies, such as computerized maintenance-management systems, integrated workplace-management systems and increasingly smart technologies, such as IoT sensors and analytics.” “There are only so many fires you can put out at once,” says Clark. Despite the global footprint, integration helps him keep the staff trim, today itself a corporate imperative. “We typically have a manager at each of the larger facilities who will manage such duties as outsourced janitorial, landscaping and snow removal capabilities — all those other functions. Although we have some 200 facilities around the world, there are only 55 or 60 people in my global facilities organization.” Beware the Yellow Line The risks of silos were enumerated above. But integration comes with its own challenges, although they tend to be more upfront. “The concept of the yellow line comes into play,” says James. “Where do facilities’ responsibilities stop and those of operations start? Establishing a clear understanding of the role facilities plays in those environments is key. Another challenge is cultural. Certain organizations are simply more comfortable with reporting to a plant or operations leader, and if that changes to a CRE-centered structure, what does that dotted line look like?” Words to the Wise Communication, upfront and ongoing, is obviously the key. In fact, that’s true regardless of what the org chart looks like. Knowledge is power for the good of the corporate whole only when it’s shared. At Scientific Games, all the department heads “meet on a regular basis to ensure we’re all connected with what’s going on in all the different organizations around the world,” says Clark. What it all comes down to is buy-in. “It’s important that the people at the day-to-day level be included, so they understand the larger picture beyond their microcosm,” says Glass. “It gives them a sense of value. At the end of the day, it’s always about inclusion and engagement.” “There’s a default assumption … when anybody tells you to do something differently from how you’ve always done it [that] Corporate is always making things harder for the business unit.” — William Glass, Sierra Nevada12 JULY 2019 SI T E S E L E C T IO N Academics have a plan to fix the southern border. It may surprise you. Instead of a border wall, what if the U.S. government built a massive energy park along the frontier with Mexico? What if engineers lined the contentious no-man’s land with 2,000 miles of solar units and made the desert bloom with desalinated water drawn from the Pacific Ocean and Gulf of Mexico? Imagine all the construction jobs. Imagine the boon to agriculture. Think of industries lured by abundant, cheap energy yielded by the mother of all infrastructure projects. “Just like the transcontinental railroad transformed the United States in the 19th century, or the Interstate system transformed the 20th century, this would do for the Southwest what the Tennessee Valley Authority has done for the Southeast,” says Luciano Castillo, Kenninger Professor of Renewable Energy and Power Systems at Purdue University. Castillo leads a consortium of 28 scientists and academics who propose that the U.S. and Mexico collaborate on an unprecedented endeavor to bring energy, water and jobs to the border region. Throw in some drones and private security and, presto, there goes illegal immigration. Pie in the sky? Maybe. But so were the moonshot and the Roman aqueducts. Three experts queried by Site Selection, while lamenting a lack of input from business and government leaders, expressed varying degrees of support for the plan, at the very least for attempting to shift the border dialogue from its current stalemate. by G ARY DAUGHTERS gar y.daug hter s @ site s ele c tion.c om U.S.-MEXICO BORDER Photo: Getty Images14 JULY 2019 SI T E S E L E C T IO N Gustavo de la Fuente Executive Director SAN DIEGO-TIJUANA SMART BORDER COALITION “This is very welcome news. It’s a very innovative, out-of-the-box solution for the border. I like the fact that this could be a money- producing development. We rarely think about the border in terms of its capacity to generate returns on investment. We concentrate on the bureaucracies and constraints on both sides of the border. These are energy projects that I think are transformative. It’s also long-term thinking, which I like. “The border region is ripe for innovation, and not just from the technical standpoint. From a management standpoint it’s ripe. The border is an untapped opportunity to manage the flow of people and goods. Why don’t we improve that and monetize it? “We have to think of any solution as a security solution first. Security takes priority. We’ve always known that, but more so today given the current administration and what’s happening at the border now. “This would be a long and consuming process. You can have both a long-term strategy and a short- term strategy where you’re trying to create a microcosm of what they want to do. They can do it here along the California- Baja California border. Sempra Energy already has a wind farm on the Mexican side of the border that’s delivering enough energy to power 30,000 homes in the San Diego County area. So, we have the beginnings of a project of that nature here. “This is a creative way of using real estate, but you have to understand the realities of that border. You need surveillance, you need security. You want trade and now you’re talking about producing energy. But the border is a complex thing. It’s not your typical piece of land that you might want to develop. It involves many actors and agencies and governments. You have to work with both sides of the border to find a solution that’s feasible.” Alan Bersin Former Commissioner of Customs and Border Protection | Senior Fellow WILSON CENTER “For the North American era that I believe is emerging, we need these kinds of broad approaches that encompass a future of harnessing the ample resources that exist at the border to produce a productive future. It’s a vision that is consistent with the larger North American project. Getting the proposal out there is an important step, although any systematic implementation would face monumental challenges. “It’s hard to gauge the feasibility or political viability. But it’s commendable, and it’s coming from a distinguished consortium of academics. In this era, where we need increasingly to think Courtesy Purdue University S I T E S E L E C T I O N JULY 2019 15 about the borders in North America and how border communities can lead us into an era of cooperation among Mexico, the United States and Canada, this is certainly a laudable endeavor. “My only criticism — although I understand it given the position of the current administration — is the link to security considerations. I understand why the consortium has done that, but I urge them not to confl ate security with a development proposal of this magnitude. Over the long term, while security absolutely is essential as a predicate for development eff orts, the current migrant crisis is not responsive to what they’re proposing. I think they might consider having this proposal stand on the pillars of economic development, energy, manufacturing and making the ports of entry more effi cient.” Mario Lozoya Executive Director GREATER BROWNSVILLE INCENTIVES CORPORATION “ is is very similar to a plan that we have worked on through a local consortium in the Rio Grande Valley area around creating an economic development wall versus the physical wall. is tells us that we’re thinking in the right direction. I think it’s essentially the same thinking in that we capitalize on geographic assets and defi ne national perspective in a better way, versus a physical wall. “Obviously, the facilities that would be required to maintain something like this would be attractive to both sides. And then you would have diff erent levels of suppliers and contractors to support that. at’s good for the economies on both sides of the border. I’ve always been of the opinion that providing opportunities to the region creates economic development, which then mitigates a lot of the problems that we have at the border. “Manufacturing in the border region from Laredo to Brownsville and along the Rio Grande Valley is huge. An idea like this would defi nitely boost that industry. And we’re starting to see the energy industry grow here as well. A lot of wind farms and turbine manufacturing. And now liquid natural gas. When you look at the Rio Grande Valley and the area from Laredo to Brownsville, manufacturing on both sides of the border is equal to or larger than the manufacturing in the Detroit area. “A project like that would completely redo North America. You’re talking about creating an asset in the middle of NAFTA. Surely, if you and I owned an energy company, we’re going to move assets in there. Same with engineering fi rms. All these ancillary business opportunities are going to move to that region. “Who manages it and how it’s off ered to the public is a portion that’s missing here. Just think of your local communities. It’s hard to put together any project without everyone wanting a piece of the pie. Here, you’re talking about bi-national and coast to coast. at’s a lot to have to deal with, and I don’t know who will take it on.” ‘PERMANENT’ BORDER SOLUTION Among the highlights of “Future Energy, Water, Industry and Education Park (FEWIEP): A Secure and Permanent US-Mexico Border Solution,” by Purdue Professor Luciano Castillo and a consortium of peers: • Energy-fueled economic development zone along border • Natural gas, solar and wind parks • Desalinated seawater pumped to arid interior • Integration with completed sections of border wall • Border-length “super-pipe” system • Free trade zone • Costs covered by energy sales and tax revenues • Specialized institutes for workforce development is would do for the Southwest what the Tennessee Valley Authority has done for the Southeast.” — Luciano Castillo, Kenninger Professor of Renewable Energy and Power Systems, Purdue University is would do for the Southwest what the Tennessee 16 JULY 2019 SI T E S E L E C T IO NSI T E S E L E C T IO N NORTH AMERICAN REPORTS 2 1 Weed and Work Nevada on June 12 became the rst state in the nation to bar employers from refusing to hire potential workers on the basis of a failed marijuana test. The law, which takes effect January 1, 2020, includes exceptions for re ghters, EMTs and vehicle operators, among others. “As our legal cannabis industry continues to ourish, it’s important to ensure that the door of economic opportunity remains open for all Nevadans,” said Gov. Steve Sisolak. The law also includes protections for workers already on the job. by G ARY DAUGHTERS gar y.daug hter s @ site s ele c tion.c om 1Real Estate’s 10-Figure Boon Commercial real estate delivered a trillion-dollar boost to U.S. Gross Domestic Product in 2018, says a report released in late June by NAIOP, the commercial real estate development association. NAIOP found that new development and ongoing operations of existing commercial real estate buildings supported 8.3 million jobs. “Commercial real estate development’s contributions to the U.S. economy are signi cant,” said Thomas Bisacquino, NAIOP president and CEO. “Our industry’s performance has been bolstered by strong consumer spending and increases in wages and job growth, as well as tax reductions enacted in December 2017 under the Tax Cuts and Jobs Act.” NAIOP reported gains in spending for of ce space and industrial construction and declines in the warehouse and retail sectors. 2 State Direct Total Output/ Jobs Created Construction Contribution and Spending to GDP Supported US$billions US$billions 1. Texas $25.745 $62.183 400,986 2. Tennessee $17.645 $40.038 268,146 3. New York $19.825 $36.196 207,915 4. California $11.873 $25.287 160,190 5. Florida $9.566 $19.965 161,122 Source: NAIOP Photo: Getty Images S I T E S E L E C T I O N JULY 2019 17 Cold Storage Is Hot The growth of online grocery sales could create a demand for up to 100 million sq. ft. (9.3 million sq. m.) of cold storage space over the next few years, according to a report released in June by CBRE. “Several factors have combined to fuel expansion of the cold-storage space, from consumers’ increasing use of online ordering for groceries to grocers’ investment in new delivery strategies and warehouse technologies,” says Adam Mullen, CBRE’s Industrial & Logistics leader. Much of the new growth, says CBRE, is expected to occur in gateway markets such as Los Angeles and the New York area, as well as leading food production states, including Pennsylvania. 4 5 3 Big Brown Triples Down Promising 300 new full- and part-time jobs, UPS has nished a multi-phase, $310 million expansion that triples the size of its Louisville package sorting and distribution facility. Now covering the equivalent of more than 19 football elds, the expanded “super hub” can process some 85,000 packages per hour via 25 miles (40 km.) of conveyors, says UPS. Louisville Mayor Greg Fischer says the UPS presence in Louisville has attracted more than 200 companies, facilitating thousands of new jobs. Louisville also is home to UPS Worldport, the largest automated package handling facility in the world and the center point of the UPS worldwide air network. Photo courtesy of UPS Photo: Getty Images 33 S.C. Welcomes Juul E-cigarette giant Juul, facing congressional investigations into whether it marketed to minors, is to invest more than $125 million in a new assembly facility in Lexington County, S.C., just west of Columbia. The company, which plans to make some 500 associated hires, says the plant will assemble JUUL products using “advanced production” techniques. Gov. Henry McMaster, who last April signed a bill barring unattended minors from entering stores that sell vape products, remarked that he’s “excited to see what the future holds for this innovative company.” Photo courtesy of Juul 4 5Next >