Industry Alliance Hammers Out a New Portfolio Management Model - Site Selection Magazine

From Site Selection magazine, March 2000

M A N A G E M E N T S T R A T E G Y

Corporate Real Estate Is In Catch-up Mode
Sorting out the role of technology in the corporate real estate context is no easy feat, given the emergence of corporate infrastructure strategies that integrate real estate and facilities management with human resources, finance and information systems functions. Wade Fransson, director of IT consulting at CB Richard Ellis, was given the task of assessing what portfolio management systems were being used by corporate participants and developing a model for technological support of portfolio management as the alliance was defining it.

Tom Bomba "Technology to support corporate real estate is pretty much 10 to 15 years behind where technology is in other areas of business," Fransson relates. Business integration systems for executive decision support were implemented in most of other areas of business long before their value was recognized in the infrastructure or real estate domains. "We're still at the best of breed stage where disparate systems are being used to support tactical functions," he notes. "I provided inventories across four areas to analyze systems in place, to compare them, and to point a way toward a possible solution down the road."

Fransson, who is based in CB Richard Ellis's Newport Beach, Calif., office, says the most interesting aspect of his research was the convergence of the Internet, thin client technology (Web browsers) and connectivity, which he says makes the integration model obsolete.

Above right: Potfolio Alliance Director Tom Bomba was senior principal at The McMahan Group, San Francisco, at the time the Alliance project was underway. He has since joined Jones Lang LaSalle as senior director.

Despite a relatively well-populated portfolio management system vendor community, corporations are not using very sophisticated systems to manage their property assets, Fransson relates. "It's like old Joe has the notebook and knows everything about all the leases in that notebook," he quips. "They're still dealing with hard copy in many cases. "The most across-the-board technology solution I found had to do with facilities management, which is a bucket into which we included several functions, including work order management, preventive maintenance, space planning, move management and CAD (computer-aided design) drawings in some cases.

"The corporations pretty much had systems in place for those functions," Fransson continues. "None of them had a fully integrated solution, and in some areas integration would be very effective in terms of reducing cost and staffing down a little." The lease administration systems were generally in use at participating alliance corporations, and a few had automated project management functions. "Almost no one had an asset and property management system, which is what the portfolio alliance was looking for -- how do corporations keep track of and value their real estate to make decisions based on value? Virtually no one was doing that. And rolling up some of that information into a portfolio management model even on an asset-by-asset level was pretty nonexistent. People had spreadsheets to value an asset relative to a different one, but systems were not in place that gathered that information in a usable fashion from a historical perspective that would support decision making."

In some cases, says Fransson, lack of asset management systems didn't matter too much, because strategies were not in place that required them. "If you don't know what the strategy is, how can you support it with technology that might take a year to build and implement?" he asks. "What are the strategic drivers behind the business that relate to the corporate real estate approach? Those could be anything from where should we locate facilities to should we own vs. lease to perhaps needing to build certain types of facilities; strategies weren't clearly defined, which may have to do with the rapid pace of business today. You have to turn on a dime sometimes."

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