ould the best system for keeping track of incentives pertaining to a global portfolio of properties be an Excel spreadsheet? For at least one multinational conglomerate, the answer is "Yes."
This summer we surveyed service providers and the corporate leaders they serve to find out which technologies they use, how they're using them, and what they'd like to use if someone would just invent it. A few of them even had time to respond.
Among the tools being used by survey respondents are such unglamorous but effective programs as the suite of Microsoft Office products. Others mentioned include Qube Global, Tririga's Real Estate Management Software (REMS), ProLease, Footprints and even Adobe Illustrator - perhaps to give enhanced artistic dimension to the firm's true dimensions. While one firm claims to have migrated 100 percent of its tools to smartphones, most see that process lagging, with one respondent noting that Microsoft Office is behind in making the transition.
Most survey respondents find lease administration and accounting to be the best use of tech solutions, while some are more assertive in using it to track headcount and utilization in efforts to make more efficient use of space, or to track title holders, equipment upgrades or construction/expansion work.
From lease administration software to facility management, energy monitoring to Building Information Modeling, programs to systems to apps, technology solutions abound for the corporate real estate and facilities professional. Which are truly innovative, and which are simply repackaged? How have mobile phone apps helped in data collection and reporting? Which blend of tools gives your team the most accurate, in-depth picture of your entire global portfolio of properties and buildings? And when do all the tools in the world come up short unless there's a savvy human being opening up the proverbial toolbox?
Real Change vs. Window Dressing
Site Selection last year invited tech pioneers from two of the world's most respected tenant rep firms - Cresa and Studley (officially Savills Studley after a May 2014 merger) - to weigh in on what they're seeing and not seeing in the field of corporate real estate technology.
Thomas W. Bogle, executive vice president and head of the Savills Studley's Strategic Portfolio Solutions Group, knows whereof he speaks when it comes to technology, having pioneered development of Web-based tools for a number of major global service providers over his 20-plus years in the field. He and his Los Angeles based partner Craig Hendrickson, a 25-year industry veteran who joined Studley as executive managing director of Strategic Portfolio Solutions in December 2012, say the off-the-shelf products haven't changed all that much.
"It's a lot of the same players," says Hendrickson, "and even though a lot is going on behind the scenes, the basic functionality of the tools has remained pretty constant."
"All of us thought 10 or 15 years ago we'd reach a point in the industry where there would be more sophistication than what's developed," says Bogle. "The irony is that large users and owners of real estate have tremendous volumes of operating and financial data, and for the most part are not using it effectively and efficiently to convert that into knowledge" that would enable predictive analysis.
"It's not as though the technology doesn't exist," Bogle says. "It probably does. What doesn't exist is an off-the-shelf or highly customizable piece of software where you can load it up, answer these 20 questions, and it will spit out the information. I think the industry has been slow to develop sophistication in this area. Most observers would say it's very difficult if not impossible to find solutions that can track transactions, projects, lease and facility information in one place. So you have to move to a best-of-breed [solution], assembling, and then layering and branding it, when the reality behind that brand is these point solutions."
In fact, he says, amid all the rebranding and amalgamation of off-the-shelf systems, "there is some deception afoot. Clients that are looking for this need to enter into it with their eyes wide open. Make sure the people selling it really understand what the definition is of 'proprietary technology.' We just heard of a client who chose a provider because of that, and we know for a fact that there is no proprietary technology there."
Finding the Facts
Part of the struggle, Bogle says, is "how to drive to points A, B and C simultaneously with one car. With a car it's a physics issue. In our world it's a technology issue."
He says one global client with multiple providers across the world doesn't believe that one provider can meet all its needs in project management and other areas, so it's chosen to take one area - transaction management - and harmonize the process so there is consistent reporting from territories as diverse as China, India, Brazil, Malaysia, California, North Dakota, Panama, Sweden and Japan.
Studley is working with the client using an off-the-shelf software, but writing custom protocols and processes around how to use the report to predict what's going on in the future. Bogle says the big providers such as SAP and Peoplesoft have told inquiring minds that the market is just not big enough to develop a highly sophisticated and complex end-to-end solution. Virtually all companies that seek to sell such solutions will say they can do that. "But talk to the users," he says, "and they have serious questions about whether they do everything they're purported to do."
" We talk to companies every week spending $50 million, $75 million or $100 million in real estate but can't tell you how many square feet they have."- Thomas Bogle, executive vice president and head of Savills Studley's Strategic Portfolio Solutions Group
That said, service providers are differentiating themselves now with data analytics, says Hendrickson.
But in some places in the world, despite more transparency and more technological penetration, the data is still hard to come by. "My experience is that it tracks the sophistication of the culture you're working in," says Bogle. "I think a lot of corporate real estate people are troubled by what they don't know."
Can You See It Yet?
Sometimes, the same opacity problem that plagues the Third World can also be found in the Fortune 500. Despite the omnipresence of tools that can shed light on what they're up to, firms still meander in the dark.
"We talk to companies every week spending $50 million, $75 million or $100 million in real estate but can't tell you how many square feet they have," says Bogle. "I talked to a client last week, 100 years old, with locations across the US, and they do not know how many square feet they have, or what they spend on real estate. How can that be? In their view, it's all built into the cost of the business units. A lot of companies have a similar story to tell. Costs are buried in the manufacturing of a product, or a service, or the P&L statement of a region."
“Lease administration is everything between the ribbon cutting and decommissioning the site that nobody else wants to do.”— Jeffrey Tosello, Cresa
Hundreds of companies in the past 15 years have used those tech tools to ascertain their footprints and start operating more efficiently and save money, he says, "but there are a lot of companies that haven't. Remember: Real estate is not just one function. Ask what they spent with Herman Miller, or what they spent on taxes, or on energy and utilities, and they could get close. But very few companies have a reason to add all that up, unless they're on a major efficiency push."
Where do you go to push that efficiency?
"If you're dealing with a company that doesn't know where their properties are, one of the best places to go is the internal risk manager - they have a list, because they insure all those places. How many people? Don't go to HR. You go to IT, and ask how many people have computers, laptops and phones. It's not that they're doing anything dishonest, but it's opaque. It's hidden behind what their core business is."
All About the Process
Cresa decided 20 years ago to rep only tenants, and that decision roughly coincided with the advent of Internet-based corporate real estate and lease administration tools. Among the Cresa pros is Jeffrey A. Tosello, managing principal of lease administration, who got his own start in the business in 1989 in Chicago, and rapidly put to use his growing expertise in business process engineering.
"We know all the players very well, and have been the testing ground in many cases," he says of the range of software products out there, recalling the days of amber screens with boot disks and FoxPro databases. All such products continually are issuing new updated versions. But the fundamental questions, even 20 years into Internet-driven data management, are still the same:
"Is this in fact all of our locations? Are these the proper data points? When you run metrics, are you pulling the right data?" asks Tosello. "It's process, not software. The software looks a lot cooler, and enables some things, but I don't know if it's remarkably different from what it was 10 years ago. Software can make a lot of those things easier," especially deployment today via cloud-based technology. Accounting rules changes from FASB will provide a prime testing ground for orchestrating data flow, he says.
Tosello doubts products with the look and feel of an Excel spreadsheet or an Oracle or SAP approach are going to go away. "They'll keep playing leapfrog," he says. He describes how, in the late 1990s, IBM downsized, and he figured his team could manage IBM's subleases. He flipped around an old DOS-based system to use as a lease admin system. There weren't any yet. But there needed to be.
"When I realized a company like IBM had a major disconnect between real estate and accounting, I started cold-calling Sprint and Exxon and Sears and landing them as customers," he says. He took a "people first" mantra as his calling card, then brought that approach to Cresa in 2002. Along the way, the importance of real estate admin and the people behind it has found the light of day, even if all the leases still haven't.
"Who's actually doing that work matters," says Tosello. "I think the industry is catching up [to the idea that] this is a discipline in and of itself. In those days, a lot of real estate departments did not have C-suite visibility, and the CEO would say, 'I thought you were doing that already.' Now, with Sarbanes-Oxley, they see that the second or third cost leader is real estate and you'd better pay attention to it.
Tosello says one challenge is getting the language the same across a company's locations.
"The vernacular is wildly different from office to office," he explains. "What do you charge for a lease abstract or audit? Let's define. I could be pulling 300 fields of data, and somebody overseas might be getting just name rank and serial number. If they're $100 and I'm $300, is it because I'm expensive, or do we define things differently?"
Miles to Go
Defining lease administration itself is a start.
"Lease administration is everything between the ribbon cutting and decommissioning the site that nobody else wants to do," says Tosello. "Some define it with correspondence. It's an umbrella over many things, depending on where the rain is coming down."
Many companies still don't have their fingers on the pulse.
"I still find publicly traded companies now managing with a spreadsheet that I've never heard of - it's 75 locations, catch as catch can, with a secretary managing," says Tosello. "The small locations are the ones that will kill you. If it's transaction-minded people dealing with it, where do they make money? They make it at the tip of the iceberg, not at the bottom. But the 50 leases at the bottom of the iceberg can sink the ship. Nobody wants to deal with 1,500 square feet in Akron - everybody wants to be at the ribbon cutting. And somebody's P&L gets eroded by locations where they're overpaying.
"Most of the audit firms will chase after the 30,000 to 50,000 square feet," he continues. "We've found cases where for five years a company's paying for utilities when the lease says the landlord pays for the utilities. In a big portfolio all you need is a few of those and it's horrifying. The software will manage it, but it's the people who go, 'Wait a minute, I see that invoice and it doesn't make sense to me.' "