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Connected thinking – estates management

The key to any successful property deal is in the effective engagement of all the main stakeholders. Gary Long, who heads the KPMG UK estate management team, explains why the most important part of that discourse occurs between the FM and property departments.

As a corporate estate manager, the opportunity presented by a forthcoming lease break or expiry offers an almost overwhelming desire to rush out and ‘do a deal’. Of course, nothing in life is so simple and the key to a successful property decision that will stand the test of time lies in a structured approach, with meticulous planning from the outset. Any acquisition project requires a dedicated and focused team of individuals from inception of the brief to the first days of occupation. In any sizeable organisation the list of stakeholders with an interest will be lengthy. A number of parties will rightly need to have a voice along the way from HR to IT, procurement to branding, diversity to CSR, but the relationship of the property and FM teams is the bond that needs to be cemented.

The due diligence required to ensure proper consideration of all options is significant and it is never too early to start the process. Before any formal business engagement, a ‘ground up’ review of existing accommodation is time well spent. For an in-house property team, engagement with FM colleagues is the key to unlocking an informed understanding of how the current building performs both in terms of cost profile and occupier suitability. Only with the benefit of the knowledge of front line colleagues who have daily contact with the business in occupation; who understand what works and what does not; what is lacking against what is overprovided; and what needs to be refreshed, refurbished or replaced opposed to that which can be economically nursed through an extended period of occupation, can an informed recommendation for future accommodation requirements be formulated.

With operational budgets under ever increasing scrutiny from the board, the need to maximise efficiencies through space consolidation, enhanced desk sharing, flexible ways of working, and robust services management is paramount. While rolling over existing leases can often offer the path of least resistance, the ability to downsize, reinvigorate the space or generate operational savings can be challenging. Conversely, a relocation to new, smaller and more cost efficient space offers a business the opportunity to present a ‘fresh face’ to clients and staff, notwithstanding potential cash flow implications in terms of existing building exit costs compounded with move and fit-out expenditure. To ensure adequate consideration is given to all options, it is vital a detailed feasibility review commences with sufficient time to include ‘drawing board’ development opportunities. This may enable a compelling case to be built to support a move even in challenging economic climates.

Sourcing speculatively built office space of a suitable size and quality, in the right location and at the right time is no simple feat, with choice particularly restricted in a number of regional centres. Accepting the additional due diligence required to mitigate risk, commitment to resource and external legal and professional fees this entails, negotiating a pre-let agreement on a fundable development has certain attractions. The ability to shape commercial lease terms to suit the business strategy is obvious, but perhaps of greater importance in terms of exercising an element of control over occupational destiny is the opportunity to influence the building design. This can make a notable difference to the aesthetic and functional qualities of a building and create a flexible and inspiring office space that may provide the business end user with a crucial market differentiator. Such differentiators may contribute additional competitive advantage in terms of client experience as well as in the battle to recruit and retain the most talented individuals.

For any potential move to clear first base, only the lure of future savings or at least a cost neutral position is likely to interest the decision makers. While the rental differential of new Grade A space may be off-set, in whole or part, by significant incentives, it is the ability to accurately assess the space need – and where practical reduce this to a level of necessity rather than desire – that tangible benefits can be realised avoiding both unnecessary capital commitment on fit-out and ongoing costs resulting from over-provision. Comprehensive utilisation data for desk and meeting room occupancy coupled with historic headcount fluctuations throughout the business cycle is a powerful tool and one which provides the evidence to counter the defence of department heads clinging to their current desk quota.

All businesses change over time and property should respond accordingly. While it may be possible to negotiate a degree of flexibility in the right circumstances, options to acquire or release space are often difficult to achieve in practice. Therefore, practitioners should ensure that space is as adaptable as possible from an operational perspective. Here, detailed engagement with operational colleagues to review shortlisted options pays appropriate dividends. The partnership approach seeks to avoid historical situations most FM’s will be familiar with, where operational teams were ceremoniously presented with accommodation their property colleagues had proudly acquired and simply been tasked to make it work.

A united approach from a combined property and FM acquisition team can eradicate a number of operational hurdles before the first spade hits the ground. The physical attributes of the building are only part of the equation – architecturally inspiring façades are wonderful until there are access difficulties to clean them; underground shared car parking and servicing areas save space, but poorly designed access ramps may cause a problem when sourcing a practical strategy for waste removal. The list is potentially endless, but designing in the flexibility to upgrade or downscale service delivery at the outset avoids the need for costly alterations on fit-out. Similarly, early FM involvement ensures that life cycle costs are considered at each stage of the acquisition process, avoiding the unpalatable realisation that savings made through securing a great property deal are eroded by an increase in operational costs – or worse, the quality of customer service aspired to is compromised as the required retrospective alterations are unaffordable.

As the arguments to stay or relocate play out, a combined facilities team working together can deliver great things – the desirables of enhanced client and staff experience, maximisation of operational efficiency and the ability to reduce ongoing operational costs are all achievable. When all is said and done, with a focus on delivering premium space at optimal cost, the ability of a building to operate on a sustainable, practical and economic level will ultimately set the benchmark for the project’s success or failure.

 

 

Extract FMJ September 2012

 

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