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“We’ve come up with a design that puts 12,000 people in one building” June 9, 2011

Posted by Bob Cook in Company Case Studies, Corporate HQ, Green Initiatives, Profession of Corporate Real Estate, Silicon Valley.
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It’s not often that a CEO of a major company makes a presentation to City Council on company plans for a new headquarters building.  But Apple is no ordinary company, and Steve Jobs certainly is no ordinary CEO.  He’s not afraid of being accused of having an “ediface complex” — a concern that afflicts most other CEO’s and which is responsible for the declining quality of architecture as it relates to corporate headquarters buildings, IMHO.  No, no one is going to challenge Mr Black Turtleneck, Mr Cool, himself, on this one.

It’ll be interesting to see if Jobs’ new Apple HQ announcement spurs imatators … just as has been the case with the iPod, iPhone, and iPad.  Will it become ok, again, to build iconic HQ’s? 

See Jobs’ presentation to Cupertino’s City Council here:  http://www.youtube.com/user/cupertinocitychannel#p/u/0/gtuz5OmOh_M

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2011: Year of the Rabbit …. and Decade of the Corporate Real Estate Exec February 13, 2011

Posted by Bob Cook in Alternative Workplace Strategies, Corporate HQ, Financial Planning & Analysis, Green Initiatives, Lease Accounting, M & A Integration, Profession of Corporate Real Estate.
9 comments

This Thursday ends the 15-day Chinese New Year Celebration.  According to the Chinese Zodiac, we’re entering the “Year of the Rabbit”.   We may also, though, be entering the “Decade of the Corporate Real Estate Exec”, the decade in which corporate real estate execs rise to truly strategic roles in their organizations.

The year 2011 will usher in an era of increased responsibility for corporate real estate professionals.  Events playing out this year will put corporate real estate executives, their staffs, and their advisors front and center.  The spotlight will be hot, but rewarding … for those ready to perform.

Leaving the oughts behind

With a name like that … “the oughts” … we should have known the decade from 2001 through 2010 was going to be tough.  Slashing budgets, laying-off people, constantly explaining why the company still has too much space:  it was not the best of times for corporate real estate folks. 

To be fair, the oughts did have their fun moments:  implementing alternative workplaces, expanding into China and India, building solar-power arrays, planning next-generation data centers.  But while these activities were sometimes high-profile (in the sense of “gee-whiz”, isn’t this cool), for the most part they tended to be tactical activities in service to specific divisions or functions … away from the central concerns of headquarters.  They did, however, help raise the self-image of corporate real estate professionals who no longer are satisfied with a backstage, custodial role.  Most are ready to perform on stage.

The good and the bad

So, if you’re in corporate real estate, how will 2011 differ from the past?

Good News:  You won’t be tasked to slash your budgets; corporate profits are doing just fine and executive management is now focused on growth rather than contraction.   You won’t be consolidating (unless your company buys another company to integrate); you’ve already done your consolidations.  And you won’t have to lay off any more of your staff; thank God, that’s over … or at least it is if you avoid being on the “losing end” of a Merger.

Bad News:  Some of you may lament, though, that some of the things that were fun in the past won’t be on the agenda in 2011:  You won’t be constructing many new buildings; we have enough of those for a while.  You also won’t be building out much space inside your buildings because you probably have built space you’re still not using.  You won’t be flying across oceans looking for new space; globalization is taking a breather while companies wait for worldwide demand to catch up with worldwide capacity.  And you probably won’t be doing a big outsourcing; where outsourcing makes sense, you probably already have.

The shape of 2011 and the decade to come

The Year of the Rabbit, CY2011, and the coming decade will bring a new world shaped by these forces: 

  • cash hoards at leading companies in a “winner-takes-all” economy
  • attractive real estate markets  from an occupier’s perspective, for at least a few more years in most locales and indefinitely in some
  • new advances in “green technologies” and lowering prices due to competition
  • the establishment of a new lease accounting standard
  • strained budgets at all levels of government

The New Agenda

This world will bring those corporate real estate professionals who are ready for the stage closer to the core of their companies’ businesses.  The new corporate real estate agenda for the “Year of the Rabbit” and beyond:

  • Acquisition Integration
  • Balance sheet Management
  • Corporate Citizenship
  • Design & Management of Processes
  • Employee Retention and Recruitment

 

Acquisition Integration.  Most leading companies are sitting on cash hoards and have large borrowing capacity, setting the stage to make the year 2011 record-breaking in terms of M&A activity.  Corporate real estate execs will play key roles in integrating acquired companies, as they have been, but those, savvy enough to grab the opportunity, will engage beyond managing cost-saving consolidations.  They will take a leadership role in managing the “soft art” of cultural integration. Corporate real estate execs have an opportunity to address a vexing problem: most M&A’s are unsuccessful.  Most experts think the obstacle to success is cultural incompatibilities.  By simply extending corporate real estate’s responsibilities from the physical environment to the social environment and thinking of themselves, not as “facility engineers” but, as “social engineers”, corporate real estate execs can … and should … take on the challenge of successfully merging cultures to achieve M&A success.

Balance Sheet Management.  All that cash and borrowing capacity at leading companies are going to make real estate central to discussions about financial structure.  Companies need to decide whether they should continue to retain all that cash (something that stockholders don’t like), pay down debt (something that has probably already been done if the company has a lot of cash), give cash to shareholders via stock buybacks or dividends (something that company managers don’t like because they want to keep money for a “rainy day”) or spend it (something that certainly cannot be done foolishly.)    It turns out that spending cash to buy company facilities bridges these concerns: it keeps wealth in the company in a way that can be turned into cash if needed, earns more than cash-equivalent investments, and can often support business operations better than can leasing property.  Real estate is, thus, destined to become important in discussions about a company’s financial structure, particularly over the next few years while an “occupier’s market” reigns and purchases can be made cheaply.  Also entering the discussion will be the new lease accounting standard that will transform the balance sheets of many companies and bring real estate strategy (own vs lease, lease duration, utilization) even further into discussions about company financial structure.

Corporate Citizenship.  Our governments are broke (to use an imprecise but, I think, meaningful term.)  Corporates will be called upon to pick up the slack … either forcefullly by regulation or voluntarily… and they will have to get serious about social and environmental responsibilities.   Federal and state governments can’t afford tax breaks for energy-savings and environmental-protection so companies will be expected to beef up their sustainability programs.  While technological advances may improve the ROI on energy-saving and environmental-protection investments, companies will be expected to make these investments even where there’s no payback.  As for local governments, they can’t afford redevelopment programs so companies will be expected to participate in urban revitalization projects, even when no subsidies are available.  There may even be a return to the civic-mindedness of the 1960’s when corporations built their headquarters with plazas to serve as centers of their communities.  Corporate real estate professionals will be managing much of this good corporate citizenship.

Design & Management of Processes.  As the role of corporate real estate execs migrates towards the center of the company, execs will find themselves spending less time on implementation and more time designing and managing processes to lead, coordinate and govern the implementers, who will increasingly be outsourced providers.  Acquisition integration, for example, requires processes to plan consolidations, account for them, and track implementation status.  Another example: the new lease accounting will require SOX-compliant processes to record leases in a timely fashion, abstract them accurately, and (if the present proposal holds) make quarterly assumptions about their likely lengths, contingent rents, and service components.  All these processes will have to be integrated with processes of other functions … HR, IT, Finance … intertwining corporate real estate with other key functions and making it integral to how the company works.

Employee Retention and Recruitment.  Despite the fact that unemployment is still stubbornly high, competition for top talent is severe.  As product design, marketing, supply chains, financing, and the art of management, itself, becomes more sophisticated, the winning of the competition for sophisticated talent is becoming more and more important to company success.  If you have the best talent, you can create the best products, the best marketing, the best cost structure, etc. … the things that allow you to easily win the competition for customers.  And what attracts talent?  Money helps, but ultimately, it’s about the work environment.  Here again, corporate real estate execs can play an important role by using their command over the physical work environment to help mold the social work environment that will determine how successful their company is in retaining and recruiting talent.

It is a new year:  “Year of the Rabbit”. 

Will it be a new decade:  “Decade of the Corporate Real Estate Exec”?

Eleven things I learned at the CorenetGlobal Summit in Phoenix September 23, 2010

Posted by Bob Cook in Alternative Workplace Strategies, Financial Planning & Analysis, Green Initiatives, Lease Accounting, Profession of Corporate Real Estate.
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 1. 110 degrees doesn’t feel that bad in the shade.

2.  Face-to-face meetings are a nice complement to living “la vida webosphera”.

3.  Corenet Summits ain’t what they used to be, many long years ago… but…

4.  Even without Duck Soup, Summits are still pretty good.

5.  Topics presented in breakout sessions draw varying sizes of crowds.  My take:

6. “Alternative Workplace” is still in first place as a topic of interest to the most people.

7. “Career Planning” is close behind (perhaps because of all the members “in transition”)

8. “Green” is gaining ground fast and could overtake “Alternative Workplace” shortly, and …

9. “The New Lease Accounting”, while far behind (it wasn’t even given a prime time slot), is coming up fast (judging by the standing-room-only crowd at a 7:45 AM session on subject).

10. PHX is near the downtown convention center, allowing for a fast exit.

11.  Saguaro live to be 200 years old (according to art exhibit at PHX) and take ten years to grow one foot tall.

Cisco’s water conservation March 23, 2010

Posted by Bob Cook in Company Case Studies, Green Initiatives, Silicon Valley.
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There’s some good press coverage on Cisco’s water conservation efforts. It’s part of Forbes coverage of World Water Day (March 22nd) for which Forbes proclaims that the “next oil” is “water”.

For some reason, the article highlights Cisco’s waterless urinals when I think the really interesting story, and the one with wider ranging implications, would have been how they’ve linked their sprinkler system to web-based weather forecasting systems to manage their landscape watering.