The Leader - March/April 2009 - (Page 17) THE EVOLVING STATE OF PORTFOLIO PLANNING: A CRITICAL DISCIPLINE FOR UNCERTAIN TIMES standard set of processes, technologies, and training tools. Other key findings include: Investment in the discipline (people and systems) is growing quickly – a number of participants have invested heavily to develop their platform and report a positive return on their investment in portfolio planning. CRE departments have largely adopted the core curriculum and vocabulary taught by the CoreNet Global EDP Portfolio Management course, including concepts such as demand forecasting, supply management, cluster analysis, sub-portfolio planning, and duration matching. They have taken the course content forward by developing strong working practices to actualize the concepts. Highly sophisticated decision-making tools have emerged to support PM efforts (flexibility, lease vs. own, market timing exposure, adjacency modeling). For example: ‡ Sprint is running a web-enabled modeling tool for its Mosaic platform to better analyze real estate decisions impacting their retail, sales office, and network support portfolios; ‡ Cisco developed a set of models to understand lease flexibility, protect against space overhang, and provide sophisticated metrics to decision makers; and, ‡ AT&T purchased econometric research to help it optimally map its space consolidation initiatives against local real estate submarket cycles. The greatest need is in integrating data from disparate systems – all research participants would like to have a single integrated system that would collect: ‡ Demand forecasts (including scenario planning that relates business drivers to space requirements); ‡ Supply information (including internal space inventory/utilization/cost and external market data); ‡ Sub-portfolio planning tools and models; ‡ Asset management data (depreciation, book values, along with information about facility age, condition, sustainability, environmental risk, and life cycle); and, ‡ Operating metrics and performance dashboards to facilitate senior-level decision making. Portfolio planning groups are often working with their firm’s C-Suite and are typically brought in early on in all M&A activity. Portfolio planning is becoming the “tip of the spear” for CRE organizations that want to be corporate change agents. Although there is wide variation in job titles, portfolio planning roles typically fall into three core categories: Customer relationship managers advocating for the business users; portfolio strategists with a global viewpoint and fiduciary control over portfolio decisions; and regional portfolio planners responsible for identifying, evaluating, and facilitating initiatives. Sometimes these roles are played by a single person, but they are increasingly defined separately and assigned to accountable members of a planning department. Emerging Trends: Key Findings The Consortium completed its work during the first half of 2008, before financial market problems escalated into the current economic crisis. Even then, the need to reduce occupancy costs ranked highest among all priorities. However, in addition to occupancy cost cutting and cost containment, we expect to see organizations investing capital and effort in the following six areas: FI G U R E 2 PORTFOLIO RESEARCH CONSORTIUM: HOW TO START A NEW PORTFOLIO PLANNING ORGANIZATION (THE “FRONT NINE”): ° Create portfolio planning charter and organizational mandate ° Develop ongoing planning process ° Develop analytical methodology and framework ° Articulate objectives and variables – ° Create financial doctrine/charter ° Ascertain overall company and business unit strategies ° Identify required decision support tools for business units ° Identify required data and sources ° Identify and deploy requisite IT and analytical tools 2 0 0 9 TH E LE ADE R 17 MARCH / APRIL
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