The Leader - March/April 2009 - (Page 19) THE EVOLVING STATE OF PORTFOLIO PLANNING: A CRITICAL DISCIPLINE FOR UNCERTAIN TIMES CRE organizations are very comfortable with analyzing the financial tradeoffs of various alternatives, usually related to the acquisition or disposal of a particular asset. these departments are pressing forward with improvements. CRE organizations are very comfortable with analyzing the financial tradeoffs of various alternatives, usually related to the acquisition or disposal of a particular asset. They are now increasing their ability to address the larger “strategic” real estate questions of what assets are core and where/how to invest in the portfolio (see Sidebar). 3 1 The broad area of green/sustainability practices came in third. Top-Three Initiatives Cost reduction initiatives were ranked #1, by a large majority – more than half said it was the number one priority and over 80 percent said it ranked in the top three. Please note: These interviews were done in the first half of 2008, before the financial crisis and severe economic downturn that characterize the current environment. Subsequent conversations with these organizations reveal an even greater focus on cost reduction. Although others cited “alternative workplace” and “space consolidation” initiatives as important, they noted that the priority derives from impact to cost reduction efforts (using alternative workspace to allow for space consolidation to reduce Metrics Almost all of our survey participants have established robust portfolio planning metrics to support decision making and improve portfolio performance. Some participants are experimenting with new measurement and reporting systems that will make metrics more clear and easily actionable, more immediately drive desired behavior, and appear more relevant to business leaders. Fully half of our interviewees feel there is room for improvement by creating metrics that better speak to their clients’ interests and help them make better decisions (see Figure 4). processes. Some of the best practices cited include: ‡ Cultivating business unit relationships to understand demand ‡ Participating in business unit planning meetings ‡ Working to understand the market/industry factors that produce real estate demand ‡ Coordinating with other internal support organizations (IT, Finance, HR, etc) ‡ Developing planning scenarios ‡ Revisiting demand forecasts frequently F I GUR E 4 PERCENT OF RESPONDENTS THAT: Policies & Initiatives Policies and initiatives are “where the rubber meets the road” – where sound planning manifests itself in actions and activities that impact the portfolio. We asked our respondents to rank and comment on their implementation priorities, distinguishing between policies (ongoing management protocols) and initiatives (one-off programs or projects that change aspects of the portfolio). Here’s what we learned: Supply Management More than 50 percent of participants rated their supply management skills “very good” or “excellent.” Participants were interviewed about the quality of portfolio and asset information they maintain along the criteria below, along with their ability to synthesize data. Nearly 75 percent said that it would be easy to access any and all of this information for analysis, even if it is located in some other department or with an external service provider. 33% 34% 33% ¢ ARE ACTIVELY DEVELOPING NEW METRICS ¢ HAVE MADE A CONCERTED ATTEMPT TO LIMIT/SIMPLIFY THEIR METRICS ¢ ARE GENERALLY HAPPY WITH THEIR CURRENT METRICS Top-Three Policy Priorities Obtaining charter and maintaining control over real estate decisions easily ranked as the top policy priority, with nearly half of the organizations rating it as their #1 priority. Risk mitigation came in second place, with a strong subset of this being “achieving flexibility on lease terms/conditions.” 1 2 Sub-Portfolio Planning [by Market, Product Type, Business Unit Cohorts] Exactly half of our participants rated themselves “very good” or “excellent” at sub-portfolio (or cohort) planning, and 2 0 0 9 THE LE ADE R 19 MARCH / APRIL
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