The Leader Magazine

MAR 2017

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MARCH 2017 33 The paradigm shift that is still being played out The mindset about today's workplace began to be forged in the late 1980s by a handful of practitioners and academics who examined where and how people worked. Their inquiry was driven by disruptive changes in the business environment that were explored by the CRE 2000 program sponsored by IDRC (now CoreNet Global) and professional education programs sponsored by NACORE (also now CoreNet Global). Today, once again, powerful forces shaped by global demographic, technologic, economic and political shifts are disrupting how and where business is done. This means that many of today's best real estate management and workplace practices will morph and, in some cases, disappear as new approaches emerge and are implemented. The six primary shifts that started to play out 25 years ago are still working themselves out in the mainstream of corporate practice, where they are often considered "innovative." 1. Financial to business asset. The view of corporate real estate (CRE) as a passive financial asset shifted to one that appreciated the real estate portfolio as an asset that could be designed and managed, in combination with new technologies and management practices, to promote new ways of working that enhanced business performance. That meant considering the availability and cost of labor, attracting and retaining the best and brightest employees, and engaging and enabling their talent and energy. It also meant learning about new markets, resiliency in the face of potential natural or man-made disaster, investment, tax management and international trade agreements. 2. Workplace as an ecological system. Organizations began to understand the "workplace" as an integrated ecological system comprised of physical design and space, information technologies, workforce demographics, work processes, and organizational culture. "Going to work" no longer meant going to a singular, fixed place within a floor of a specific building where one spent all, or at least a better part of, one's day. The workplace was recognized as a system of loosely linked spaces inside and outside the "office" (the building) designed to support specific activities such as quiet work, informal communication, and client and group meetings. The workplace now included the home; places owned by others, such as caf├ęs and hotel lobbies; Internet-connect parks; co-working spaces; the offices of collaborating firms or clients; airplanes; and airline lounges. To be support work anywhere at any time, the workplace now relied on cyber as well as physical space. 3. Needs vs. preferences. Where once the modus operandi of the CRE function was simply to take orders for space and property that business units preferred, CRE started working with business units to anticipate their needs and to sharpen their understanding of how to best meet these needs through real estate and workplace strategies. 4. Power and opinion vs. data. Supporting the focus on needs rather than preferences, CRE decision-making is now more often underpinned by analytics and rigorous review of business context and real estate financials; individual, team and department performance data; and how space is being used. The art of the real estate deal by market analysis and brute-force negotiation has now been widely supplanted by algorithmic methods and a wide range of employee data such as space and energy cost per square foot and per employee, and measures such as employee job satisfaction, health and well being, and engagement. 5. Stable/static to agile portfolio. Traditionally, enterprises were largely perceived as relatively stable, with a known culture and known tasks and processes. Corporations assumed that facilities and the uses they house would have a relatively long life. This assumption began to disintegrate in the decades prior to the turn of the century in response to the unprecedented surge of new information technologies, mergers and acquisitions, the rise of new international powerhouses like China, and rapidly growing markets in developing countries. Agility has become an overarching objective and takes many forms: flexible tenancy arrangements that enable rapidly acquiring or exiting buildings and locations as political and economic circumstances warrant, and reconfiguring space quickly as teams, projects, and processes evolve. 6. Tactical to strategic. Formerly, the CRE function primarily relied on in-house staff's transactional skills to acquire, configure and deliver space, with support of contracted designers, brokers and property managers. Today, corporations host relatively small groups of in-house staff primarily focused on strategic planning and relationship management. With this paradigm shift the professional orientation of CRE professionals now recognizes that no single discipline or profession encapsulates all the expertise needed. Professional silos have become dysfunctional. In some cases that has led to significantly broadening the boundaries of CRE to encompass all corporate services, from real estate and facilities management to transportation, security, catering, and information technology. Expanding the range of skills necessary has also been addressed by forming mutually beneficial collaborative business relationships and partnerships as part of a business eco-system comprising a network of companies. Going forward: four megatrends The shifts that began some 25 years ago now need to be updated and reconfigured to address "new" challenges: not only those already recognized by corporate leaders, but also those that are just beginning to emerge in a still-uncertain future. CoreNet Global's recent report, The Bigger Picture, The Future of Corporate Real Estate, listed topics that are examples of known issues that demand attention now: technology and the Internet of Things; risk mitigation; cybersecurity; environment, energy and sustainability; corporate social responsibility; and the interests and needs of a changing work force, particularly with respect to well-being. Addressing these challenges now is necessary but not sufficient. These challenges have been clear for a decade or more. Dealing with them now is playing catch-up with the known future. Enterprises need to be aware of and begin to explore responses to fundamental changes in the context of global business, changes that are still largely undefined or not even recognized. We see these contextual changes as mega-challenges, defined more by fundamental shifts in how business is done than by particular action-oriented challenges noted in the business literature.

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