Real Estate That Drives Competitive Advantage | Our Take March 2024

[Click here.]( to view with images. To ensure delivery to your inbox, please add [CBRE Group Inc.](mailto:Capitalmarkets@cbrecommunications.com) to your address book. [OurTAKE logo] Expert perspectives on what matters most in commercial real estate March 2024 This month, Whitley Collins writes about what portfolio optimization truly means amid a sea change in real estate. Real Estate That Drives Competitive Advantage [Author Photo]( 3-min read By [Whitley Collins]( Global President, Advisory & Transaction Services | Occupier [Real Estate That Drives Competitive Advantage] One question is dominating conversations among major occupiers more than ever before: “How do we optimize our real estate portfolio?” The subtext is usually that money is being wasted on empty space—which in the case of office is often accompanied by uncertainty around where utilization patterns are going to settle out. But portfolios are made up of more than just office space, and cutting costs and driving efficiency are only one part of optimization. The most critical piece is optimizing the entire portfolio’s effectiveness. And that’s how you turn real estate into a competitive advantage. Your real estate should help attract and retain the best talent, accelerate business growth, enhance culture and drive efficient operations. This can be daunting, especially when so many people inside your organization now have strong opinions—and biases—about real estate. Consequently, a new approach is required, one that better [integrates the needs of your business and your people](. Here are several things I’m seeing that are setting some CRE executives and their companies apart right now. First, they engage the C-suite and align stakeholders across the business. The C-suite, line-of-business leaders, support functions and employees all need to be heard. All of these stakeholders have their own unique motivations that must be identified, discussed and aligned if you’re going to succeed in developing a holistic strategy that makes each stakeholder feel empowered and contributing to a common goal. Strong [cross-functional leadership engagement]( is imperative to success. And that might include having a placemaker in the C-suite. Such a C-suite-level executive, sometimes called a Chief Places Officer—who intimately understands the business, its employees and its spaces—can shepherd change and develop solutions with a cross-functional group of stakeholders who have sometimes competing needs and conflicting interests. Moreover, the Chief Places Officer can serve as a linchpin in the employee experience. After all, even the most well-located, perfectly designed and tech-enabled spaces on their own aren’t enough. Employees have to believe in an organization’s brand and culture and feel connected to it when in the workplace. It’s about [treating employees like consumers]( their needs, delivering amenities and creating memorable experiences. Ultimately, having this central role signals that these companies are thinking differently and are committed to doing so. Next, they’re aligning labor and location differently. Attracting and retaining the best talent is a key priority for every CEO—and a material expense for every company. And as space ages and becomes increasingly obsolete—including headquarters locations—companies are [creating new location strategies]( that have different drivers than those of the last generation of space. Not all talent needs to be in the same location anymore. If a particular job really can be “done from anywhere,” maybe it can be done from a talent-rich, global, low-cost location. Conversely, if a job needs a specialized skill or a large concentration of highly skilled talent, the larger global-city talent pools are still critical contenders. They’re also establishing relationships with aligned property owners. When choosing a new building to house their business, [smart occupiers are partnering with landlords]( that can offer a combination of the flexibility, experience, sustainable operations and financial incentives to make the commitment more well-matched to their strategy. With $2-plus-trillion of debt coming due on commercial properties over the next three years, the most strategic occupiers are also conducting their due diligence to understand the leverage they have with any landlord they are transacting with. Additionally, successful companies are thinking creatively about capital generation. A new approach to real estate usually requires capital, and funding capital projects is a bigger concern for CFOs than ever. But that doesn’t mean your hands are tied. Credit tenant leases (CTLs) and synthetic leases are two creative ways to get capital projects funded while optimizing the balance sheet and preserving cash flow. Both structures also allow for long-term control of the asset. In addition, sale/leasebacks can be lucrative ways to generate cash that can be recycled elsewhere, especially for assets that don’t make sense to own long term. And lastly, they’re using data to keep score. In a data-driven world, with the promise of AI driving high aspirations for more efficiency, it’s time for the professionals responsible for real estate operations to take control of their data—whether [total cost of occupancy]( business performance or utilization rates. The most successful companies are investing in tools and resources to [gather actionable data]( that help inform next steps as workplace policies evolve. This includes everything from using sensors to track how and when space is used to creating and monitoring KPIs that measure [how usage drives business outcomes](. Because ultimately your real estate portfolio’s purpose is to enable, not hinder, your business. So the next time you’re asked about optimizing a real estate portfolio, you can say that the better question is, “How can we make our real estate a competitive advantage?” Don't Miss Out Was this newsletter forwarded to you? [Subscribe]( Know someone who would benefit from Our Take? [Share]( Get the content most relevant to you by [managing your preferences](. Explore More CBRE Content Listen to our latest podcast, [The Weekly Take]( Explore all of our latest Insights & Research at [cbre.com]( This email was sent by: CBRE Group Inc. 2100 McKinney Ave Suite 700 Dallas, TX, 75201, US [Unsubscribe From This List]( You may also unsubscribe by calling toll-free +1 877 CBRE 330 (+1 877 227 3330). 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