Corporate Real estate refers to the land legally owned by any corporation, along with all the permanent fixtures on the land. This is a term that comes across in common law, laid down through courts and gleaned from several tribunals. It can be safely assumed that based on the general valuation approach adopted by corporations today, realty covers over 30-40% of a corporation’s capital assets. The amount spent on realty is also the next in terms of investment made by a corporation after personnel maintenance expenses. As a consequence, this aspect of management is awarded very high priority while drawing up strategies to enhance the company value.
Top quality realty management plans in the corporate sector must include not just the functional premises and other land, but also focus on expendable and unused property. Redundant building locations have made their way into strategies for utilization of realty assets of corporations. If space claims such a large percentage of funds, it is natural to find buildings and vacant land earmarked with importance on a company’s balance sheet.
The plans drawn up in the past in this area have always concentrated on representing the company’s value as well as enhancing the latent value of the organization in operational realty. But in recent developments, many companies have worked out plans to do the same using the non-operational land and objects in addition to regular corporate real estate management schemes. It must be understood that realty is not an asset to be used just in distressed times. Resources must be used but costs must also be cut down, increasing profitability to the best possible extent.
In ‘The Components of Corporate Real Estate Management’, Oliver Breitenstein, Alexander May, Friedrich Eschenbaum say that “The objective of CRE is the making of a return from realty without changing the head branch of a business”. Here, the company decision makers have the responsibility of controlling the business realty organization operations, which are carried out decentralized, and by using external service providing companies. The realty portfolio has two sections. Firstly, expendable land will be sold for income or set aside to be considered for project implementation. Next, an internal rent will be introduced in the operational plants and buildings after evaluating market conditions.
This portfolio is worked upon and optimized. Alongside, there must be a strong focus on cost optimization which will lead to reduction in costs.
Similarly, there are many ‘commandments’ about corporate real estate management that can be studied and evaluated with respect to the organization’s current status, value and the realty potential.
External service companies can be brought into the scene for efficient exploitation of realty assets, disposal of the non-operational realty, planning and implementation of realty cost optimization procedures, and finally, ensuring a proper level of transparency in the corporate realty portfolio. Such a plan will assist the organization and ease the burden brought in by the other organizational expenses, while helping the other strategies in achieving the business objectives.