The takeaway is that global and regional CRE decision-makers cannot stop at solutioning for the Day 1 portfolio and operating platform . Once that is handled , strategy development must rapidly shift to focusing on the long-term target because that is often where substantial synergy can be realized . The long-term focus also should be viewed from two perspectives :
The Portfolio . The portfolio entails finding synergies with respect to the size and cost of the physical footprint . Within the flurry of financial and legal activity that occurs when integrating two companies , global and regional CRE decision-makers should seek opportunities to :
• Restructure lease contracts , particularly if there are strategic locations , such as a headquarters or global shared service center where it would be advantageous to lock in a low rent rate for five-plus years , given high expectations that rents will increase .
• Contemplate sale-leaseback while being cognizant of the impact on balance sheets .
• Leverage remote work to permanently eliminate space from the portfolio or accommodate projected headcount growth without having to acquire additional space .
• Reduce the number of buildings in the footprint or even relocate to markets that are better for talent or operational reasons .
The Platform . The platform focuses on the operating model that governs the physical footprint . This is where global and regional CRE decision-makers should be asking themselves :
• Who is going to manage the real estate and facilities following a carveout or merger ?
• How will they build the CRE organization structure ?
• Are they insourcing or outsourcing real estate and facilities management services ?
• Who are their third-party vendors , and what do those contracts look like ?
• What software is being used to administer leases , manage space , and monitor facility systems and maintenance ?
When strategizing for the long-term CRE portfolio , a plethora of variables are unique to every merger integration or carveout that can impact the ultimate outcome . For example , every company has a slightly different approach and policy for remote work during the pandemic and the subsequent return to the office . Every company
has a unique culture and workplace branding . Every company assigns space to its employees and uses collaborative or amenity space in different ways . Some of these disparities may seem insignificant , but when compounded across 50 or 100 buildings in a large-scale merger integration , the impact can sum to tens of thousands of square feet and even generate seven-figure capital costs to reconfigure space .
Looking ahead to 2022 , it will be interesting to see if this level of M & A activity is sustained against the projected inflationary environment and the forecasted rise in interest rates . Global and regional CRE decision-makers may find themselves challenged to meet the short-term agility needs of the portfolio , while also trying to navigate the impact and opportunities derived from longterm real estate decisions . In these times of uncertainty and volatility in real estate , avoid strategizing corporate real estate in a vacuum . When CRE decision-makers work in cross-functional , integrated teams , they often produce the best course forward .
Rob Raymond Managing director in the Real Estate
Solutions Group at FTI Consulting , an independent global business advisory firm
Contact him at rob . raymond @ fticonsulting . com .
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CIREMAGAZINE . COM COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE 15