A framework for identifying and measuring value added by corporate real estate

Abstract

PurposeThe purpose of this paper is to model how real estate strategies can add value to the core business, providing corporate real estate mangers with a tool to illustrate to corporate officers how real estate adds value to the firms.Design/methodology/approachThe authors review previous research and interview 26 corporate real estate executives to examine what are common approaches to developing real estate strategies and measuring performance. They then model how real estate adds value to the firm and how that value can be measured.FindingsMany firms do not recognize how real estate adds value to the business. While they may have a corporate real estate strategy, that strategy is often not developed in coordination with the overall business strategy. In addition, the performance measures being used by many companies focus solely on cost, not value added.Practical implicationsCorporate real estate's contribution to the core goal of wealth maximization can be modeled to illustrate the tangible and intangible effects real estate has financial performance. A structured approach to developing a real estate strategy in conjunction with the core business strategy, supported by a performance measurement system will allow corporate real estate executives to better communicate how corporate real estate is adding value to the firm.Originality/valueCorporate real estate managers need better ways to illustrate, to corporate leaders, how they add value. This paper illustrates such a model with supporting operating decisions and performance measures.