A New Era in Corporate Property Management

By Shearer, Kenneth A. | Journal of Property Management, November-December 1989 | Go to article overview

A New Era in Corporate Property Management


Shearer, Kenneth A., Journal of Property Management


A new era in corporate property management After years of relative indifference, many corporations are recognizing the value of operating their properties more professionally. Many factors have contributed to this growing awareness. Fear of takeover attempts had prompted some corporations to streamline their real estate holdings. Recent SEC requirements that the rental costs be carried on corporate balance sheets have forced companies to recognize the true cost of occupancy. In some cases, the presence of a new, more cost-conscious chief executive or board member marks an increased emphasis on more efficient operation of the premises.

Regardless of the reasons, this trend represents both a recognition of the value of professional management and an opportunity for the management firm to serve as a consultant for applying property management techniques in the corporate environment.

In the past, corporations have too often buried the cost of building operations in everhead and ignored actual costs. There may have been a building budget, but it was rarely monitored closely.

Many corporations further increased their occupancy costs by adding inappropriate charges, such as furniture repair or porters used in functions other than occupancy, into a facilities budget. In one company at which Cushman and Wakefield consulted, each department had a porter, who essentially functions as a "go-for" for the department. In New York City, a porter's salary may reach $30,000 a year, including benefits. When the costs were charged directly to the departments instead of to building overhead, most department heads found that they could do without these employees.

At the same time, it is often difficult for a corporate facilities manager to reduce the costs of building operation. Political pressures from executives who demand one service or another may add up to significant expenditures. Often the facilities manager sees his or her principal job as "keeping the bosses happy," rather than minimizing costs.

In such instances, hiring an outside consultant to assess the facilities management operation may be the answer to lowering costs. An independent property management consultant hired by top management is less likely to be restricted by company sacred cows.

Analyzing a corporate

facilities program

An awareness of costs is the first step for a corporation interested in lowering costs, leasing space to other tenants, or selling a building. Reviewing the staff of the facilities management department is a good place to begin assessing operating costs.

In the first phase of a facilities audit, a consultant may begin by interviewing every employee and determining exactly what each does and why he or she does it. In some cases, facilities staff size has grown to the point that productivity is not high. Often staff supervision can be consolidated in fewer hands to reduce management costs.

Staff painters, electricians, or carpenters may not have enough direct building work to keep them busy, so they are used to do more menial jobs or work that does not necessarily need to be done.

Often a more compact staff can perform the same services with the assistance of some outside contractors. For example, if an outside contractor's painter or electrician does not have enough work at one location to keep busy, he or she is sent somewhere else. This reduces cost at each location.

In addition to reviewing and revising employees' job descriptions, an outside facilities-cost consultant will review maintenance and operations procedures to determine ways to improve efficiency. Cleaning is one of the single largest recurring costs in most building operations and usually presents great opportunities for savings. Of course, most buildings could be cleaned less often, but that is usually not acceptable to corporate owners.

A more productive way to reduce costs is by eliminating work that is probably not done anyway.

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