Corporate Real Estate Management: Evidence from German Companies

By Schaefers, Wolfgang | The Journal of Real Estate Research, January 1, 1999 | Go to article overview

Corporate Real Estate Management: Evidence from German Companies


Schaefers, Wolfgang, The Journal of Real Estate Research


Abstract. Based on a conceptual framework of factors representing and influencing corporate real estate management, this study is the first to be performed on the topic in Germany. The research shows that, despite their significant value and associated costs, real estate assets are at present seriously undermanaged by the vast majority of German companies. It seems that the international "bandwagon" toward active real estate management has not yet reached German firms. However, in some companies the function is evolving into a recognized management activity that requires a more formal and systematic approach.

Introduction

The central objective of corporate management is the active, goal-oriented management of long-term business development through the establishment and maintenance of competitive advantages (Porter, 1985). Thereby the competitiveness of both corporate products or services and corporate resources plays an important role. While current management literature and practice provide various concepts for the management of such corporate resources as capital, technology, information and personnel, the conceptual treatment of real estate as a corporate resource has largely been neglected.

Articles have pointed out that real estate is a significant yet undermanaged portion of total corporate assets (Avis, Gibson and Watts 1989; Veale, 1989; Teoh, 1993; and Arthur Andersen, 1995). Corporate leaders often justify the lack of management by proclaiming, "We are not in the real estate business!" This despite the fact that real estate represents 10%-40% of total assets and occupancy costs can range between 3% and 10% of revenues or 5% and 15% of total costs.

There are indications that especially American and British companies are beginning to reevaluate their policies of benign neglect of property assets (Avis et al., 1993; and Joroff, Louargand, Lambert and Becker, 1993). Recent research shows clearly the increasing interest by non-property-companies in corporate real estate management (CRE). Many companies are awakening to the importance of their real estate holdings. In this respect, this study represents a most timely research. It is the first to be performed in Germany on the subject of CRE management and examines the status quo of the function in large, well-known German companies.

Consequently, the objectives of the study were:

To obtain basic data on the status of CRE management in large German companies;

To investigate motives and rationales for current practices;

To identify trends and needs for change; and

To conduct an international comparison of CRE management.

This article is divided into three sections. The first section presents the research design with particular emphasis on the research sample and on the conceptual framework used for the data analysis. The second section contains selected results of the research. Finally, the last section provides some concluding remarks.

The results of this research represent part of a larger academic study, which examines the problems of CRE management in a broader theoretical and methodological context (see Schaefers, 1997).

Research Design

The research was based on a questionnaire with 48 questions and multiple-choice answers. For the purpose of the study, the questionnaire was sent to nearly 900 German companies, each with revenues of more than DM250 million and more than 1,750 employees. As senior executives are the main policymakers, and because their attitudes influence corporate treatment of real estate, the questionnaire was specifically addressed to them or to the director of real estate in cases where this person was known.

Of the 897 companies to which the questionnaire was sent, 203 responded (a response rate of approximately 23%). However, only 111 responses could be used for the statistical analysis. Most of the remaining 92 companies stated that they were not able to participate in the survey due to organizational or informational considerations. …

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