Relationship Between Corporate Real Estate and Facilities Management
By Dave Clifton
Content Strategy Specialist
French fries and ketchup. Football and tailgating. Fall weather and hot cider. Some things fit together naturally and become associated that way. In the business world, one of the best examples of this phenomenon is between corporate real estate and facilities management. It’s hard to have a conversation about one without the other, and both affect each other. Companies that understand this relationship will succeed in cohesively managing their facilities and their greater real estate portfolio.
What is facility management in real estate?
Facility management is a function within corporate real estate. The objective of a corporate real estate manager is to oversee the portfolio of a company’s properties. Each property within the portfolio needs its own oversight, which falls to a facilities manager. It’s best to think about this relationship at-scale: real estate is the broad focus; facilities are the narrow focus.
While real estate management is important for the company’s mission and financial outlook, it’s driven largely by facilities management. For example, a company’s property portfolio may consist of several locations, but the weight of each location depends on how it’s managed. If some locations are well-managed, they’re assets on the balance sheet. If others are poorly run, they become drains on revenue. In this way, it’s important to practice good fundamental facilities management, to ensure each property in a portfolio is an asset to the company.
Two sides of the same coin
Instead of thinking about corporate real estate vs. facilities management, think about them as two sides of the same coin. High-level real estate decisions trickle down to individual facilities, while facilities management insights power broader decision-making at the real estate level. Additionally, problems at one level can affect decision-making at the other. This relationship is important for both corporate real estate managers and individual facilities managers to keep in mind.
What to expect in corporate real estate facility management depends on the scale of a company’s real estate portfolio. An organization with one or two properties has different considerations and challenges than a company with dozens of properties. The scale of individual facilities matters, too—as does the prospect of owning vs. leasing.
For example, the decision to consolidate from 20 properties to 18 is much less significant than the decision to slim down from four locations to three. Similarly, budgeting for facilities upkeep across a portfolio becomes more complex the more properties there are and the more complex those holdings are. This necessitates the expansion of both corporate real estate and individual facilities’ teams. Scale plays a big role in oversight, which plays an even bigger role in decision-making and direction.
Facilities management impacts real estate costs
As mentioned, the biggest relationship between facilities management and corporate real estate is cost. Most real estate expenditures happen at the facility level (aside from property acquisition). There’s upkeep and maintenance, repairs, remodeling, renovations, improvements, and any other cost associated with facilities. The sum of these costs is reflected on the bottom line for that specific facility, which then becomes a line item for corporate real estate at a higher level.
A corporate real estate manager looks at property holdings and their costs and asks a simple question: is the cost attributed to this facility justified? If it costs $2.4M annually to operate a facility and that facility only produces $2.8M in revenue, a real estate manager may decide the cost of operation isn’t worth it. Rarely are examples of this cut-and-dry, however. Generally, there’s significant cost-benefit analysis that goes into real estate decision-making at the corporate level. What matters is that a real estate manager has concrete facts, figures, and costs to base their analysis and assessment on.
Ultimately, the more efficient and productive facilities managers are in keeping up a property, the better that property looks on the corporate balance sheet.
Micro to macro: facilities to corporate real estate
The relationship between corporate real estate and facilities management is an important one for businesses to recognize. It’s the bridge between micro and macro; the company’s everyday operations to broader company goals. What happens at the facility level affects a company’s real estate strategy, and strategy decisions affect how facilities operate.
It’s essential for facilities managers and corporate real estate managers to work together in their respective capacities. Together, they can drive efficiency and cost-effective operations, while pushing the company in the direction of its goals. Companies that unify corporate and facility strategies will position themselves to drive more efficient, focused operations.
Keep reading: How Agile is Your Real Estate?