Real Estate properties are one of the largest operational expenses for businesses. Yet, corporate real estate often times remains the misunderstood and undervalued asset. As businesses expand and the proposed FASB lease accounting standards become a reality, real estate will become a top “C” level priority. By implementing real estate strategic opportunities now, the savings benefits can increase earnings over short and long terms.
Compliance and Reporting
The most significant change to the way corporations finance assets in forty years is coming. The new FASB/IASB standards will make larger companies’ financial statements more transparent since the new changes will require the reporting of lease obligations on the balance sheet. More than half of the CFOs, surveyed by CFO Research and IBM, say their company has not begun the preparations to be able to produce the required reporting-a sobering admission. Developing the processes needed to accumulate the necessary data and addressing the new FASB compliance with an effective strategy now, can position your company to be able to leverage the value assets and make strategic decisions on assets that will be impacted by the new rules.
Technology Cross Communication
This shift in real estate’s position within the overall corporate strategic plan has presented a challenge since the information is often parceled out and managed by different departments. More than a third of CFOs expressed concern with errors and oversights in data collection using this de-centralized way of maintaining information. In the age of technology, many CFOs report a necessary, if not immediate need, to upgrade their systems for tracking and managing real estate assets. To facilitate cross discipline communication, there are single platform solutions – ERP, IWMS, and Point Solutions. A comprehensive evaluation of your company’s needs will maximize the benefits derived from using one or more of these integratable software systems.
Bigger Impact with Smaller Footprint
Many businesses are finally over the recession hangover and back on track to grow. According to 47% of CFOs surveyed, CRE expenses will increase in the next three years. The survey finds that while global growth is increasing, CFOs are trying to decrease the overall cost of maintaining assets. The “right-sizing” of real estate portfolios has become one of the top three objectives for finance executives. As companies begin to take move from operational to strategic views of real estate, they will create more value for their own shareholders rather than the landlord (who has been, up to this point, benefiting from the short-term perspective). By stratifying properties in strategic categories, the companies can develop a more cost-effective occupancy plan.
Opportunities Are There
In a changing business environment where companies will have to show their “full deck”, top management is feeling the pressure to meet profit objectives. The formula for corporate strategic plans needs to shift to a longer-term focus. For companies that optimize their real estate portfolios effectively by understanding the value of the corporate real estate asset; it will create significant improvement to the bottom line. The time is right for developing the metrics, systems, and data that will be needed to take advantage of the opportunities for ownership or other financing structures that can enhance profitability and reduce costs.
Are you ready?