European Real Estate Society Conference 2013 Vienna, Austria, July 5 th 2013

1. “Best Practice, Best Fit, Best Model?” Strategic configurations of Corporate Real Estate Management in Europe European Real Estate Society Conference 2013 Vienna, Austria, July 5th 2013 Dr. Annette Kämpf-Dern Prof. Dr. Andreas Pfnür 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 1/22

2. “Best Practice, Best Fit, Best Model?” Strategic configurations of CREM in EuropeAGENDA • Introduction and Research Question regarding a CREM concept:What is CREM and how should a CREM management concept look like? II. Framework: Literature Overview and the CREM Map • Research Design: Exploring the most advanced using CA-QDA • Findings: Some “Best Practice”-Principles, but heterogeneous designs • Discussion: “Best Fit”-Designs that need further research to identify systematics of well-functioning configurations 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 2/22

3. I. Intro Wide consensus about what CREM generally is aboutCREM definition Purpose: Providing the strategic direction and supervision” that ensures “that land and building matters are dealt with so that they operate efficiently and effectively”.Thorncroft (1965); Stapleton (1986); RICS (2008) Function: Establishing and maintaining a “close match between an organization’s business and property strategies”. Bon (1994) Activities: Forecasting, planning, directing, coordinating and controlling real estate activities necessary to provide (acquire), operate (use) or liquidate (dispose) real estate assets.Thorncroft (1965); Stapleton (1986); Kaganova et al. (2006); Kämpf-Dern and Pfnür (2009) Objects: Managed are buildings/parcels of land, building clusters or portfolios of buildings and land holdings. Bon (1994); Ching Application:Corporates whose business is not real estate. Bon (1994); Pfnür (2002) Definition used:Corporate Real Estate Management (CREM) denotes the planning, decision, organization, implementation and controlling of all those real estate activities necessary to provide, operate or liquidate real estate from all perspectives (the owner, the user and the producer) of corporates whose business is not real estate. The goal of CREM is to support the overall corporate strategy acknowledging user-oriented (cost-benefit-ratio), financial (capital invested) as well as operative aspects. 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 3/22

4. I. Intro Yet, tasks to be performed can differ considerablyOverview of CREM tasks CRE Management Tasks: Governance, Portfolio Management, Asset Management, Operative RE Facility Management CRE Core Tasks („Services“) • Supply • Leasing • Acquisition • Project Development • Usage/Operations • Technical • Infrastructural • Commercial • Services • Recovery • Letting • Sale • Project Development Interaction with Core Business and other support functions Communications, IT, HR, Accounting, Legal, … Source: Own graph based on Management Model St. Gallen; Hartmann/Lohse/Pfnür (2007), p. 8f.; Kämpf-Dern/Pfnür (2009), p. 26; DIN EN 15221 Facility Management 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 4/22

5. I. Intro Focus of Corporate Real Estate Management moves: From task manager to strategically relevant function MANAGEMENT TASKS Def. of policies, objectives & standards, systems set-up, controlling & improvement  Governance Assessment/determination of requirements, portfolio planning & controlling  Portfolio Management Strat. planning, organizing & controlling building clusters/individual buildings  Asset Management Operative (day-to-day) planning, organizing & controlling tasks  RE Facility Management CORE TASKS • Supply • Leasing • Acquisition • Project Development • Usage/Operations • Technical Services • Infrastruct. Services • Commercial Services • Recovery • Letting • Sale • Project Development SUPPORT TASKS Communications, IT, HR, Accounting, Legal, … Source: Own graph based on Management Model St. Gallen; Hartmann/Lohse/Pfnür (2007), p. 8f.; Kämpf-Dern/Pfnür (2009), p. 26 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 5/22

6. I. Intro Moreover: CREM tasks can be in one, two, or three perspectives CREM USER perspective CREM INVESTOR perspective Maximization ofbenefit-cost ratio of RE resources Maximization of capital value invested in RE CREM Activities Maximization of profit from producing RE and RE services CREM PRODUCER perspective Source: Kämpf-Dern/Pfnür 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 6/22

7. I. Intro Summarized: Breadth and depth of CREM in corporates and over time varies considerablyCREM responsibility/influence areas Strategic level Usage Investment e.g. Corporate Identity,Employer Branding,Productivity,Sustainability e.g. Corp. Finance,RE Invest./RE Portf. Mgmt. IV. II. Behavioral/intangible orientation Financial/tangible orientation e.g. Green Building,Workplace Design,Building FlexibilitySickness Rate e.g. Technical Functionality, RE Accounting Production III. I. Operative level 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 7/22

8. I. Intro So: What is a “good”1 CREM system? How can CREM be institutionalized2, a “CREM concept” look?Research question What we see: Set-ups that are highly diverse in every aspect ! What we want to know: What are the relevant determinants for CREM institutionalization? How are they interrelated?Does a “super ordinate plan” for CREM exist? What we are looking for: A systematic, theory-based recommendation A CREM Management Concept Guiding on: CREM strategies, structures, processes, qualifications, culture, KPIs, … 1) Effectiveandefficient 2) „Institutionalization of CRE Management means the whole complex of measures that are necessary to develop and implement a real estate strategy that fulfils the purpose and goals of CREM.” (Pfnür 2002) 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 8/22

9. II. Frameworks Majority of CREM research deals with parts of CRE management setup – none with the wholeOverview of CRE management institutionalization research (selection) Business goals and context CREM goals CREM partly holistically CREM strategies • Schaefers (1999) • Pfnür (2002) • Acoba/Foster (2003) • Manning/Roulac (2001); • Gibler et al. (2002); • Bon et al. (2003); • Lundstrom (1993); • Nourse et al. (1993); • Lindholm et al. (2006); • Lindholm (2008) • Hartmann et al. (2010) CREM organization CREM outsourcing functions CREM controlling / KPIs • Manning/Roulac (1996); • Kämpf-Dern (2010) • Hartmann (2011) • Kimbler and Rutherford (1993); • Manning et al. (1997); • Gibler/Black (2004) • Lundstrom (1993); • Lindholm/Nenonen/Gibler (2006); Which design to make ALL parts together be effective and efficient?  Holistic approach needed! (also: Veale 1989) 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 9/22

10. II. Frameworks CREM-Map proposes CREM institutionalization parameters: targets, strategies, organization & controlling systemInstitutionalization framework Sector, regulations, competition, … External corporateenvironment of interaction Municipality/public Investors Customers CREM-influence of stakeholders Company targets& strategies Size, international-ization, portfolio, ... CREM-history & mandate Corporate-management Spheres of activity regarding CREM- institutiona- lization CREM CREM-targets Degree of integration into the corporate strategy Shape andoperationalization CREM-strategy Controlinglsystem CREM-controlling Width and depth of the content Real estate division User(BUs, staff) Ownership rate Externalservicers CREM-organization Centralization Sourcing Organizational structure HR/culture Process-management Internal corporate environment of the CREM Source: Kämpf-Dern/Pfnür 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 10/22

11. III. Research CREM research approach needs to be considerablydifferent to majority of established business researchComparison of situation and approach rationalization Majority of business economics research CRE management research • Usually within one established discipline/ function (e.g. finance, marketing, sales, production, …) • Considers one or two perspectives • Can build on established theories theory/hypotheses testing • New/young function that touches multiple disciplines simultaneously (e.g. finance, building management, production, IT, HR, ..) • Needs to consider three equally important perspectives  high complexity • Needs to adapt/establish theories theory generating •  What? How much/many?-Questions • Correlations, Structural equation analysis • Quantitative research methods (e.g. large scale surveys, dyadic surveys, secondary data) • Analysis of large number of average/ comparable individuals/companies •  Why? How?-Questions • System analysis • Explorative research methods (e.g. case studies, fuzzy cluster analyses, primary data) • Analysis of leading/trendsetting companies 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 11/22

12. III. Research Research Design: Explorative CREM-ResearchUnits of analysis: Large European corporates • Comparison of the institutional designs of the Corporate Real Estate Management from European large-scale companies (case studies), notably • guiding target system and typical strategies • integration of the CREM into company organization and organizational CREM-configuration • CREM-relevant framework of the company • CREM control system Target oftheresearch Reference Companies • Selected by the following criteria • advanced stage of CREM development • great quantity of existing space and heterogeneous type of use (office-, retail- and/or service space) • willingness to collaborate 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 12/22

13. III. Research 10 European companies with highly diverse context parameters participatingCase study approach 5 2 3 Office & retail: 2 Office & retail & technology: 5Office & logistics respectively industrial: 3 1 3 2 4 2 1 3 4 (DT, SC) (AL) (DP, FT, TS) (T, ABB, CB, SI) X = Number of companies by major characteristics 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 13/22

14. III. Research Heterogeneity of sample and in-depth-informationrequire alternative method of analysisQDA comes from Social Sciences, in business rather innovative Computer-Aided Qualitative Data Analysis (CA-QDA) Research question / theory Definition of selection criteria and categories Review of material line by line: Subsumption or new category formulation Revision of categories after 10-50% of material review Final material review Analysis and interpretation 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 14/22

15. III. Research Research results documented in Case Vignettes used to identify/compare general principles & influential parametersVignette-Example Telecommunication company 1 2 3 4 5 6 7 8 9 10 11 Source: Results of interviews 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 15/22

16. IV. Findings Diverse bundles of objectives and prioritizations …Examples Real Estate USER perspective Real Estate INVESTOR perspective Become “best employer“ CREM “Add value / maximize return from real estate“ Increase core business productivity Reduce user costs Increase cash-balance/ cash Improve sus-tainability/ecology Reduce operating costs ProfessionalizeCREM internally Legend: Veryimportant Corporate 1 Corporate 2 Real Estate PRODUCER perspective 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 16/22

17. IV. Findings ... resulting in very different, but all well-performing constellations of institutionalization parametersExamples Produktionsunternehmen. Core business specific RE; high need for flexibility; high degree of own usage FS-Companies (Retail). Predominantly commodity-usage. corporate identity is important (Customers & staff). Telco 1: Private background. commodity-real estate, mobile communications. growth strategy, international. Telco 2: State-owned background. real estate-mix (many aren’t necessary anymore). present core business is decreasing. 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 17/22

18. V. Discussion Guiding “principles” can be identified, butspecification of design parameters varySummary from observations (selection) Source: Results of interviews 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 18/22

19. V. Discussion Conclusion & Hypothesis: Not one „Best Model“ – Instead: „Best Fit“-Approach needed„Fit“ of Vision/Mission/Targets, Situation, Design Parameters CREM Targets (Target System) Design Parameters ofmanagementsystem Vision/Mission/Corporate Targets Strategy A B C D Control- System Context -System-Fit Inter-System-Fit Organi-zation Situation (Constraints) Intra-System-Fit Internal Corporate Environment ofthe CREM External Corporate Environment Source: On the basis of Kämpf-Dern (2010): Organisation des Immobilienmanagementsals Professional Service, p. 69 Next step research: Which parameter constellations make a “best fit”? Theoretical foundation: Configuration framework (Mintzberg, Miller/Friesen, etc.) 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 19/22

20. V. Discussion Next step: Specifying and testing emerged hypotheses regarding well-performing CREM configurationsInitial hypotheses regarding CREM institutionalization 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 20/22

21. V. Discussion CREM management concept not to be constituted on „best model“, but on „best fit configuration“Summary & Outlook Problem • CREM’s role and purpose quickly developing and changing • Several surveys/research approachs but no integrated concept to guide institutionalization Research question • Identify or develop a CREM management concept that supports CREM to fulfill its (respective) purpose effectively and efficiently Research design • Develop a CREM management model based on general management research as well as CREM research • Explore renown CREMs to validate & concretize model Major findings • Model structure & contents confirmed by interview partners • General “principles” are followed by companies, but well-functioning constellations are highly diverse Conclusion & Outlook • No “Best Model” identified, instead configurational approach • Next: Testing hypotheses emerged with larger number research 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 21/22

22. Contact information Dr. Annette Kämpf-Dern Head of Real Estate Management & Project Development FBI Tel.: +49 (6151) 16-5264 Fax: +49 (6151) 16-4417 Email: kaempf-dern@bwl.tu-darmstadt.de Prof.Dr. Andreas Pfnür Head of FBI - ForschungscenterBetriebliche Immobilienwirtschaft Tel.: +49 (6151) 16-3717 Fax: +49 (6151) 16-4417 Email: pfnuer@bwl.tu-darmstadt.de 05.07.2013 | A. Kämpf-Dern / A. Pfnür | Department of Real Estate Management | TU Darmstadt | 22/22