Flexibility is taking on a whole new meaning in the context of real estate technology, particularly with respect to workplace design. "Flexibility used to mean we would reconfigure a workstation, because we're trying to make our churn costs go down," noted JLL's Doug Sharp, who heads up project management for the firm. "Now, flexibility is at the next level, it's in the underground and overhead grid, wireless [options], raised flooring. It's changed the way a lot of people here do business, because the technology group now has this clout that almost is in competition with the real estate space, and it's a difficult process to manage."

Sharp also sees an important, strategic role for technology. "Corporate real estate will certainly be a people-to-people business for a long time. But the technology advantage we find is that we are getting better information with which to make better decisions. I think that's what all of us want technology to do for us -- provide the information so that we're not making uneducated decisions on the project management side, transaction side or the facility management side. Technology is moving us toward better decision making."

Others in the group advocate more widespread use of technology to help meet corporate real estate challenges more effectively. "Corporate real estate is in the dark ages in terms of technology," noted one real estate executive. Added another, "We certainly see the need for technology, but the technology products designed for real estate suggest it's an immature market; the products available now aren't meeting our needs."

There's plenty of data available for decision support, but tools are needed that can analyze data, filter out irrelevant data and enhance decision support, summarized another participant.

Shareholder Pressure
Just as vexing as the need to sort out technology's place in corporate real estate is the need to reconcile shareholder expectations with workplace realities. McKesson HBOC's Robinson put it best: "A lot of times, Wall Street is driven by EVA [economic value added] or SVA [shareholder value added], and a lot of compensation packages and reward systems in companies today are based on what happens to the value of the stock -- lots of stock options are riding on that. It's extremely difficult to make the arguments that we used to make around why we should own versus lease, when from an economic value added standpoint, return on invested capital, it's difficult to show the return on real estate as an owned situation as opposed to a leased situation."

Yet corporate real estate does play a key role in a company's ability to compete and therefore does play a strategic role, if perhaps a less visible role than, say, the marketing department. This is particularly true in the high tech arena, some participants pointed out. "Far more important than [employee] amenities in the high tech environment is the internal mechanism that removes barriers to productivity," asserted one participant. "You have to understand how your internal customer works, how the development teams evolve for different products and how cross-functional aspects come together. The internal work environment should be created in such a way as to remove as many barriers to productivity as you can."

And if competitive advantage can be found in retaining employees, which most would say is the case, then corporate real estate can make a difference here, too, particularly in the case of call centers. "The churn rate is critical for us in the call centers, especially if you're involved in a tight labor pool," noted a real estate manager from a major insurance company. "Some of our competitors take the approach of cramming as many people in them as they can, knowing they'll only get eight to 10 months out of the employees, and they'll continue the churn. That's fine if there is depth to your labor pool. But when it's tighter, you cannot afford to lose those employees. We try to make more of an investment into the bricks and mortar, making them less dense with the intention of holding onto these people and keeping the churn rate down. As you go through your five- and 10-year cycle, that makes a tremendous amount of difference. All things being equal, these people will go across the street for fifty cents more an hour."

The rest of the session covered the topic of working effectively with business units, a topic that was explored in even more depth in the following session moderated by Tom Wenkstern, director, Global Consulting, Dallas. For space reasons, this subject will be covered more thoroughly in a Management Strategy article in the near future.

Strategic Mindset Needed
The Roundtable's luncheon speaker was Martha O'Mara, Ph.D., a lecturer at the Harvard Design School and author of the recently published Strategy and Place: Managing Corporate Real Estate and Facilities for Competitive Advantage (The Free Press, 1999). "The predominant mindset in corporate real estate still is 'costs are bad, real estate is bad, we need to get rid of it,' " she pointed out. "I want to propose that the proper mindset for enabling competitive advantage in your organization is the strategic mindset." This mindset, she explained, involves providing a solution to workspace issues that meets your company's unique needs. That solution must factor in people and technology costs a well as real estate costs, which corporate infrastructure resource strategies are designed to help companies do.

Getting management to shift its mindset to one that appreciates real estate as a strategic corporate resource -- the same as research and development, capital, human resources and technology -- is no small feat. The reason, O'Mara suggested, is because there is no way to quantify worker productivity, which is the essential point of corporate real estate. Until such a tool exists, it is important for corporate real estate managers to think strategically, and O'Mara's book offers insights that help readers do just that. The book looks at three primary ways organizations approach making corporate real estate decisions.

Incrementalism says you only obtain what you need when you need it and try not to invest much money in aesthetics or capital investments. The standardization model applies design and process standards from a central location, specifying what certain types of facilities are to look like. The third strategy is value-based, O'Mara related. "That's when people think about the organization, where it is going, what the culture is and what meaning the real estate decision has for the organization."

O'Mara says her research studied companies to determine why they used the approach they did. O'Mara could determine the answer by ascertaining what strategic issues the company was grappling with at the time it was making a real estate decision.

"Not surprisingly, companies with highly uncertain strategic environments were incremental," she related. "If they were fairly certain, they could standardize. It got very interesting in cases where companies knew they'd be in business tomorrow, but they didn't know what the business would look like, what the customers would demand, where the technology was going or how competitors would respond. But they were at a big enough scale to make larger real estate commitments."

One way to think of such companies is being in a period of strategic uncertainty, O'Mara said. But they are better positioned to make corporate real estate decisions that support the company's strategic plan and foster competitive advantage.

The first of the Roundtable event's two afternoon sessions focused on selecting the appropriate discount rate, the weighted average cost of capital, the cost of debt and opportunity cost, and how these factors should influence corporate real estate decisions. This session was moderated by Robert Dmytryk, senior vice president in Jones Lang LaSalle's investment banking division, Los Angeles, and James M. Hanson, senior vice president, investment banking, Chicago.

Relationships Do Matter
The day's final session, "Innovative Approaches to Outsourcing," was moderated by Debra Moritz, managing director; Graham Coutts, director, development consultancy services in the Australia/Asia region; and Katie Kopec, national director, based in London. Outsourcing arrangements add value if they go beyond mere cost savings to supporting the company's strategic goals.

"Each and every real estate decision that is made actually can and should support the corporate strategy as well as the business unit strategy," Moritz observed. "Anytime we are answering a question, we can see how it directly correlates -- getting our arms around both strategies translates into more effective short- and long-term business decisions."