CHICAGO—Top corporate officials used to consider their real estate departments an unimportant backwater. Today, however, these departments play a key role in deciding how to steer vast organizations. As a result, large and mid-sized companies, and even large law firms, have made sure to attract people with a variety of skills, including experience in human resources and information technology, to their in-house real estate operations, dramatically increasing their professional capacity. Maureen Ehrenberg, the executive managing director of global facilities management for CBRE, was a panelist at last week's BOMA/Chicago's mid-year market review. She also spoke to GlobeSt.com yesterday on how this transformation came about, and the key role Chicago played in the big shift.
“The whole corporate real estate function has been up-skilled,” Ehrenberg says. “It's a response, of course to the market,” and the need to cut costs, but the true roots of the change goes deeper. In the mid-1990's, the increased importance of information technology led to its centralization in the corporate world, but that also sparked a reconsideration of corporate real estate. “There were strong parallels between the two. Many people were saying, 'well, wait a minute, when you make a real estate decision it stays with you for a long time, just like IT. We should centralize the real estate function.'” Therefore, instead of allowing local offices to make rental decisions, companies began lining up their entire portfolio, forecasting out rents across many markets, analyzing market trends and developing a comprehensive strategy. The result was typically “millions of dollars that can be invested back into the business.”
“These positions have become far more holistic,” Ehrenberg adds. “Before, you mostly saw people who were experts in real estate.” Now, however, many lead corporate real estate divisions after holding top IT or human resources positions. IT skills help with the increased need for data analysis, and the latter have become important since more companies have realized that decisions on where to locate, and in what kind of building, can impact hiring.
“The voice of human resources is a growing factor,” she says, especially as businesses seek to attract recent college grads. Greater environmental awareness among this cohort means the corporate office has make sure new facilities have attributes like fresh air, light, an energy sustainability plan, and fosters a collaborative environment. “There's a whole other dimension there; employees ask, 'am I working for a company that has the same values I have?”
The transformation could have resulted in bloated corporate real estate divisions, but over time, many companies decided to outsource many functions such as overall strategy, market analysis, database maintenance, transaction and facilities management and many others. “They may have a very thin staff,” she adds, largely designed to keep tabs on the work of third-party providers. But most still refuse to outsource the management of customer relations. “That right now is held to be sacred; they're keeping that in-house.”
And speaking of Chicago, Ehrenberg says “we were right there at the beginning of the professionalization of property management.” Around 1989, for example, Baxter Healthcare Corp. outsourced their facilities management, including strategic decision-making, to the Trammell Crow Company, one of the first to take that step. “They were definitely visionary.” That long history allowed a deep well of expertise to form in the city. Furthermore, many who got their start here took that expertise to other markets. “I run into property managers who got their start in Chicago all over. The most dynamic leaders in the field are based in Chicago.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
