Posted by:
Ed Noha
Strategic Consulting

Commercial Real Estate executives from a host of industries explained how they are following through on “cost savings ideas” at our session on that topic. Their strategies are not earth-shattering—recasting leases, utility cost reduction, alternative workplace strategies, dispositions of excess properties—but it’s hard not to be impressed by some of the savings totals, in the tens of millions of dollars. Some noted that the increased corporate focus on cost-cutting has helped them break down barriers that existed previously.  I noted at the session that ideas without actions to back them up produce no value. It sounds like this group has already learned that lesson.

Ed

Posted by:
Richard McBlaine
Strategic Consulting

What a year!  And it’s only the beginning of the fourth quarter.  I’ve been attending CoreNet summits for a number of years now, and I feel this year’s summit in Las Vegas is one of the most critical ones yet.   CRE teams have plenty of issues to tackle: Right-sizing their portfolios, sustainability, M&A, and, more than ever, cost reductions.

Finding ways to save money isn’t as easy as it used to be.  CRE teams aggressively drove down occupancy costs during the 2001/2002 downturn and have kept them low since then, so there aren’t many rocks left to look under today. In the 30 years I’ve been in this industry (hard to believe since I’ve just celebrated my 35th birthday!), I’ve seen lots of different cost reduction strategies.  Many of them will work now–as long as we keep some things in mind: The rules around portfolio flexibility have been rewritten.

1. The rules around portfolio flexibility have been rewritten.
2. The own-versus-lease decisions we make today will outlast the downturn.
3. Cost containment is vitally important in strong markets as well as weak ones.
4. Delivering immediate impact has to be balanced with long-term strategic needs.

While the long-term impacts of the current economy have yet to be fully understood, we already know the rules of the game have changed.   It will be interesting to see how companies re-set their occupancy costs and change their approach to portfolio planning.  If the downturn has taught us anything, it’s that flexibility and scenario planning will be key. What do you think?

You’ll get more insights from my colleagues at the “135 Cost Savings Ideas” presentation on Tuesday.  Hope to see you there!

Richard