Adjustment of corporate real estate during a period of significant business change
Abstract
This paper seeks to understand whether the alignment process between business strategy and Corporate Real Estate (CRE) between 2007 and 2014 was dynamic. It investigated the financial data of 230 UK companies by means of a distributed time lag auto-regression model. The results show an increased commitment to CRE suggesting a reduced ability to dynamically align the portfolio. Evidence is found that CRE adjusts as turnover, profitability and employment numbers alter. However, measures of efficiency, effectiveness and productivity are not improving. The new business strategies of transient competitive advantage and blue oceans strategy require flexible resources, which require CRE to be capable of dynamic alignment. This study shows such flexibility does not yet exist in practice. Current theories of alignment should be reconsidered in light of the changing business environment. Without a dynamic alignment capability of CRE a company’s financial performance will be impaired.
Keyword : corporate real estate, CRE, competitive advantage, business strategy, dynamic alignment, change
How to Cite
Cooke, H., Appel-Meulenbroek, R., & Arentze, T. (2019). Adjustment of corporate real estate during a period of significant business change. International Journal of Strategic Property Management, 23(3), 171-186. https://doi.org/10.3846/ijspm.2019.7954
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Neely, A. (2005). The evolution of performance measurement research. International Journal of Operations & Production Management, 25(12), 1264-1277. https://doi.org/10.1108/01443570510633648
Nourse, H. O., & Roulac, S. E. (1993). Linking real estate decisions to corporate strategy. Journal of Real Estate Research, 8(4), 475-494.
Park, A., & Glascock, J. (2010). Corporate real estate and sustainable competitive advantage. Journal of Real Estate Literature, 18(1), 1-19.
Porter, M. E. (1985). Competitive advantage. New York: Free Press (extended edition in 1998 of the 1985 original).
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Riratanaphong, C., & Van der Voordt, T. (2015). Measuring the added value of workplace change. Facilities, 33(11/12), 773-792. https://doi.org/10.1108/F-12-2014-0095
Rodriguez, M., & Sirmans, C. (1996). Managing corporate real estate: evidence from the capital markets. Journal of Real Estate Literature, 4(1), 13-33.
Roulac, S. E. (2001). Corporate property strategy is integral to corporate business strategy. Journal of Real Estate Research, 22(1/2), 129-151.
Scheffer, J. J. L., Singer, B. P., & Meerwijk, M. C. C. Van (2006). Enhancing the contribution of corporate real estate to corporate strategy. Journal of Corporate Real Estate, 8(4), 188-197. https://doi.org/10.1108/14630010610714862
Stadlhofer, G. (2010). Corporate real estate performance: contribution to core business competitiveness at global pharmaceutical enterprises. Journal of Corporate Real Estate, 12(2), 96-116. https://doi.org/10.1108/14630011011049540
Stegerean, R., & Gavrea, C. (2009). The past and present of performance measurement. In Managerial Challenges of the Contemporary Society Proceedings (pp. 274-278). Babes Bolyai University, Cluj-Napoca, Romania.
Tangen, S. (2005). Demystifying productivity and performance. International Journal of Productivity & Performance Management, 54(1/2), 34-46. https://doi.org/10.1108/17410400510571437
Tipping, M., & Bullard, R. K. (2007). Sale and leaseback as a British real estate model. Journal of Corporate Real Estate, 9(40), 205-217. https://doi.org/10.1108/14630010710848458
Van Ree, H. J. (2002). The added value of office accommodation to organisational performance. Work Study, 51(7), 357-363. https://doi.org/10.1108/00438020210449012
Weatherhead, M. (1997). Real estate in corporate strategy. Basingstoke: Macmillan Press Ltd. https://doi.org/10.1007/978-1-349-14024-4
Willis, P. (2008). Corporate real estate practice in Australia. Journal of Corporate Real Estate, 10(1), 40-53. https://doi.org/10.1108/14630010810881658
Appel-Meulenbroek, R., Brown, M. G., & Ramakers, Y. (2010). Strategic alignment of corporate real estate. In Proceedings of the 17th ERES Conference, 23rd–26th June, Milan, Italy.
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. https://doi.org/10.1177/014920639101700108
Blenko, M. W., Mankins, M. C., & Rogers, P. (2010, June). The decision driven organisation. Harvard Business Review, 54-62.
Cooke, H., & Appel-Meulenbroek, R. (2015). Impact of corporate real estate on UK business. In Proceedings of the 22nd ERES Conference, 24th–27th June, Istanbul, Turkey. https://doi.org/10.15396/eres2015_89
CoreNet Global. (2015). The essential guide to corporate real estate. Atlanta: CoreNet Global Inc.
Doz, Y. L., & Kosonen, M. (2008). Creating and testing work-place strategy. California Management Review, 50(30), 95-118. https://doi.org/10.2307/41166447
Gibler, K. M., & Lindholm A.-L. (2012). A test of corporate real estate strategies and operating decisions in support of core business strategies. Journal of Property Research, 29(10), 25-48. https://doi.org/10.1080/09599916.2011.608470
Gibson, V. (2000). Property portfolio dynamics: the flexible management of inflexible assets. Facilities, 18(3), 150-154.
Gibson, V. A., & Lizieri, C. M. (2001). Friction and inertia: business change, CRE portfolios and the UK office market. Journal of Real Estate Research, 22(1/2), 59-79.
Grantham, C., Ware, J. P., & Williamson, C. (2007). Corporate agility: a revolutionary new model for competing in a flat world. New York: AMACOM.
Guardian. (2016). UK productivity gap widens to worst level since records began 18 February 2016. Retrieved from https://www.theguardian.com/business/2016/feb/18/uk-productivity-gap-widens-to-worst-level-since-records-began on 9th January 2018
Hamel, G., & Prahalad, C. K. (1989). Strategic intent. Boston: Harvard Business Review.
Haynes, B., & Nunnington, N. (2010). Corporate real estate asset management: strategy and implementation. Oxford: EG Books. https://doi.org/10.4324/9780080965222
Haynes, B. P. (2012). Corporate real estate asset management: aligned vision. Journal of Corporate Real Estate, 14(4), 244-254. https://doi.org/10.1108/JCRE-10-2012-0022
Heywood, C., & Kenley, R. (2008). The sustainable competitive advantage model for corporate real estate. Journal of Corporate Real Estate, 10(2), 85-109. https://doi.org/10.1108/14630010810905606
Heywood, C. (2011). Approaches to aligning corporate real estate and organisational strategy. In Proceedings of the 18th ERES Conference, 15–18th June, Eindhoven, The Netherlands.
Heywood, C., & Arkesteijn, M. (2017). Alignment and theory in corporate real estate alignment models. International Journal of Strategic Property Management, 22(20), 144-158. https://doi.org/10.3846/1648715X.2016.1255274
IAS37. (2001). International Accounting Standard 37: provisions, contingent liabilities and contingent assets. London: International Accounting Standards Board.
IFRS16. (2016). International Financial Reporting Standard 16 Leases. London: International Accounting Standards Board.
Joroff, M., & Becker, F. (2017, March). Exploiting change and uncertainty to drive corporate value. The Leader, 32-35.
Kaplan, R. S., & Norton, D. P. (1996). The Balanced scorecard. Boston: Harvard Business School Press.
Kim, W. C., & Maugborgne, R. (2015). Blue ocean strategy (expanded edition). Boston: Harvard Business School.
Kunc, M. H., & Morecroft, J. D. W. (2010). Managerial decision making and firm performance under a resource-based paradigm. Strategic Management Journal, 31(11), 1164-1182. https://doi.org/10.1002/smj.858
Lasfer, M. (2007). On the financial drivers and implications of leasing real estate assets: the Donaldsons-Lasfer’s curve. Journal of Corporate Real Estate, 9(2), 72-96. https://doi.org/10.1108/14630010710828090
Lindholm, A.-L., Gibler, K. M., & Levainen, K. I. (2006a). Modelling the value-adding attributes of real estate to the wealth maximization of the firm. Journal of Real Estate Research, 28(4), 445-475.
Lindholm, A.-L., Nenonen, S., & Gibler, K. M. (2006b). A conceptual framework of CREM performance measurement tools. Journal of Corporate Real Estate, 8(3), 108-119. https://doi.org/10.1108/14630010610711739
Liow, K. H. (2004). Corporate real estate and stock market performance. The Journal of Real Estate Finance and Economics, 29(1), 119–140. https://doi.org/10.1023/B:REAL.0000027204.13892.53
MacIntosh, R., & MacLean, D. (2015). Strategic management – strategists at work. London: Palgrave.
McGrath, R. G. (2013). The end of competitive advantage. Boston: Harvard Business Review Press.
Mintzberg, H., & Water, J. A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, 6(3), 257-272. https://doi.org/10.1002/smj.4250060306
Mintzberg, H., Simons, R., & Basu, K. (2002). Beyond selfishness. MIT Sloan Management Review, 44(1), 67-74.
Mintzberg, H., Ahlstrand, B., & Lampel, J. (2009). Strategy safari (2nd ed.). Harlow: FT Prentice Hall.
Nappi-Choulet, N., Missonier-Piera, F., & Cancel, M. (2009). Value creation and the impact of corporate real estate assets. Journal of Corporate Real Estate, 11(2), 78-90. https://doi.org/10.1108/14630010910963124
Neely, A., & Bourne, M. (2000). Why measurement initiatives fail. Measuring Business Excellence, 4(4), 3-7. https://doi.org/10.1108/13683040010362283
Neely, A. (2005). The evolution of performance measurement research. International Journal of Operations & Production Management, 25(12), 1264-1277. https://doi.org/10.1108/01443570510633648
Nourse, H. O., & Roulac, S. E. (1993). Linking real estate decisions to corporate strategy. Journal of Real Estate Research, 8(4), 475-494.
Park, A., & Glascock, J. (2010). Corporate real estate and sustainable competitive advantage. Journal of Real Estate Literature, 18(1), 1-19.
Porter, M. E. (1985). Competitive advantage. New York: Free Press (extended edition in 1998 of the 1985 original).
Reeves, M., Levin, S., & Ueda, D. (2016, Januray−February). The biology of corporate survival. Harvard Business Review, 47-55.
Riratanaphong, C., & Van der Voordt, T. (2015). Measuring the added value of workplace change. Facilities, 33(11/12), 773-792. https://doi.org/10.1108/F-12-2014-0095
Rodriguez, M., & Sirmans, C. (1996). Managing corporate real estate: evidence from the capital markets. Journal of Real Estate Literature, 4(1), 13-33.
Roulac, S. E. (2001). Corporate property strategy is integral to corporate business strategy. Journal of Real Estate Research, 22(1/2), 129-151.
Scheffer, J. J. L., Singer, B. P., & Meerwijk, M. C. C. Van (2006). Enhancing the contribution of corporate real estate to corporate strategy. Journal of Corporate Real Estate, 8(4), 188-197. https://doi.org/10.1108/14630010610714862
Stadlhofer, G. (2010). Corporate real estate performance: contribution to core business competitiveness at global pharmaceutical enterprises. Journal of Corporate Real Estate, 12(2), 96-116. https://doi.org/10.1108/14630011011049540
Stegerean, R., & Gavrea, C. (2009). The past and present of performance measurement. In Managerial Challenges of the Contemporary Society Proceedings (pp. 274-278). Babes Bolyai University, Cluj-Napoca, Romania.
Tangen, S. (2005). Demystifying productivity and performance. International Journal of Productivity & Performance Management, 54(1/2), 34-46. https://doi.org/10.1108/17410400510571437
Tipping, M., & Bullard, R. K. (2007). Sale and leaseback as a British real estate model. Journal of Corporate Real Estate, 9(40), 205-217. https://doi.org/10.1108/14630010710848458
Van Ree, H. J. (2002). The added value of office accommodation to organisational performance. Work Study, 51(7), 357-363. https://doi.org/10.1108/00438020210449012
Weatherhead, M. (1997). Real estate in corporate strategy. Basingstoke: Macmillan Press Ltd. https://doi.org/10.1007/978-1-349-14024-4
Willis, P. (2008). Corporate real estate practice in Australia. Journal of Corporate Real Estate, 10(1), 40-53. https://doi.org/10.1108/14630010810881658