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ERES 2015, Istanbul, 24-27 June 2015

Adding Value by Corporate Real estate

Definitions, parameters and practical

applications

Dr. Theo van der Voordt

Delft University of Technology

Faculty of Architecture

Dpt. of Real Estate & Housing

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Management of building-in-use

RealizationConstruction/ implementation)

PreparationBriefing and design

Initiative

CREM = the management of a real estate portfolio by aligning the portfolio and the services to the needs of the core business in order to obtain maximum added value for the business and to contribute to the overall performance of the organisation

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Initiation Briefing & design

Managementof building-in-use

Construction

Teams / individuals

Organization

Area

Building / places

Stock / portfolio

Society

stake

hold

ers

physica

l en

viro

nm

en

t

Demand Supply

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Content

Exploration of the concept of added value + added value for whom?

Applications in health care practice

Conclusions and practical implications

Next steps

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Definitions of Added Value of CRE & PRE

The ability of real estate decisions, processes and inputs to create shareholders wealth Rutherford and

Nourse, 1988; Manning, 1991; Manning and Roulac, 1996; Manning et al, 1999; Lindholm et al, 2006

Contribution of CRE/PRE to organisational performance and the attainment of organisational objectives from a point of view of different stakeholders De Vries 2007

The trade off between benefits and sacrifices, taking into account the needs, preferences and prerequisites of all stakeholders Jensen, Van der Voordt,

Coenen (2012); Den Heijer 2011; De Vries 2007; Van der Zwart 2014; Riratanaphong 2014;

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Adding Value by Real Estate

INPUT

REAL ESTATElevels

• areas• portfolios• buildings• places

OUTPUT

PERFORMANCE

levels

• society• organisation• user groups

• individuals

THROUGHPUT

Value adding management

real estate (input)adding value (throughput)improved performance (output)

added value = Δ output

Δ output =output before real estate intervention versusoutput after real estate intervention

Output can be measured with Key Performance Indicators (KPIs)in connection to various stakeholders

Adapted from Den Heijer 2011

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CONTEXT: Legislation, society, market, demography

ORGANISATION: Culture / structure / aims and objectives

OUPUT

ProductsServices

INPUT

Human resoucresTechnologyInformationCapitalREAL ESTATE

Real Estate intervention

MaintenanceFunctional adjustment

Reshuffling(partial) Renewal

New Building

Change in PERFORMANCProductivity Competitive Advantage Profitability

PROCESS

STAKEHOLDERSOwners Governement Employees

Suppliers Clients Neighbours

INFLUENCE

Production CostImage Risk controlFlexibility PossibilityCulture financeInnovation Satisfaction

De Vries 2007

Various stakeholders

strategic

policy makers

functional

users

controllers

financial

technical managers

physical

focus on university focus on real estate

stra

tegi

cop

erat

iona

l

campus decision

source: Managing the university campus (Den Heijer, 2011)

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Adding Value by CREM/PREM

in Dutch health care practice

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Methods

Analysis of documents and interview, jointly conducted with MSc students, post-MSc students and 1 PhD studentSector N

Cure (hospitals) CREM 5

Cure (hospitals) CEO 5

Cure (hospitals) FM 8

Housing with care for the elderly - CREM 16

Mental health care - CREM 20

TOTAL 54

real estate added value definition

reduce costs To reduce investment costs, capital costs, operational costs and other real estate related costs during the whole life cycle.

improve productivity To increase production with the same amount of resources for production or the same production with less real estate through a more efficient use.

increase user satisfaction To create functional, pleasant and comfortable places for all end users, such as visitors, customers and employees

improve culture To support shared values and behavioral rules.

increase innovation To stimulate renewal and improvement of primary processes, products and services by real estate.

support image To express corporate objectives by using real estate as a brand of organisational mission, vision and culture

improve flexibility To incorporate flexibility and adaptability of real estate to facilitate future spatial, technical, organisational and juridical adjustments.

improve finance position To attract external financing to reinvest in the primary process or to improve the overall financial position of the organisation by managing real estate as an asset.

controling risks To anticipate on real estate related technical and financial risks.

Nine added values

Van der Zwart 2014 (research 2010)

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Johan van der Zwart 2011

Reduction of real estate costs during the life cycle (investment costs, operational costs) by steering on efficient space use and smart design.

Improvement of (labour) productivity, e.g. by supporting logistics of primary processes and short walking distances between related functions.

Improvement of user satisfaction by steering on a functional, comfortable and pleasant working environment, taking into account user needs and preferences.

Improvement of possibilities to get real estate financed by external parties, e.g. by regarding real estate as an asset to improve the overall finance position of the organization or an assessment of the (future) marketability of the building. Value creation can be a particular ambition here.

Improvement of flexibility to enable future spatial, technical, organizational or juridical adaptability, e.g. by standardization, simple opportunities to extend the building or easy adaptability to other functions.

Support of a positive corporate image, e.g. by a nice overall building appearance and an appropriate building lay-out.

Stimulation of innovations in order to improve business processes, e.g. by creating formal and informal meeting space to exchange ideas

Supporting (change of) corporate culture, e.g. by sharing work spaces to support social interaction.

Risk management with regard to time, costs, health and safety, and coping with a changing context, e.g. technically by application of strict safety standards or juridical by short term rent contracts.

Sustainability, e.g. by application of energy saving measures or application of environmentally friendly materials.

Creating a healing environment, e.g. by taking care for sufficient daylight, a healthy indoor climate, and lots of greenery.

Thesis Jeth Prevosth

Hogeschool Rotterdam

2011

Added value of hospital facilities

Summarized in

Prevosth & Van der Voordt

FMN 2011

Findings

Number of respondents marking the value in top 3 of most important values

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Measures to increase user satisfaction (patients, visitors, employees)

Creating a pleasant ‘healing’ environment where people feel at home, safe and welcome (hospitality)Better signposting to support way-findingAttractive indoor climate (temperature, ventilation)Daylight and outside viewSufficient privacy (more 1-bed rooms)Places for social interactionHigh quality of semi-public places e.g. waiting roomsSpatial lay-out supporting one-stop consultationsNice ICT facilities, etc.

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Eye hospital, Rotterdam

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18

Deventer hospital

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Measures to reduce investment/running costs Sharing facilities by New Ways of Working and new

ways of consultation Strict space allocation Standardisation of spaces Sustainability measures to reduce energy

consumption Process optimization by Design & Build, DBFMO Check of Service Level Agreements on cost-

effectiveness Outsourcing Collaboration with other hospitals Etc.

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Measures to increase productivity

Spatial clustering of related care processes Well considered location of operation theatres Sound logistics of transport (beds, food, medical

facilities) Attractive indoor climate to avoid a Sick Building Place and time independent access to medical

data Smart use of ICT and other technology (robots) Lean supply of facilities and services (just in time

delivery) Etc.

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Housing with Care

Mental health care

Cure

FM

Cure

CRE

Cure CEO

Total

N=16 N = 20 N = 8 N = 5 N = 5 N = 54

User satisfaction 6 3 (11) 7 3 4 23

Innovation 4 4 (9) 1 3 4 16

Productivity 4 4 (13) 4 2 - 14

Cost reduction - 6 (17) 3 3 1 13

Flexibility 3 7 (16) 2 - - 12

Risk control 1 5 (13) 2 1 1 10

Healing environment 7 N.A. 1 N.A. N.A. 8

Culture N.A. 1 (6) 2 2 2 7

Positive image 2 1 (6) 2 1 1 7

Opportunities to finance

1 3 (9) 2 - - 6

Sustainability 4 N.A. - N.A. N.A. 4

Prioritised values

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Different priorities - dependent of:

Internal context: vision, mission, strategy, culture

External context: political, economic, competitors

Phase in the life cycle

Conclusions - 1

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Range of definitions

output oriented or ratio between output and input

Various stakeholders

shareholders (Lindholm 2008); 6 types (De Vries 2007);

4 types (Jensen 2010); 4 types (Den Heijer, 2011);

Various types of added value

7 types (De Jonge 2002); 9 types (De Vries 2007), 7 types

(Lindholm 2008); 12 types (Den Heijer 2011), 6 types

(Bradley 200; Riratanaphong 2014); 9 types (Van der Zwart

2014)

Conclusions - 2

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Practical implications – Input to:

Raise awareness among decision-makers of opportunities for value adding management.

To evaluate the current real estate strategy and tactical/ operational decisions regarding care real estate.

To explore potential synergy and conflicts between different values from the perspective of different stakeholders.

To discuss how design choices with a long-lasting impact on the use value, experience value and future fit with the organisational vision, mission and objectives and the interests and needs of different stakeholders

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Search for a more standardized AV-framework

Search for standardised KPIs

Search for practical guidance

Next steps

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Next step New Book 2016

FM and CREM as Value Drivers

How to manage and measure added value

Edited by Per Anker Jensen & Theo van der

Voordt

Background & Introduction12 value parameters

Reflections, Conclusions & KPIs

2015

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Senior researcher at the Center for People and Buildings

Delft, Netherlands

www.cfpb.nl

Associate Professor

Corporate Real Estate Management

Faculty of Architecture, TU Delft

Department of Real Estate & Housinghttp://reh.tudelft.nl

www.tudelft.nl/djmvandervoordt