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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