To use or not to use: which type of property should you choose?. Predicting the use of activity based offices
| Pages | 320-336 |
| DOI | https://doi.org/10.1108/JPIF-09-2014-0059 |
| Date | 06 July 2015 |
| Published date | 06 July 2015 |
| Author | Rianne Appel-Meulenbroek,Astrid Kemperman,Marleen Kleijn,Els Hendriks |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
To use or not to use: which type
of property should you choose?
Predicting the use of activity based offices
Rianne Appel-Meulenbroek
Real Estate Management and Development,
Eindhoven University of Technology, Eindhoven, The Netherlands
Astrid Kemperman
Urban Planning, Eindhoven University of Technology,
Eindhoven, The Netherlands
Marleen Kleijn
Twynstra Gudde, Amersfoort, The Netherlands, and
Els Hendriks
Wicely by MCS, Antwerp, Belguim
Abstract
Purpose –Corporate real estate (CRE) is a costly and risky asset in need of more rigorous evaluation
methods to support strategic decision making for portfolio and asset management. Especially the
indirect added value on organizational revenues is hard to quantify, while it is gaining importance.
The purpose of this paper is to describe a quantitative technique that predicts office use as input for
CRE management (CREM) decisions.
Design/methodology/approach –After a literature study to identify relevant aspects influencing
office use in modern work environments, a Bayesian belief network (BN) is constructed from a large
database of 80,907 observations of office use in three organizations in Belgium and the Netherlands.
Next specific evidence from future scenarios of organizational change is entered to discuss the
application of BN for CRE decision-making processes.
Findings –This study showed that the use of activity-based offices might be influenced by a
complex network of office design variables and user characteristics. The use of the predicting
possibilities of a BN model can help CRE managers identify employee behaviour inside their
offices. That information is valuable input for future workplace decisions and strategic CREM
activities.
Practical implications –This study provides CRE managers with a model to gain knowledge
on office use to get a better grip on how to add value with activity-based office concepts. The
results obtained through using such a model can help support decision making on their office
layouts.
Originality/value –Bayesian BNs have not been used in this area of research before. This paper
provides both academics and practitioners with valuable insights in the possibilities of this
methodology for the field.
Keywords Corporate real estate, Added value, Bayesian belief network, Employee behaviour,
Office concepts, Portfolio decisions
Paper type Research paper
Introduction
Corporate Real Estate (CRE) is a costly resource, often the second largest behin d labour
cost (Oladokun, 2010; Pole and Mackay, 2009). It is also a risky asset (Liow and Ooi,
2000), especially in times of crisis. As organizations are striving for more value
added, the pressure to achieve a more effective CRE asset management has increased
Journal of Property Investment &
Finance
Vol. 33 No. 4, 2015
pp. 320-336
©Emerald Group Publishing Limited
1463-578X
DOI 10.1108/JPIF-09-2014-0059
Received 11 September 2014
Revised 17 November 2014
Accepted 10 December 2014
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
320
JPIF
33,4
(Liow and Ooi, 2004). As Liow and Ooi state: “This means that existing real estate
assets would be subject to more frequent and rigorous evaluation to justify their
continual inclusion in the firm’s asset portfolio”. Others (Mc Donagh and Nichols, 2009;
Bouri et al., 2008; Roulac et al., 2005) have also stressed the necessity to manage CRE
more strategically.
For investors, portfolio management means achieving the optimal added exchange
value through reducing costs and focusing on the market value of the assets. As
Krumm and De Vries (2003) point out, corporate users are not very successful property
traders because they need to fulfil business needs that might not match market timing.
Managing CRE portfolios strategically means not only focusing on direct financial
gains, but also including evaluation of added use value through its effect on the
activities of the corporation/employees (Krumm and De Vries, 2003). Besides a focus on
direct return (“Reducing costs”) and indirect return (increasing the “Value of CRE
assets”), it is important to have insight in how the buildings in the portfolio are used
and support important added values like employee satisfaction and organizational
flexibility (Lindholm and Leväinen, 2006). But as De Vries et al. (2008) mention, there is
a lack of outcome indicators to show added value of more intangible CRE values like
this. Also, CRE managers know more about reducing costs than increasing revenue
(Brown, 2008) and divert most of their attention to it (Krumm and De Vries, 2003).
In terms of EVA this might not be the optimal way to increase profit. CRE management
(CREM) should also focus on increasing revenues created in the primary process of the
organization (Oladokun, 2010).
As Tay and Ooi (2001)point out, allocation of theworkspace is a key issue confronting
CREM; now even more than in 2001. New ways of working, new generations and
changing lifestyles have required a new office concept since the turn of the century
(Duffy and Tanis, 1993; Van Meel and Vos, 2001) and thus many organizations are
investingin new or existing properties in the CRE portfolioto align with activities of their
employees. For efficiency reasons, new ways of working are increasingly implemented
using activity-based office designs, as these are supposed to result in cost reduction
through the sharing of workplaces (Gorgievski et al., 2010). This reflects well on the
performance of the real estate portfolio. Not surprisingly, the activity-based office is
rapidly being implemented by organizations worldwide (63 per cent of large enterprises
had already rolled out new ways of working: Dixon and Ross (2011)). Besides cost
reductions, these offices are also adopted to increase productivity of employees,
strengthen image, increase collaboration and other organizational goals (Van Koetsveld
and Kamperman, 2011). But opposite effects have been shown to take place too.
Wrongful estimations of the required number and typeof workplaces then lead to office
environments that did not support new work processes optimally (Brennan et al., 2002;
Duffy and Tanis, 1993). Such a misfit between the user and the work environment can
create workspace stress and negatively influence productivity (Rashid and Zimring,
2008; Vischer, 2007). It might look as if added value has been achieved through cost
reduction, but for the corporation as a whole it might have been the opposite.
For strategic management it is essential to have access to data that can support
decision making on office design based on expected user needs, besides the existing
data on the direct financial effects. When organizations are considering a change in
their CRE portfolio they often hire consultants to measure space usage and
occupancy levels before and/or after changes are made. The data gathered that way
are rich, but unfortunately are mostly analysed for deciding on changes that could
increase direct return only (how many m
2
’s can we cut?). So, even if data are gathered
321
Predicting the
use of activity
based offices
To continue reading
Request your trial