Value creation through the management of corporate real estate
| Pages | 61-72 |
| Date | 01 February 2003 |
| DOI | https://doi.org/10.1108/14635780310468310 |
| Published date | 01 February 2003 |
| Author | Peter J.M.M. Krumm,Jackie de Vries |
| Subject Matter | Property management & built environment |
Practice briefing:
Corporate real
estate
61
Journal of Property Investment &
Finance
Vol. 21 No. 1, 2003
pp. 61-72
#MCB UP Limited
1463-578X
DOI 10.1108/14635780310468310
PRACTICE BRIEFING
Value creation through the
management of corporate real
estate
Peter J.M.M. Krumm
Investment Management & Consulting Group, Hertogenbosch, The
Netherlands, and
Jackie de Vries
Delft University of Technology, Delft, The Netherlands
Keywords Real estate, Added value, Corporate finance, Management
Abstract Traditionally performance of real estate portfolios is either measured by internal rates
of return or to costs per square meter (or per FTE). An increasing number of corporations have
during the last couple of years been focusing on introducing performance metrics based on
shareholder value. Although the popularity of value based management changed the corporate
metrics the contribution of real estate is still measured by cost reductions or capital minimisation.
It is seldom that corporations proactively benefit from other, non-financial, effects resulting out of
professional real estate management. The objective of this paper is to highlight the value of
managing corporate real estate and its contribution to the performance of a corporation both in a
financial and non-financial manner.
Introduction
Regardless of the increasing interest for, and awareness of, challenges in
managing a corporation's real estate portfolio, the financial perspective of the
real estate academy remains very traditional. Most of the attention towards
(corporate) real estate still originates either from a net-present-value and
residual value perspective or from a cost per square meter or per FTE focus.
Given the increasing importance and impact of shareholder value and
corporate finance it is somewhat strange that within the real estate industry the
prime and almost sole perspective is still aimed at the real estate investment
portfolio. Corporate real estate portfolios are hardly addressed. This lack of
interest is strange given the fact that: the total amount of corporate real estate
is much bigger than the real estate investment portfolios; and the average
return on a real estate investment portfolio is crushed by the average return on
investment of a corporation at large.
Evans et al. (2001) conclude that the lack of interest is, amongst others,
caused by the fact that investors, analysts and the stock market were unable to
grasp the importance of corporate real estate. Their conclusion was that the
(upcoming) changes in the UK financial reporting standards would contribute
to a changing perspective on corporate real estate and as a result on certain
corporations. The ``unawareness'' problem is however not so much within the
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