POINT of view
By Dr. Michael Mueller, Principal at CYLAD Consulting, Stephen Turner, Partner at CYLAD Consulting and Daniel Frutig-Meier, Partner at SeestattExperts
Corporate Real Estate Management (CREM) has faced several challenges in recent years. Globalization, international competition, demographic change, innovation, new workplace models, and – at the forefront – digitalization have changed the Corporate Real Estate world significantly. Now, the COVID-19 crisis has disrupted the Real Estate environment with travel bans, office closures, split-teams and a step change in remote work. Regardless of whether or not pandemics break out more regularly in the future, some of the changes made to cope with this unprecedented situation are likely to wholly or partly become permanent features of our work lives. We may even be on the cusp of an evolution in the way we work and how we utilise Real Estate for business.
CYLAD Consulting has explored how CREM can be utilized as a short-term mitigation lever during the crisis and contribute to a faster business recovery mid-term. We have also hypothesized which structural changes could be instituted in the long run as part of a smart operating model, to secure the health and safety of employees and maintain business resilience.
1/ Short-term: contain costs and secure liquidity
The #1 priority for companies during the crisis (apart from securing health and safety) is cash manage-ment to ensure economic survival. Due to declining revenues from core business and challenges in securing payments from customers, there is a need to identify short-term cost savings. A range of CREM related levers may be activated to improve short term cash flow:
2/ Mid-term: prepare recovery phase and business ramp-up
When the end of the crisis is foreseeable, companies will attempt to regain momentum and refocus on revenue growth. This transition to a ‘new normal’ operational state must be carefully choreographed. The focus of CREM should be to allow for a ramp-up according to the requirements of the core busi-ness while still preserving cash and protecting the health of employees:
A careful preparation and close collaboration with Operations, HR, Finance and other departments is the key to success in this phase.
3/ Long-term: manage structural changes
In the long run, the priority for companies will be to mitigate the impact of future pandemics on em-ployee health, operations and overall business. This implies structural changes to Corporate Real Es-tate and its management. Just as the 9/11 attacks created higher security standards, the COVID-19 crisis is likely to prompt a permanent elevation of health protection at work. CREM can play a key role by enabling productive social interactions while maintaining physical distancing. Even building codes may be amended to limit the risk of future pandemics. Thus, CREM is responsible to create conditions to ensure ongoing business operations, e.g.:
These measures should help maintain workforce productivity not only during future pandemics, but also during seasonal waves of influenza. While higher health protection standards will apply to all kinds of real estate, they are arguably even more important for business units that cannot easily switch to remote work, such as production, logistics and warehousing.
Along with innovations to Corporate Real Estate itself, the Corporate Real Estate Management func-tion will need to incorporate new tasks and adapt its structures (organization, processes, etc.) in order to drive the transition, effectively manage the complex trade-offs and engage employees in creating new ways of working.
What is your vision for the upcoming months and for when the worst of the crisis has passed? Despite the negative effects – what are the opportunities that might be found during the crisis? How will CREM help you capture these opportunities?
About the Authors
Dr. Michael Mueller is a principal from CYLADs Hamburg office and leading CYLAD’s CREM practice, Stephen Turner is the partner leading CYLAD’s Melbourne office and Daniel Frutig-Meier is a partner at SeestattExperts, based in Zurich.