The availability of utilization data can enable finance executives to begin to adapt their strategies to the next normal.
As companies start to reclaim their offices, CFOs may want to use the coming months to test their theories about real estate utilization, watching carefully for patterns. As they prepare to do so, they should now identify and determine the information they will need to make the best decisions about aligning their real estate assets with their company’s overall objectives.
Such as? Consider the following:
Reassess safety costs. Safety and costs are among the real-estate issues they may want to examine closely. The process of reentering offices and facilities may feel abrupt and disorienting to workers. But CFOs should pay close attention to whether the company is relying on accurate out-of-pocket cost estimates for safety provisions and implementing adequate protective measures—both to support a smooth transition and for the foreseeable future.
Evaluate longer-term technology needs. This is also the time for CFOs to evaluate their companies’ longer-term technology needs. While virtualization technologies were quickly deployed when the pandemic hit, now CFOs may want to consider technologies that help optimize workspace utilization and facility operations over time. In addition, they can identify opportunities to leverage internet of things devices and workplace technology to help provide a safe and healthy environment. Given the importance of communication, they can consider establishing feedback channels and listening to the workforce to understand concerns as conditions change, using analog and automated processes.
Review the company’s real estate portfolio. Finally, along with the financial planning and analysis team, CFOs should examine the performance of the company’s real estate portfolio. The goal of such a review should be to produce an implementation road map to reconfigure the portfolio so as to optimize the workplace. That road map should also help management rethink design and planning for new facilities to incorporate changing workplace behaviors and requirements.
CFOs in Commercial Real Estate
The COVID-19 crisis represents a pivotal point for CFOs in many industries, but finance executives in the commercial real estate (CRE) sector face especially daunting demands. Like others, those in the CRE sector are confronting the challenges associated with leading their companies through vast health and economic uncertainties. They have to do so, however, in the midst of an unparalleled industry transformation at the intersection of real estate and technology. To achieve that, they may want to consider the following:
- Building out their operational and financial plans. Over the next 12 to 24 months, CRE companies can collaborate closely with tenants, evaluate their portfolio assets in light of the pandemic’s impacts on end users and investors, and prioritize how they will spend their cash. To help optimize financial and operational agility, it’s also important for CRE CFOs to evaluate contractual rights and obligations related to leases, especially as they pertain to property closures, operational changes, and insurance and vendor contracts.
- Exploring digital transformation. As catalysts for change and improvement, CRE CFOs may want to consider additional technology investments to prepare their organizations for the future. Digital transformation in CRE was a strong trend before COVID-19, and accelerating technology usage now can help drive top- and bottom-line growth through more informed decisions, greater efficiency, and improved tenant experiences. Using a wider variety of advanced data and analytical tools and techniques could enable companies to make better-informed decisions―and help CFOs use finance’s analytical skills to boost their business partnering and strategic advisory roles.
- Employing scenario planning and forecasting. In their strategic capacity, CRE CFOs can also make decisions about how to position their asset portfolios, where to direct available capital, and how to evaluate potential opportunities. Similarly, conducting a strategic review of core competencies can help aid decisions on diversifying into properties that complement their existing portfolios.
Building a Foundation for the Future
The COVID-19 crisis is a pivotal point in time. While organizations are taking steps to keep their employees safe and operations running, a next normal will emerge that may look quite different from today. That transformation extends to how real estate teams plan for and manage workplaces as well as how CFOs work with those teams to assess the company’s real estate portfolio.
At a time when CFOs in just about every industry are likely addressing questions about their organizations’ business and talent plans, CFOs would do well to think carefully about the optimization of real estate within those strategies. Even in the midst of a pandemic, it’s up to CFOs to provide a foundation of clear thinking on which to build the future.
— Francisco J. Acoba, U.S. Real Estate & Location Strategy leader; John D’Angelo, managing director, Real Estate leader; Kris Routch, specialist leader, Deloitte Leadership practice, all with Deloitte Consulting LLP; Kathy Feucht, Global Real Estate leader, and Darin Buelow, Global Location Strategy leader, both with DTTL; and Jim Berry, U.S. Real Estate leader, Deloitte & Touche LLP
Editor’s note: Part one of this series, CFOs Evaluate Real Estate for Strategic Alignment, explored how real estate’s strategic role may change as a result of the pandemic