Portfolio planning in an uncertain economic environment

Abstract

Over the past several years, the global economic downturn has forced many organisations to dramatically rethink the way they conduct business — they have been forced to do so in order to survive. While most of the focus is on cost reduction, this situation also creates an opportunity for the corporate real-estate department to redefine the way in which it interacts with the rest of the company and take its rightful place as a strategic business partner. These new market factors require a different set of portfolio management processes at all phases of the planning life cycle. Accordingly, there are implications for how corporate real estate professionals relate to their business unit customers as well as how real estate market information is tracked and evaluated. Key items addressed in this paper include: how to plan for and manage economic uncertainty; taking advantage of rapidly changing real estate market conditions; emerging transaction structures; understanding and negotiating with the ‘new’ owners of real estate; and using market timing to lock in costs and enhance flexibility. Effective execution of these techniques will increase the internal credibility of the corporate real estate organisation and improve the chances of getting a seat at the table for corporate planning discussions.