As the first or second expense on your income statement, it is critical that your commercial real estate continuously aligns with business goals. To achieve this, business leaders should turn to portfolio optimization.
As part of our ongoing optimization series, we have walked you through what to expect during the current state assessment phase, how to navigate future assessment, and how to successfully use scenario planning to optimize your portfolio.
Once you’ve evaluated the real estate assets in your portfolio and developed a sound strategy to optimize them, it’s time to implement your plan.
For everything you need to know about portfolio optimization, download our free whitepaper.
What Does Portfolio Optimization Implementation Include?
Portfolio optimization implementation is strategic in nature and may take significant time to fully execute, especially if you have a large commercial real estate portfolio.
It involves managing the strategic action items outlined during the scenario planning phase, managing financials, and executing any necessary CRE transactions. The goal of this phase is to guide your changing real estate portfolio towards business goals.
Among other activities, action items during the implementation phase may include:
- Redesigning a workspace.
- Disposing of a property.
- Debt restructuring.
- Surplus lot splits.
- Real estate acquisition.
Specific actions depend on the types of assets in your real estate portfolio. To learn more about the differences between supportive, unsupportive, and missing assets, and how to optimize them, download our free whitepaper.
5 Tips For Successful Portfolio Optimization Implementation
Many companies lack the expertise and bandwidth to handle portfolio optimization alone, and the implementation phase can be especially daunting. Here are a few tips to help you get the most out of this fourth and final phase.
1. Set Up Recurring Meetings
With real estate being one of the largest expenses of your business, it is critical that your team remains updated with the latest portfolio activity. At Allegro Real Estate Brokers & Advisors, we typically meet with our clients bi-weekly for tactical discussions and quarterly for strategic reviews. We also coordinate annual updates to review year-over-year growth, wins, and other activity that occurred in the portfolio, along with future planning.
2. Recognize That Implementation Is an Ongoing Process
Strategic CRE portfolio optimization doesn’t happen overnight. Depending on the number of action items you’d like to complete, this process could take months or even years to fully execute. And as market conditions and business objectives shift, you should find yourself revisiting this process once again.
3. Work With a Team of Real Estate Professionals
The CRE portfolio optimization process is time-consuming, and requires a significant amount of knowledge about the market and commercial real estate in general. For the most success, have a team of real estate professionals with the right skill sets surrounding you to execute your plans.
4. Use KPIs to Measure Change
Prior to implementing any portfolio changes, identify the key performance indicators (KPIs) that matter most to your business. Record what these metrics look like with your existing portfolio, so you can accurately measure change as real estate improvements are made.
Some common KPIs include:
- Cost per square foot.
- Square foot per employee.
- Average distance to customers or employees.
- Net present value (NPV).
5. Leverage Appropriate Reporting Tools
Ensure that you, and the real estate brokers you’re working with, utilize the right tools to make reporting easy and transparent. Automated reporting tools and dashboards allow you to not only analyze performance, but also share these findings with other company stakeholders.
Understanding and optimizing your commercial real estate portfolio is the key to long-term business success. By evaluating and strategically improving the assets in your portfolio, you will be able to remove those that are no longer supporting business and focus on leveraging those that will positively impact your bottom line for years to come.
Align Your CRE Portfolio With Business Strategy
Corporate real estate optimization is fundamental to achieving your business goals and responding to new challenges. Learn more about assessing and adapting your CRE to meet changes in business by downloading our free guide, Portfolio Optimization: The Essential Corporate Real Estate Guide.