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An insight into Corporate Real Estate Management

Introduction

It is a projection that the two thirds of humanity will live in the cities by the end of the next 50 years (BBC, 2006). Along with the fast growing economies of the developing and emerging nations like China, India, UAE - the real estate market and the industry has realised great successes, pulling the economic development significantly, and contributing a lot to the nation's prosperity. Today, the real estate construction industry assumes more tasks. China in 2008 has seen over RMB 3,000 billion entering real estate construction (Gao, 2009). India, on the other hand, could see $12.1 billion investment in real estate sector (IBEF, 2009). This has turned the focus on to the cost control and regular management in the real estate industry. The investments in this industry are very high and lasting, thereby encouraging a lot of people, institutions and agencies to take active participation in the construction projects. This shift has resulted in multiple levels with the cost control and management becoming more complicated (Gao, 2009). An inefficient realisation of the objectives of the project could lead to great wastage and would later bring more pressure on the property management sector.

Literature by both management theorists and practitioners perceive that any business will perform successfully if it understands what its business is and focuses on aligning the operational decisions and implementing them in accordance to the objectives (Charles, Grantham & Ware, 2007). Strangely in the case of real estate industry, this connection is missing, wherein it is not clear how the businesses address their operating decisions and implements their strategy decisions though the real estate decisions (Krumm & Vries, 2003). Nourse and Roulac (1993) argue that surveys of corporate managers indicate a curious ignorance and indifference in relating their real estate assets to the overall strategies guiding their organisations.

Professional skills required for Real Estate Management

Krumm and Vries (2003) argue that the large degree of insecurity in real estate decision making is also a major reason why corporate real estate is often overlooked. The role of property managers or advisors is henceforth very important as their advice is crucial and could result in large investments. Following are some characteristics of an ideal property manager (IREM, 2009):

  • Updated knowledge about new laws and practices in the given localities, cities and states.
  • Updated on local ordinances.
  • Very honest while enforcing property rules and rental policies.
  • Well oriented and organized with paper works.
  • Good communication and computer skills.
  • Should not refrain from working with the public.
  • Should have a strong sense of duty and commitment.

Conclusion

Corporate real estate management is predominantly approached with an economic point of view - mostly concerned with the financial gains of cost minimisation, often at the expense of other strategic priorities. This paper however identified a growing paradigm shift among organisations towards the valuation of their real estate assets. It emphasises the fact that an organisations real estate management decisions will be effective depending on the extent to which it supports the overall business objectives. This can be achieved only by careful consideration of how the real estate assets contribute to corporate strategy and in turn how the real estate operating decisions support the real estate strategy. This transition in corporate attitude has resulted in changing relations among the various corporate centres and the operating companies. In addition it has also reshaped the traditional role and the positions of staff departments. This realignment should result in a more strategic orientation and would enable the organisation to effectively relate productivity to shareholder value.

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