Top executives rely on high-quality software programs to expedite their commercial real estate needs.
Corporate real estate departments across the country and around the world are undergoing a rapid transformation. After years of quietly operating in near obscurity, the keepers of the company space are being brought to the forefront. Because of corporate downsizing, shifts in space utilization patterns and the realization that there are higher and better uses for certain assets, the corporate real estate sector has gained in strategic importance. Accordingly, so has the software that each department uses in performing daily tasks.
"Corporate real estate software has a major role to play nowadays," says Richard Kadzis, director of marketing at the International Development Research Council (IDRC), an association for corporate real estate with 2,700 members based in Norcross, Ga. "It can unify the dual world of buildings and bytes, the virtual and the physical office. It can help real estate executives manage the site selection process in an information age context and it's going to change the way we view service providers."
"That's important because technology is now a driving force in our world," says Kadzis. "And it will not only change the way we do business, but it will change our business. Globalization is one way. Technology is an enabling force for globalization. The corporate real estate executive has to think nontraditionally now. The meaning of real estate is changing with the millennium. It's tied up in delivering more value to customers and shareholders."
"Technology is at the center of that transformation. It's not an end in itself, but a means to an end," says Mark Lambourne, chief executive officer of ASI International, the Lafayette, Calif., developer of CorpSuite Plus. "Vendors are listening very closely to the demands of corporate real estate executives and incorporating the technological advances in products, providing an important impact on their business from a communications viewpoint," says Lambourne. "Some software now enables various groups to collaborate using the same or different data. This provides executives with a totally different approach to managing real estate."
Lambourne says that one of the biggest challenges in corporate real estate today is determining reasons to purchase a particular technology and then deciding how it will be used. "Technology only benefits a company if it changes the business - such as operating more efficiently," he continues. "If technology is just used to replace a piece of paper, executives won't see the real benefit. Today's corporate executives need to be educated about what technology can do for them."
Windows-based systems For instance, AT&T has developed its own corporate real estate system along with Anderson Consulting several years ago and has licensed a version for use by others. "The Windows-based software system is typical in many ways, such as keeping track of all leases, abstracts, payments and so forth. It's a very powerful system," says Stephen M. Brazzell, asset management vice president for AT&T Global Real Estate. "If you have a large portfolio like we do, it has tremendous capabilities. It's a fairly sophisticated system that gives you the ability to do online queries. If you wanted to know how many leases in New York between 5,000 and 10,000 sq. ft. are expiring in the next three years. You could find that out within seconds as well as what units within the company occupied space. Knowing where costs are and what cost reduction opportunities exist, enabling us to do master planning - and our real estate portfolio totals 74 million sq. ft."
"We recently licensed a version of it for use by the General Services Administration (GSA) and are continuing limited marketing activities for it through a third party," adds Brazzell. "One of the most important features of AT&T's system is its internal billing capabilities. At one time, we were billing 400,000 line items per year, but we have reduced that substantially. We still bill in thousands of line items, but the software makes the process very easy."
Brazzell advises companies looking into new corporate real estate software to thoroughly investigate the database market and completely analyze the company's needs and objectives. "You've got to have accurate and timely information about your real estate portfolio and performance from a cost and usage standpoint. If you don't invest in timely and accurate information, you can't make the kind of strategic decisions needed in the current environment."
Clients require customization Customization of corporate real estate software was important at McKesson Corp., a $19 billion pharmaceutical distribution company based in San Francisco.
"We use ACE and Retrack systems that were provided for us by CB Commercial. ACE is a database that provides building and lease information such as the size and type of space, unique specifications and lease terms and conditions - all the basic information that a company needs for tracking their real estate portfolios," says James "Skip" Law, senior vice president of real estate. "Retrack is a project management tool that can be customized according to how many benchmarks are required for each development project. This software assists the real estate and facilities department in real-time tracking of each project. Any time we have questions about a project, we can pull up the latest data - who is working on it, what needs to be accomplished, where we are with costs and so forth. We have 400 properties and 16 million sq. ft. of space, so we have a need for immediate data."
Law notes that there are a number of different software products being offered that basically perform the same functions. "Unfortunately, there is not a standard for the industry in which a software company such as Microsoft or Autodesk can take the best elements of several products and combine them into one integrated package," he continues. "Autodesk, for example, has created a standard for CAD drawings. It would be an enhancement to meld CAD drawing capabilities with a database using standard tools. This then could become an efficient tool for moving corporate real estate data from one company's portfolio to another in the case of acquisitions and dispositions."
Using the common sense approach "Yet not every corporate real estate department is opting for all the new bells and whistles now being offered by real estate software companies. Some are using common sense," says Jack Brophy, vice president of real estate and assets at USG, a national manufacturer of building materials based in Chicago. "USG utilizes modified off-the-shelf software for the company's real estate needs. We've gone through the whole gamut. We got involved in computers ahead of the curve, at a time when everyone told us they had the perfect software. That was 12 years ago. We spent a lot of money to buy a customized software program. We hardly got it on our computers before it became archaic."
USG uses software from Microsoft Office, including Word, Excel and, most important of all, PowerPoint. "Since it's the same entity, we don't have the need for an elaborate computer program that the owners of an office building would need," says Brophy. "We hang our matrixes on Microsoft Office. One of our department's biggest jobs is to handle the negotiations for new plants and the incentive packages. When we' re doing that, we're trading matrixes and models. We just put them in the PowerPoint presentation and go from there. We're on our second or third upgrade with PowerPoint and it's easier for them to upgrade our programs for us rather than we play catch up switching from program to program with different vendors."
USG also uses a common sense approach also for expanding its software duties noting that someone has to sit down and input this stuff. "We started out creating an elaborate filing input system, but found out we were spending more time putting data on computers that we didn't really need," says Brophy. "If you look up something once every 10 years, why put it on computers. We're talkers, not typists. And since there are so many changes in the field, there should be some sort of trade-in for computers and software programs that are obsolete six months after you buy them."
User prefer easy to use systems "Thus a corporate real estate software system that is easy to use is highly prized by many corporations," says Carol A. Perschbacher, real estate specialist at Steelcase Inc. in Grand Rapids, Mich., the world's largest manufacturer and provider of office furniture, office furniture systems and related products and services. Steelcase uses MILM by MacMunnis. "MacMunnis is a leasing management company that handles the leases of the company's properties," says Perschbacher. "They created the program. It suits our needs, since MacMunnis added some features especially for us. The software provides for pulling up an abstract of any of our many facilities - both owned and leased - from 600 to 800 sq. ft. We had a very difficult time getting into the old system but, with MILM, we can run an inventory report in three minutes. It's very helpful with budget projections on a year-to-year basis."
"Perhaps one of the reasons for a dearth of software in the corporate real estate sector is that most real estate software has focused on the investment side rather than the corporate real estate area," says Ralph Intagliata, director of market research at American Express Real Estate Services in Chicago. "In general, investment real estate is fairly straight forward and focused cashflow and valuation. However, corporate real estate is focused on providing quality and cost-efficient space to its employees, be it real estate or otherwise. Developing alternative officing strategies, from desk sharing to telecommuting, is one of our main goals. Unfortunately, there is no software I know of which directly helps us in this area."
"Our day-to-day operations, property management, project tracking, customer service and site selection software are our most standard products. But I really haven't found one total software package that is entirely for corporate real estate and I doubt there ever will be one," says Intagliata. "The company modified a standard lease administration software to accommodate our desire to have various business units share offices. Previously, we could not report to a business unit all of its locations and its specific occupancy costs if it hadn't signed the lease. Now we can, although it's been a surprisingly difficult programming change. Another unique aspect of our lease administration system is in our lease charges, we bill our independent financial advisors just for the space they occupy. As you can see, an off-the-shelf product just doesn't make sense for American Express."
Software specific to work flow As more companies reinvent themselves, there will be more need for software products to handle work flow, document transfer, valuation, lease analysis, lease administration and other financial modeling tasks specific to real estate assets.
"The problem is that, because real estate is not their main business, corporations frequently do not manage the space of the lease process in the same way an investment real estate owner would," says Ronald Dean, managing director/strategic development at ARGUS Financial Software in Houston. "Only recently has ample attention been paid to the real estate component of the corporation. As time goes on, analysts say more and more attention will be paid to that component - making corporate real estate departments and integral part in strategic planning and better business development."
Mike Sheridan is a Houston-based writer who contributes frequently to NREI.