Over a cup of coffee and a warm meal, a CRE manager recently told the poignant tale of how his former employer, a massive multinational in the paper and publishing industry, reasoned that centralization of the real estate function would be a good thing.
The company was expanding into emerging markets at a brisk pace. Real Estate was managed by business unit, and the only corporate approval required was that of the legal team, to confirm and reject terms and conditions. With no redundancy and a decentralized real estate model, the company unwittingly competed against itself in negotiations for a significant real estate property.
After the transaction took place, and after they realized what happened, the company hired my CRE companion. It was his job to centralize real estate and, among other things, prevent such missteps from happening.
My companion has since moved on to bigger and better things, but assured me he left his former company centralized, and coordinated. After all, the left hand not knowing what the right hand is doing makes for a sloppy meal.
Rory Johnson 07/09/2007
rory@intelligentcre.com
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[…] The question becomes whether the centralization effort is worth the reward. In my previous post An Uncoordinated Effort this was clearly the case. Under less extreme circumstances, the benefits can include accountability, synergy and economies-of-scale. McDonald’s for example, operates owned and franchised stores. But the franchisees don’t secure the convenient intersection locations for their restaurants, how could they, they lack the expertise and capacity to do so. Instead, McDonald’s has regional real estate teams. Accountability resides with those who are set up to manage real estate, not operating managers who are set up to oversee operations. […]
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