yang

Property Management VS
Corporate Real Estate MAnagement

Table of Content

1.0 Introduction

..
2.0 Property

4-13

Management
..
3.0 Corporate Real Estate

14-33

Management
4.0 Comparison between Property Management

34

& Corporate Real Estate

Management..............................
5.0 Reference

35-36

...

1.0 Introduction
Property management and corporate real estate management (CREM)
are two different kinds of aspects of strategic management discipline in real
estate field. In general, property management refers to the administration of
residential, commercial and industrial real estate while corporate real estate
management refers to success and value-based purchasing, management
and marketing of real estate in companies. Many developed countries are
following the practice of traditional styles of property management, such as
Hong Kong, England and so on. The service of property management can be
extensively based on the policies and strategies of a company. Mostly those
factors to be in consideration are the function of a building, size, quality,
location, age, the background of ownership and the capability of the
company. Property managers have to ensure the smooth implementation of
the strategies so that value creation can be achieved through the
management. By adding in the value to the building effectively and
efficiently, a company is able to guarantee great return of profit in the long
run.
These two kinds of management have the functions of management of
properties, however in separated areas and scenario. Corporate real estate
management covers a wide range of activities, namely financial planning and
management, facilities planning and management, investment planning and
management,

and

construction

planning

and

management.

Perhaps

occasionally property management is under the umbrella of corporate real

estate management or exists as subset to it. Therefore, this report is going to

discuss and elaborate both the theories of management thoroughly so that
we can get a whole picture for those two areas of management of housing.

2.0 Property Management

Background
Property management is the operation, control, and oversight of real
estate as used in its most general terms. Management shows a need to be
cared for, monitored and accountability given for its useful life and condition.
This is much akin to the role of management in any business. Property
management is also the management of personal property, equipment,
tooling and physical capital assets that are acquired and used to build, repair
and maintain end item deliverables. Property management involves the
processes, systems and manpower required to manage the life cycle of all
acquired

property

accountability,

as

defined

responsibility,

above

including

maintenance,

acquisition,

utilization

and

control,

disposition.

(Wikipedia, 2012)
According to The Boards of Valuers, Appraisers and Estate Agents Malaysia
the Property Management are currently only a registered valuer can practice
as a Property Manager. The property manager ensures that the owner gets
the best returns of his property investment. They also ensures that the
building is well maintained, the building services well looked after and all
expenses paid. He is able to optimize usage and enhance the investment in
property. He advises on lease renewals, selection of quality tenants and the
appropriate tenant mix. (The Boards of Valuers,Appraisers and Estate Agents
Malaysia, 2015)

The growth of professionalism in property management start during the

depression of the 1930s which they had a profound influence on the evolving
property management profession. The numerous business failures and real
estate foreclosures of this era placed a trust of the nations real estate in the
hands of mortgage-lending institutions, such as a trust companies, insurance
companies, associations, credit unions and banks. (Robert C. Kyle, 2000)
In the first time, a large volume of income-producing property was owned by
corporation, many corporations formed their own property management
departments. The newly formed management departments employed
contractors and builders, but spent little thought and less action on the
economics, advertising and merchandising of the income property. These
new owners soon learned that a landlord has to do more than select tenants
and collect rents, and as the need for more sophisticated management
techniques became apparent, the property management profession gained
stature. However, few facilities were available for training persons in these
vital aspects of property management. (Robert C. Kyle, 2000)
Today, more diverse types of properties now under professional management
and the increasing variety of ownership entities employed by investors make
the need for professional property management skills even more critical. The
pressure for managers with sophisticated management skills and extensive
technical skills increases daily with the growth in size and complexity of
managed property. Continued professional training is there a must if a

property manager is to grow and succeed in this profession. A number of

organizations have grown to meet the demand for developing standards for
the profession and to offer educational programs. (Robert C. Kyle, 2000)
Owners who do not live at their properties, or a group of people who share
common occupancy, such as an office building, refer to property managers
to handle daily care and building operations, efficiently, fairly and under
budget. Even though they can work out of their offices, property managers
are typically away from their desks showing apartments, checking on
maintenance staff or meeting with tenants. (Locsin, 2015)
The Roles of the property managers is to ensure that the properties under
their care are operate smoothly, maintain their appearance and increase in
value of the property. They inspect all facilities, hire, supervise and assign
duties to maintenance staff and contract for services such as trash removal
or landscaping. They also show properties to prospective tenants or buyers,
explain occupancy terms and collect monthly rents; and pay taxes and other
maintenance fees. On the administrative side, they ensure that all
procedures act in accordance with relevant laws such as the Federal Fair
Housing Amendment. They also keep property records and prepare budgets
and financial reports for owners. (Locsin, 2015)
The specialties roles and job titles of property managers can differ by
specialty. Real-estate managers oversee income-producing residential and
commercial properties so that investors receive the maximum returns. They
6

handle financial operations, such as tax payments, payroll and maintenance

bills. Community association managers administer communal properties
such as condominiums so that all residents are treated fairly and pay their
fees on time. Onsite property managers are in charge of daily operations on
a single property, such as a shopping center. They keep facilities clean and
make repairs as needed. Finally, real estate asset managers coordinate the
buying, selling and development of real estate on behalf of investors and
businesses. (Locsin, 2015)

 Property Management Problems and Solutions

Following are the common problem faced in the property management and
the suggested solutions for each problems (TALLY PROPERTY, 2015) (Haueter,
2014):
1.

Failure in the Property

Damage to the property can occur at any time and immediate maintenance
or repair jobs need to take place immediately to avoid inconveniences to the
tenants.
The solution to this problem that may occur is to have a preventive
maintenance program in place and have a professional staff to attend the
reparation jobs if any damage occur.

2.

Complaints from the Tenants

Complains from the tenants is like the negative feedback from them. Most
complaints are on those to do with the repairs or correcting something on the
property. Complains show us things that need to maintain. It can be small or
large issues.
Solution to this issue is every complain need to be looked into and cannot be
ignored. Appropriate actions should be taken so that they feel their voice are
being heard.

3.

Late Payment

One of the major problem faced by the property owners the payment or rent
is not received on time and tenant has different excuses for it. It can cause
profit problem to the owner if it is not handled.
The solution to this problem requires multiple pronged approach. Firstly,
there should be a person in charge to collect the rent and the tenants should
be aware or well informed that they need to have their payments ready on
time.
The second solution is penalty on the tenants for late payment, which is
certain percent of the amount that should be paid. This should be informed
to the tenants at the beginning.

4.

High Vacancy Rates

High vacancy rates or seasonal fluctuation can hurt the income to the owner
and proper action should be taken.
This problem can be solved with the right marketing technique and the
proper advertising and good reputation.

5.

Low Charging to the Tenants

It is necessary to know the value of the lodgings and analysis should be done
on how much the tenants willing to pay. Over charging should be avoided to
prevent the loss of tenants.

 The benefits of property management

1. Higher quality tenants
Most of the landlord who have perform the difficult search for the right
tenant to rent the home all the time. Think of tenant screening ,it will
definitely have a certainly possible to get a bad tenant out of your home
once they are in, but its a real difficulty and you are so much better off
never accepting them in the first place. A whole screening process are
actually results in reliable tenants that who can pay on time, rent longer, put
less wear and tear on the unit and generally cause less problems.
By using property management, you will be shielding yourself from rental
scams directed at the owners, and discrimination lawsuits resulting from an
inconsistent screening process. It is actually also means that we can avoiding
bad tenants, scams and lawsuits that it is arguably one of the most
significant benefits a property management will provide.

10

2. Increase the value of the investment

Preventative maintenance is achieved through putting systems in place that
catch and deal with maintenance and repair issues early on, before they
grow into larger more costly problems. This requires a written maintenance
check

program,

detailed

maintenance

documentation

and

regular

maintenance visits. The management firm can also offer you suggestions
and feedback on upgrades and modifications, both how they will affect the
rent you can charge, as well as their impact on maintenance and insurance.

3. Personal benefits for owners

Firstly, there will have less stress like avoid having to deal with middle of the
night emergencies, chasing down rent, evicting people from the owners

11

property, tenants who wreck the property, rental scams, lousy vendors and
piles of paperwork.
Secondly, there will have more freedom in managing the owners property.
Live and invest wherever you want with the constraint of needing to be near
your properties. Additionally you can live and travel without the requirement
of always being available in the event that your tenants have a need you
have to tend to. Once you have found a good management company, it
doesnt matter if you live in the same state. Some landlords live in other
countries and simply collect their check every month without ever seeing the
property.
Lastly, it will free up more of your time. For an example, time is money, and
for many investors, their time can be more profitably spent in areas other
than servicing their properties.

The graph above shows the time affects the cost of project.

12

4. Security and safety of property management

Commercial and residential property management and life safety

integration: building critical infrastructure and facility life safety
features.

Emergency response of the building operation:

hazardous materials, fire evacuation, medical emergencies,
extreme weather, evacuation and shelter in place, H25, 02 C02,
suspicious packages, and bomb threats.

Fire safety plans :

Fire and human behaviour, building or facility fire warden roles
and responsibilities.

Arriving the fire, police and EMS priorities and expectations,

lessons learned and common challenges during evacuations.

13

5. Maintenance management
The objective of maintenance is as a priority one, to create an availability
performance which is suitable for production demands in the organization.
The term maintenance covers all activities undertaken to keep equipment in
a particular condition or return. It to such condition. Deferred Maintenance
includes the repair, rehabilitation, or replacement of facilities and damaged
heavy construction and agricultural equipment with shortened utility
because we have not performed maintenance.
Bath Tub Curve
The bath tub curve describes the cost of equipment over its lifespan.
From commissioning to winding up.

14

Cost

100% Life

15

3.0 Corporate Real Estate Management

Definition of CREM

Corporate Real Estate Management which is known as Public Real Estate

Management (PREM) in the semi-public sector, is one of the central tasks of
managing the real estate portfolio of a company, corporate group or a public
institution. (G&K Management Berater, 2015)

Initiation To CREM

Many corporate groups want to reduce the amount of capital which is tied up
in real estate. They want to invest more capital in the core business. In view
of cost pressure and ever-shrinking budgets, local authorities have similar
aspirations. As a consequence, they think about selling their real estate. One
solution is to launch a process to establish a real estate portfolio with the aim
to generate added value through creation of transparency and improvement
of cash fees. The tied-up property should be made available through
reduction and an optimizing process. The idea of CREM has been presented
about an integrated concept and the realization of real estate portfolio
management. (Dietmar SPERLING, 2005)
In view of today's globally difficult economic situations more and more
groups of companies realize that their real estate property does not belong
among the core business anymore. Therefore, an ever-growing number of
major companies is concentrating on their original business with which the
value-added process is highest. In order to remain competitive, most of

16

enormous companies detached themselves from real estates ( Buildings,

Lands) in order to reduce their capital will be offered on the market in the
coming years as it already initiated a couple of years ago due to real estate
was regarded as an inalienable property and inviolable reserve. (Dietmar
SPERLING, 2005)
However, the sale of large property holdings, however, can be very
problematic for companies, because in many cases their real estate assets
have been dealt with poorly. Often enough, the management does not even
know about the properties sizes and/or market values. That can sometimes
lead to disasters. (Dietmar SPERLING, 2005)
Monitoring company performance has traditionally been associated with
accounting, and the purpose has been to determine a companys financial
success. Success has been judged via comparison to previous years results
and various key indicators, such as return on investment, turnover and net
profit. This has also been the case in the context of corporate real estate
management (CREM). Historically, corporate real estate managers have
tended to measure performance from an operational efficiency perspective
factors such as operating costs, costs per square foot and maintenance cost.
(Steffenhartmann et al., 2009)
The current situation of companies requires a group-wide adoption of
responsibility for the real estate management. In this process the following
tendencies can be observed: (Ranko Bon, 1994)

17

The globalization of the markets provides increasing competition

pressure associated with a growing influence of the financial markets
on the management. According to a regulation of the European
Commission of 19th July 2002, all listed companies must prepare
consolidated

accounts

in

compliance

with

IFRS

(International

Accounting Standards) by 2005 at the latest. Thus real estate has to be

shown in the balance sheet at market value. This fact may have

serious consequences for the property, financial situation and profits.

The appearance and strategy of companies undergoes sudden changes
because of the surge of mergers and acquisitions. - Basel II (that
implements an EU directive) requires a new quality of risk transparency
and risk management, in order to obtain more favourable conditions on
the capital market.

These tendencies lead to challenges on the real estate management as

follows:

Reduction of the capital tied up in real estate and cost minimization in

the use of real estate for financial benefit

Creation of transparency in the stock of real estate and in its

utilization
Efficient setup of a stock of strategically important real estate and

liquidation of strategically insignificant property

Value adding in real estate management and transparency and followup of property risks. These statements go to show how changeable the

18

world of real estate has become and what great efforts will have to be
made to pursue real estate policies that facilitate successful business.
While up to now the focus was on growth, on securing the companys
location and the development of secret reserves, there will be a shift to
portfolio optimization, minimization of space requirements and reduction of
the additional costs in future.

Introduction of CREM

The basic principles of a successful real estate policy are a customer-oriented

organisational structure as well as the creation of efficient business
processes. This goes along with a concentration of responsibilities within a
group or company that includes the requirements of internal and external
customers. Only that way a readjustment of real estate affairs is achieved,
which allows to stick to the core business. Comprehensive services are
offered from a single source that brings about higher quality and
improvement of the efficiency. This leads to an organizational adaptation,
which consists in the creation of a central CREM board with a strong
orientation

to

the

company

management

policy.

This

board

places

requirements on the operational sectors such as project development, facility

management, purchasing and sales departments. Further subordinate

19

service units that need to be set up are valuation, property management and
project controlling.

Objective of CREM

The significant objective of CREM is the creation of a return from real estate
without distracting the focus from the firms core business. Furthermore,
CREM should make a contribution toward the strength and competitiveness
of a company by ensuring that company-owned resources are used
effectively. In short, increase profitability of the company from both core and
non-core operations. (Steffenhartmann et al., 2009)

The Criteria of CREM

In future, the classification of real estate will have a stronger focus on the
features of efficiency and usability than in the past where the emphasis was
rather on operational necessities. As a first step of assessment it is
necessary to prepare all areas of land in terms of real estate development,
then to review the usability of sites and sub areas (such as reserve areas) as
well as the profitability of sites and sub areas (for example power station
sites), and finally, to match site-specific identifiable potentials. (Dietmar
SPERLING, 2005)
Existing procedures of exploitation and optimization show clear limits, too.
The present approaches of individual or block sales or the issue of closed or
20

open funds offer the client advantages and disadvantages. However, an

inter-company joint property product could turn problems into opportunities.
In this context one could think of closed funds focussing on high-quality
items in a perhaps suboptimal location (for example head offices of great
companies). This way, thanks to common interests, deconsolidation with
regard to the intention of long-term lease (high credit standing of the tenant)
can be achieved through reduced share property. (Dietmar SPERLING, 2005)

The principles of CREM ( Based on Research conducted by

Professor Ranko Bon)

Professor Ranko Bon is a Professor of Construction Management and

Economics in the Department of Construction Management & Engineering at
the University of Reading.

He was headed the department from 1996 to

1999. In the year 1994, he conducted a research on CREM. Then, Professor

Ranko Bon has distilled what he sees as the central principles of corporate
real estate management into ten concise points of CREM principles:
1. Corporate real estate management (CREM) concerns the management
of buildings and parcels of land at the disposal of private and public
organizations that are not primarily in the real estate business. An
organization that occupies space is in the real estate business and
needs to manage it properly. CREM covers the entire range of activities
concerning portfolios of buildings and land holdings: investment
planning and management, financial planning and management,
construction planning and management, and facilities planning and

21

management. The chief real estate officer (CREO) is the top executive
concerned with an organizations property and needs to integrate all
these activities into a coherent strategy.
2. Just as a fleet of ships requires overall strategy and co-ordination
among individual vessels, so too does a fleet of buildings. Although
each vessel in a fleet may have a separate mission, the fleet as a
whole is informed by a mission common to all. This mission stems
from the strategic objectives of an organization. The primary concern
of CREM is to establish and maintain a close match between an
organizations business and property strategies.
3. The possible courses of action differ for buildings and parcels of land in
different parts of an organizations portfolio. Conversely, the very
structure of the portfolio should reflect alternative courses of action
that apply to different classes of real property. One of the most
important functions of CREM is to keep an account of the options
available for various components of the portfolio. This information can
be used as the basis for detailed contingency planning for properties
that

are

the

best

candidates

for

disposition

or

significant

reconstruction.
4. Each property is going through the real property cycle, starting from
and returning to unimproved land. In some cases the real property
cycle involves shortcuts and detours of various kinds. The stage in the
cycle in which a particular property may be found needs to be
understood in the light of other cycles which are important to an
organization, such as product and/or process cycles. CREM is
22

concerned with the entire real property cycle of each property in the
portfolio, although it focuses on the utilization and operation stage.
More precisely, it is concerned with the relationship between the real
property

cycle

and

other

strategic

cycles

characterizing

the

organization in question.
5. The opportunities to influence the costs and benefits of building
ownership decline most rapidly in the planning and design phases of
the building process. CREM tools need to be applied as early in the real
property

cycle

as

possible.

The

information

available

to

an

organization concerning its good and bad buildings is invaluable in

guiding both new construction projects and repair and reconstruction
projects. As the real property portfolio of each organization differs
considerably from any other portfolio, each organization needs to
develop and maintain a database with information specific to that
6.

organization.
The primary operational task of CREM is to provide approaches and
tools that facilitate the formation and maintenance of a feedback loop
between

real

property

performance

across

the

portfolio

and

managerial action. The feedback loop opens the road towards

continual incremental improvement of real property performance,
guided by the ever-changing objectives of an organization. Continual
incremental improvement that is always in line with changing
organizational goals is the theory behind CREM. It focuses on the
provision of tools that would help change an organizations real

23

property portfolio in the right direction, while relying on the business

strategy for determining what direction is right for the organization.
The information concerning property performance available to an
organization should be arrayed so as to ensure that its management
can learn about the consequences of their actions on real property
performance, as well as the effect of real property on the overall
performance of the organization.
7. CREM requires effective monitoring of property performance by means
of a system of property performance indicators. For a given budget,
there is a tradeoff between many indicators measured a few times,
and a few indicators measured many times. The latter is generally
preferable to the former, because management is generally more
interested in relative change than in absolute values of performance
indicators.

8. As in manufacturing, the objective of statistical quality control (SQC) is

to ensure that actual property performance is within the desired
bounds upper and/or lower. These bounds can be tightened over
time. In the case of properties, SQC should be applied with special
care. First, cross-sectional comparisons of buildings are difficult
because of their heterogeneity; even identical buildings at different
locations will appear to be different. Second, longitudinal comparisons
of the same building at different points in time are difficult because

24

many building processes are very slow; everything will appear to be

the same even over long periods of time.
9. Because one of the key concerns of CREM is the maintenance of a
continual ability to adapt to changing economic conditions facing an
organization, the structure of real property performance indicators
should correspond to the structure of the portfolio itself. The
management of adaptability and flexibility should not be narrowly
directed only towards individual buildings. The problem arises on at
least two additional levels that of a cluster of buildings, and that of
the portfolio as a whole. Furthermore, on all three levels there are
distinct aspects of the problem: physical, financial, and organizational.
Physical aspects predominate on the level of individual buildings;
financial aspects predominate at the portfolio level; and organizational
aspects are especially important at the building-cluster level. Again, all
these aspects of CREM need to be integrated by the CREO into a
coherent property strategy.
10.
Real property performance should be measured with the
objective of gradually changing the character of the entire portfolio via
continual

managerial

action

bent

on

improving

real

property

performance. The key objective is to improve the overall performance

of the portfolio by shifting the average performance in the direction of
improvement, as well as to tighten the variation around that average
performance. Good and bad performance are relative notions. The
best performance in one period may be considered to be the worst in

25

another. Moreover, at any one time there will necessarily exist both

good and bad buildings.

Benefits or advantages of CREM

Corporate Real Estate Management (CREM) has always been a valuable asset
on corporate balance sheets, even if many companies do not realize this is
the case because lack of prominence. Maximizing the value of real estate has
become an increasingly important competitive factor in the ongoing
globalization process. Various industry research studies over the last ten
years indicate that more than 25 percent of corporate assets are invested in
real estate and that total occupancy costs of corporate real estate represents
5 percent to 8 percent of total (pre-tax) gross sales, or 40 percent to 50
percent of net income. (Steffenhartmann et al., 2009)
A major task of CREM is to identify strategic challenges focusing the
company and to manage their effects on corporate real estate. The planning
and decision horizon of CREM therefore is concentrated on the development
of long-term potential for success. CREM should identify and evaluate the
economic and technical trends driving the firms real estate portfolio,
improving the firms competitiveness. Moreover, a study by Asson in the
Journal of Corporate Real Estate explained that in addition to the financial
optimization of real estate portfolios, this form of cooperation leads to
greater

flexibility,

cost

certainty,

and

higher

service

quality.

(Steffenhartmann et al., 2009)

26

The existence of a property database that provides adequate and timely

information (such as business needs, staff requirements, facilities, occupancy
costs and market data) is essential for facilitating effective strategic planning
of corporate real estate. (G&K Management Berater, 2015)
One study in United State concluded that competition is forcing companies to
examine both their assets, especially corporate real estate and their
processes in order to increase market share, maintain competitive positions,
and increase shareholder value. Thus, research recognizes the significant
value of real estate (to non-real estate firms). But in spite of this recognition,
corporations continue to under-manage real estate assets and resources.
In part, this is because corporate real estate management (CREM)
departments lack prominence in most companies. As a result, this valuable
part of corporate balance sheets goes largely unnoticed and undermanaged.
So, in order to establish the importance of corporate real estate, it is
necessary to define the role of CREM in a company (Steffenhartmann et al.,
2009)

Challenge for CREM

Financial education and performance standardization within the field of

corporate real estate management must improve both at the upper echelons
of executive management, and within the CREM departments. Without a
proper understanding of the financial and operational impact of corporate
real estate on company balance sheets, senior management will continue to
own their corporate real estate. In turn, decisions on how to manage that
27

real estate, whether owned or leased, remain based on flawed reasoning.

(Steffenhartmann et al., 2009)
On the one hand, some members of the Corporate Real Estate Management
and Facilities Management Forum (Professor John Hinks, July 2013) argued
that real estate is still where most people go to meet, discuss ideas, innovate
and to get their work done. Notwithstanding that technology is reducing
business reliance on physical work environments, they argued that real
estate looks likely to continue to play a major role in businesses that
continue to trade through their spaces. (This was also the argument for
banks and high street retail a few years ago of course.) But in such
circumstances, the role of the CREM&FM function will continue to be to
provide the best environment in which the business can function, at a
reasonable cost. (Professor John Hinks, July 2013)
In other words a continuation of the demand profile upon which the industry
was built, albeit at a smaller and possibly shrinking scale. The implicit
argument here was that further sustaining improvements were all that was
needed. Indeed it was suggested that this was the default trajectory, wherein
the CREM&FM industry will mature along the same lines other support
service functions have. (Professor John Hinks, July 2013)
According to the study of Realizing the Value Of Corporate Real Estate
Management (Steffenhartmann et al., 2009), while survey, respondents
indicate that CREM performance has improved over the last several years, it
is unclear what metrics they use to arrive at that conclusion, given that in

28

some cases, they work independently, while in other industries basic

financial metrics were not referenced in terms of measuring the opportunity
cost of corporate real estate. Despite a growing body of research on best
CREM practices, the under-management of corporate real estate assets
continues. Inadequate attention is paid to resource allocation, and the skill
sets required to effectively manage key functions of CREM are lacking.
(Steffenhartmann et al., 2009)
In addition, the inability to define the role of corporate real estate, combined
with the inability to measure the lost opportunity cost of corporate real
estate, obscures senior managements view of the underlying value which is
locked into many corporate real estate portfolios. Among CREM staff, real
estate is still primarily viewed as a cost centre, which further supports
evaluating corporate real estate from the perspective of both the balance
sheet and operating resource allocation. Corporate real estate is not a core
business of these firms. However, regardless of whether companies
recognize it or not, corporate real estate remains a valuable and underutilized asset (Dietmar SPERLING, 2005)

29


There

Strategies in Corporate Real Estate Management

are

many

strategies

implemented

in

corporate

real

estate

management (CREM), based on several different approaches. One of the

strategy models is presented by the METIS Management Consulting (METIS),
which is based in Munich and established in early 2006. METIS is a
specialized professional service firm that supports financial institutions in
securing and developing their market positions. (METIS Management
Consulting, n.d.)
The following figure shows the strategy model used in CREM.

Source: (METIS Management Consulting, n.d.)

30

o BUSINESS STRATEGY
Corporate real estate have direct correlation with business objectives (METIS
Management Consulting, n.d.) therefore it will give direct impact to the
success of the company. Corporate real estate managements involvement in
the overall strategy process is thus a crucial matter.
The strategy could be executed through systematic planning between real
estate related business activities and the corporate strategy itself.
A systematic planning of all real estate related business activities and a
regular adjustment with the corporate strategy to work well together will
ensure a maximum utilization of potentials within the operational real estate
portfolio.
At this stage of strategy, the challenge particularly to be met is to link mostly
long-term real estate decisions with a corporate strategy that has to flexibly
adapt to a rapidly changing environment. (METIS Management Consulting,
n.d.)

o REAL ESTATE STRATEGY

The second stage in CREM strategy is to focus on the real estate. Most
financial institutions have already provided the basis for a strategic
management of the resources by collecting the relevant data of its corporate
real estate portfolio.

31

However, an explicitly formulated real estate strategy is often missing. METIS

Management Consulting stated that even if such a strategy exists, it lacks
the institutionalized link with the corporate strategy and does not
operationalize specific goals and objectives for middle management and
staffs.
Real estate strategy basically focus on the operational and non-operational
factors in real estate where CREM is implemented in the operational
elements while Real Estate Asset Management is implemented for the nonoperational elements.

o DEVELOPMENT & MANAGEMENT STRATEGY

Developments and management strategy covers both operational and nonoperational

elements

in

the

portfolio.

Operational

aspects

in

the

management strategy includes space requirements, cost or benefits, build,

buy or rent, and financing. Meanwhile, non-operational aspects are income or
risk, the strategy to maximize earnings, evaluation and sales.
Strategic space management plays a central role in specifying and
operationalizing real estate strategy. Apart from that, under development
strategy, buildings, projects and concepts utilization are developed. For
example, innovative branch and office usage concepts are developed and
implemented as well as precise targets for improving space efficiency are
also set. (METIS Management Consulting, n.d.)

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In other word, a successful CREM has to be timely linked with the corporate
strategy development process. This means that CREM tasks do not only
comprise the identification and evaluation of relevant trends affecting the
companys competitive position, its productivity and the interests of
shareholders.

o FACILITY MANAGEMENT STRATEGY

Facility also play an important role in CREM. Facility management strategy
focuses on the organization, processes, services, service-levels and costs of
the facilities available in the portfolio. Emphasizing on the outcomes from the
facilities alone will also contribute to the success of CREM.

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Figure 1: The Strategy Model of CREM

Source: (Anna-Liisa Lindholm, January 2006)

Added Value of Corporate Real Estate Management

Business Focus
Traditionally CRE as decision concerning and focusing on cost factor
consideration only. But nowadays CRE contribute to overall business
performance. CREM contribute to the core business than cost- control. The
CRE also consider the communications and working relationship with
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management to a top-performing real estate department and not only

focusing on cost minimisation.

The contribution of transformation of real estate by reformulating facilitating

operations to increases productivity, more clearly identify increasing value as
strategy, highlighting changing culture by introducing workplace, and
grouping a range of real estate decision under risk control.

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Workspaces already become a important elements of CREM after the

compensation and benefits, as well as location of the site choosen for
financial

success,

taskmaster

through

dealmaker,

entrepreneur

and

controller of business strategist will addressed company competiveness.

By using the CRE strategy to support organisation, they mostly have clear
vision which of aim they want to create with their building and they can even
perform efficiently by using 5 stages of CRE development.
CREM also allow the managers to track performance, and let the employees
know what is they expected if they want to get rewards by reaching the
employer targets.
Asset Management Focus
Real estate used to be a production factor. Many corporation have chance to
increase their profitability through more effective management of their real
estate and to actively manage to achieve corporate goals by focusing on
using an approach that treat the interactions of real estate with the capital
structure, capital cost, debt capacity and overall operations of firm.

36

Company financial success normally determine by comparing result by

various key indicators such as return on investment, turnover and net profit
to compare with previous year with accounting. The corporate real estate
managers tended to measure performance from an operational efficiency
perspective such as cosy per square foot, maintenance cost and also
operating cost. There are several type of measures of CREM showed in table
below.

Most corporate real estate and facilities management sources provide

oversight of common performance indicators, which usually represents
operation view of these discipline. The little literature above showed that the
every aspect of CREM and facility management, tactical and operational,
namely strategic and especially tie up CREM to the organisational strategic
decision making.

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Financial Focus
In the financial aspects, the real estate may provide other forms of added
value for example effectiveness and efficiency of the activities in the
corporation even though the return on real estate is generally lower than the
return on the core business.
CRE have significant impact on the firms credit facility, its operating
economics and its financial statements in the property investments. Real
estate also able to affecting many corporate financial parameters such as
cost of debt, cost of equity, systematic risk and market-to-book ratio of nonreal estate firm. So it is necessary for the real estate to corporate financial
management and its important.
Real estate have great impact of corporate which can impact in corporate
performance by cost reductions or improve revenue.
CREM also able to improve the stock market values, an also able to often
accounts for a significant portion of firms total assets or working capital.

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4.0 Comparison between Property Management &

Corporate Real Estate Management
Scope

Property Management

Corporate Real Estate

Management

Objectives

Building

Strategic

real

estate

maintenance

activities to support the

business operation
occupies/ Stakeholders

Users

Building

Skills

tenants
Property specialist,

Property specialists with

business

financial and

administration and

management

Level of

engineering
Tactical/ operational

background
Strategic/ tactical

Management
Activities

Day-to-day basis;

The management of all

administrative

aspects of real estate;

management,

acquisition and

marketing and

development,

physical

disposition, property

management

management, financial
analysis, surplus
property, and
miscellaneous activities
such as leasing and

Management

Property Manager

brokerage
Corporate

Real

Estate

Manager

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(Source: Ali, Zaiton. (2008), Corporate Real Estate: Another Real Estate
Area)

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5.0 References

Anna-Liisa Lindholm. (January 2006). Measuring the Added Value of

Corporate Real Estate Management. Finland: Institute of Real Estate
Studies, Helsinki University of Technology. Retrieved from
http://lib.tkk.fi/Diss/2008/isbn9789512293605/isbn9789512293605.pdf
Dietmar SPERLING. (2005). Corporate Real Estate Management (CREM).
TS5.2 Corporate Real Estate Management (CREM) , 16-21.
G&K Management Berater. (2015). Retrieved from Grgen & Kller GmbH:
http://gk-mb.com/history/?lang=en
Lindholm, A. L. (2008). Identifying and Measuring the Success of Corporate
Real Estate Management.
Locsin, A. (2015). The roles of Property management. Retrieved from Chron:
http://work.chron.com/role-property-managers-11347.html
McDonagh, J. (21 January 2002). Measuring Corporate Real Estate Asset
Management Performance. Seventh PRRES. Canterbury.
METIS Management Consulting. (n.d.). About Us. Retrieved 2015, from METIS
Management Consulting: http://cremperformance.com/en/metis_en.html
METIS Management Consulting. (n.d.). Strategy. Retrieved 2015, from METIS
Management Consulting: http://cremperformance.com/en/strategie_en.html
Professor John Hinks, H. o. (July 2013). CORPORATE REAL ESTATE
MANAGEMENT AND FACILITIES MANAGEMENT FORUM. Zurich (pp. 128). Hamshire, UK: Zurich Insurance Group Ltd.
Ranko Bon. (1994). Ten Principles of Corporate Real Estate Management.
Corporate Real Estate Managemen, 9-10.

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Robert C. Kyle, F. M. (2000). Property Management (sixth edition). In F. M.

Robert C. Kyle, Property Management (sixth edition) (p. 14). Chicago:
Dearborn Financial.
Steffenhartmann et al. (2009). Realizing The Value Of Corporate Real Estate
Management. pp. 21-33.
The Boards of Valuers,Appraisers and Estate Agents Malaysia. (2015). Role of
Registered Valuers, Appraisers and Estate Agents. Retrieved from The
Boards of Valuers,Appraisers and Estate Agents Malaysia:
http://www.lppeh.gov.my/role.php
Wikipedia. (July, 2012). Property Management. Retrieved from
https://en.wikipedia.org/wiki/Property_management
Wurdemann, W. W. (2012). Corporate Real Estate Performance: The Added
Value Measured. Retrieved from http://www.tias.edu/docs/defaultsource/Kennisartikelen/corporaterealestateperformance_wouterwurde
mann.pdf?sfvrsn=6

Haueter, R. (2014, August 16). Chandler Property Management | Potential

Problems in Rental

Real Estate. Retrieved from Caldwell Property

Solutions: http://caldwellaz.com/chandler-property-management-potentialproblems-rental-real-estate/
TALLY PROPERTY, I. (2015). 4 Common Issues in Property Management and
Their Solutions.

Retrieved from TALLY PROPERTIES:

http://talleyproperties.com/blog/4-common-issues-in-property-managementand-their-solutions.html

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