Research Proposal (P1 Report)

The centralization of the CRE function

and its implications on alignment
strategies of global portfolios

KaranGupta
Student Number: 4413652
Address: Hugo de Grootstraat 90. 2613 TW, Delft.
Phone:
Email:
Date:
Graduation Laboratory:
1

Contents
Personal Motivation .............................................................................................................. 3
Vision about the research subject ...................................................................................... 3
Future role in the construction (real estate) industry ......................................................... 3
Study Targets General and Personal ................................................................................... 4
Research Proposal ................................................................................................................. 5
Research Methodology ...................................................................................................... 5
Problem Analysis ................................................................................................................... 6
Literature Review and Problem Build Up ............................................................................... 7
Alignment of Corporate Real Estate with Corporate Business Strategies ............................ 7
Globalisation of Businesses (and consequent Corporate strategies)................................... 9
The centralisation of the Corporate Real Estate Function ................................................ 10
Implications of Local culture in CRE strategies ................................................................. 11
Main Problem to be solved .................................................................................................. 14
Main Research Question .................................................................................................. 14
Reference List ...................................................................................................................... 16

Personal Motivation
An interest in how various functions affect people and organisations has led to the
conception of this study. Globalization and the consequent cross cultural implications on
people and organisations are topics that I am highly intrigued by and that has led me to
choose a topic where I am able to study the links between local cultural differences,
globalization and the way in which delivery systems (for example the delivery of a real estate
strategy) are executed in such an environment. I believe workplace management is one of
the most important topics within the domain of corporate real estate management/ Facility
management. It the one strategy which directly affects the satisfaction levels of employees
of a company and is consequently their productivity levels. It also affects the real estate
occupancy costs of a company (real estate being one of the top three costs to a company
usually). It can be thus safely justified that workplace management and strategy are one of
the main concerns of big multinationals today.

Vision about the research subject

(unclear)

Future role in the construction (real estate) industry

Regarding the future role of the of this research in the real estate industry, it can be said that
this topic does hold a lot of relevance in for the future. The world is globalizing faster than
ever with constantly improving communication and technology. Additionally, globalization is
a topic rarely touched upon by any academic literature on corporate real estate. However
the real estate practice is constantly talking about how globalization is a force in the real
estate industry. This research would attempt to bridge that gap from the perspective of one
single real estate strategy and thus pave the way for future research concerning corporate
real estate in the global context.

Study Targets General and Personal

(still to be completed)

Research Proposal
Research Methodology
The concerned research project is based on a qualitative approach which will be more
subjective in nature The main methodology will follow an inductive system and attempt add
to existing knowledge regarding corporate real estate management. The research design is
largely influenced by what is known as "grounded theory" (Bryman, 2012). This approach
basically provides answers to relevant questions regarding the research question and seeks
to build up on the existing literature, and at the same time offering scope and direction for
future research.
The thesis will be inductive and iterative in nature. A cross case analyses backed by
comparative literature review and fieldwork exploration will be executed. In addition to
academic literature of scientific background, extensive professional literature will also be
studied. In the end it is expected that some gaps between academic and practical (from
practice) perspectives would eventually be bridged through the (generative) framework
developed in this thesis. This would then provide a more holistic view on the real estate
management in large multinationals operating all over the globe.

Problem Analysis

Target group for this research (WHO)

Geographical Basis (WHERE)

Chronological Context (WHEN)

Research Methodology (HOW)

Reasons for this research (WHY)

Scientific/Practical Relevance

The main target groups which are the focus of this

research are large corporate multinationals with
big global portfolios. These could be different
sector such as services, finance, oil & gas etc. The
main criteria is to hold a large global real estate
portfolios under management
The research aims to have a global outreach
based on the nature of a multinational
corporation's business along with an individual
focus representative of particular regions to
reflect cultural variations' impact on centralised
CRE strategies
While the research focuses primarily on the
current state of affairs of the position of the CRE
function within companies, it would also look at
how this position evolved and what is the future
outlook.
Mainly an inductive approach with focus on
adding on to existing body of knowledge and
develop an analytical framework that investigates
the tension between a centralised CRE approach
and local cultural variables
There is limited literature which focuses on the
position of the CRE in the company. The practice
however regards this is as very important. Hence
to bridge this gap, there is a need for specific
research on how the organisational position of
the CRE team influences alignment strategies and
how cultural differences across the globe are
addressed within these increasingly centralised
decisions
This thesis attempts to bridge a gap between
scientific and professional perspectives. n this
context it has a dual focus by generating an
analytical framework through scientific
approaches that could be easily adopted by
practice.

Literature Review and Problem Build Up

The main problem emerges out of an extensive literature review which classified into four
domains. Literature and knowledge accumulation on these four domain is imperative in
understanding the main problem. These provide a concrete background to the research
problem and also make it possible to point out the gap between current research within
academia and the discourse of the profession. These four domains are:
1.
2.
3.
4.

The alignment with CRE strategy and corporate strategy

Centralisation of the CRE Function
Globalisation of Businesses (and corporate strategy)
Local culture in CRE strategies

Literature Review Background of the Four domains:

Alignment of Corporate Real Estate with Corporate Business

Strategies
For over two decades, there has been a valiant effort by the academia to highlight the
advantages of linking corporate real estate to overall corporate strategies. Back in 1993
Nourse and Roulac stressed that an organisation's real estate decisions can be effective
only up to the extent to which they align and support the overall business strategy. This
relationship between real estate operations and real estate strategy would have to be
made explicit and so does the alignment between real estate strategy and corporate
strategy (Nourse & Roulac, 1993). Since then a substantial stride forward has been made
in making defining the alignment and the added value of real estate management both in
academia and practice. Lindholm and Levinen (2006) observed that in the crowded
market pace businesses need to be ever more strategic in the use of all their resources
including real estate. Real Estate is put at the same level as other supporting functions like
Human Resources, Finance, IT etc. In fact Joroff, Lambert, and Louargand (1993) called
the real estate the "fifth resource" of an organisation and hinted at how integral it is to
any business. Corporate Real estate now has graduated from being a "stepchild of
business research" (Too, Harvey, & Too, 2010) to being regarded as an important strategic
tool for a business and that too one which is difficult to duplicate by the competition
(Wills, 2008). The increase of corporate real estate research has also been fuelled by the
continued domination of real estate on the corporate balance sheet as well as the
increasingly complex business environment compelling firms to discover their hidden
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real estate values (Too et al., 2010). Thus the rhetoric of aligning CRE strategies to
corporate strategies is relatively strong in the present day. Corporate real estate
strategies are strategy decisions such as buy/lease decisions, workplace strategies,
procurement strategies, locational strategies, real estate finance, occupancy costs etc.
(Ali, McGreal, Adair, & Webb, 2006; Lindholm & Nenonen, 2006; Scheffer, Singer, &
Meerwijk, 2006; Then, Tan, Santovito, & Jensen, 2014). Business needs and corporate
strategies are based on aspects such as productivity, branding, profitability, growth,
flexibility, technology, people etc. (Ali et al., 2006; Lindholm & Nenonen, 2006; Scheffer et
al., 2006; Then et al., 2014). The method in which most of the literature has gone about
determining this alignment is by creating alignment models or frameworks which attempt
to show the link between CRE strategies/decisions and their relation to corporate
strategies. Most models of measurement and alignment attempt to make the various
variables of alignment between corporate strategy and real estate strategy explicit and
quantifiable. For example, Roulac (2001) made a table with eight accommodation
strategies and seven corporate strategies for competitive advantage. Lindholm and
Levinen (2006) use classify various real estate decisions into seven CRE strategies and
relates them to two the main business goal of increasing shareholders wealth.
It is however peculiar that the profession has only recently formally embraced the
importance of alignment between real estate strategy and corporate real estate (JLL,
2011, 2013, 2015a). The position of the CRE department, its own management structure
and its strategic alliances with partners has been the main topic of discussion among the
practice (Evans, 2012). Thus while the academia talks about the CRE alignment as a
"process, behaviour or/and state" (Heywood, 2011), the professional is more concerned
about the actual position of the CRE department. Thus there exists a certain gap between
the academic literature and professional literature based on the manner in which CRE is
perceived. This gap emerges from the evidence that none of the models/frameworks
conceptualised by the academia are actually being used by the profession (Heywood,
2011). So in this regard, bridging this gap would require looking at the affect of the
position of the CRE function in delivering real estate strategies, and also looking at
alignment as an output or a result.
The professional perspective is based more on the position of the CRE function within the
organisational structures and how that impedes or enhances the CRE department's ability
to function and deliver strategies. To study the changing position of the CRE function
within organisations it first imperative to explore how organisations are becoming highly
globalised. This is tackled in the following section

Globalisation of Businesses (and consequent Corporate strategies)

The world is globalising and the businesses are off shoring and outsourcing like never
before. Too et al. (2010) have already observed that globalisation has led to "hypercompetition" in the market. Another highly dominant perspective of study when it comes
to globalisation is the play of local culture. There is obvious tension between global
strategy and local cultural preferences, since businesses need to align themselves to local
systems to succeed in different markets. Stevens and Dykes (2013) have studied the effect
of home country and host country cultural differences on how firms locate to other
countries. They found that cultural differences can lead to a variety of differences in how
firms perceive foreign markets (Stevens & Dykes, 2013). Hofstede (1994) states that
management practices that work in one country might not work in another country due
to national and organisational cultural differences. However it is also stresses that a
common organisational culture can define a multinational and keep it together. Thus
while national culture has to be kept into account while managing, a common
organisational culture can actually help in keeping the corporate together, in the sense
that it creates common values (Hofstede, 1994).There is also enough evidence of different
managerial techniques that are used in cross cultural business situations. Apetrei, Kureshi,
and Horodnic (2015) take the example of small and medium enterprises (SMEs) to show
the various ways cross cultural differences can be managed. These include adaptation,
standardisation, submission etc. We see here that culture does play a big part in the
development of a corporate strategy in the face of globalisation. Coming to the
implications of this on real estate, Too et al. (2010) observes that managers must think
globally but act locally, i.e. glocalization in order to develop a well-articulated corporate
real estate perspective. Specifically, globalization brings about the development of new
corporate real estate capabilities that reflect a global mindset which can then evolve into
a pluralistic management capabilities in relation to corporate real estate decision making.
The next section looks at exactly what has been discussed: new real estate capabilities
with a global mind set. Due to globalization, the CRE department has actually become
more central and is acting centrally to deliver "consistent solutions" (Evans, 2012; JLL,
2011, 2013, 2015a, 2015b).

The centralisation of the Corporate Real Estate Function

The real estate function is becoming increasing globalised as has already been hinted in
the previous section. As a consequence, the corporate real estate decision making has
becoming highly central and globalised. CRE teams are becoming smaller and smaller and
are making decisions in consistence with a global strategy (Evans, 2012). It is however
interesting to notice that academia has not researched the organisational setting of
multinationals and their implications on the corporate real estate strategies. The
centralisation of the CRE function is in fact one of the main focus of all professional
perspectives. JLL (2013, 2015a) has stressed for the past six years that the centralisation is
a growing trend and it is changing the way the corporate real estate strategy is delivered.
This centralisation is also a consequence of businesses become more global and
multinational. Large corporate have a global footprint across almost the whole world real
estate managers find themselves having to manage a global portfolio (Krumm, 1999)
which is highly varied in terms of locations, countries, culture, costs, occupancy levels etc.
While academic research has not explicitly explored the CRE function within the
organisational setting of a corporation, the implications of globalisation are being
explored now. For instance Too et al. (2010) describe the advent of hyper-competition
due to globalisation and stress that real estate needs todevelop new capabilities to
support global business strategies. These include flexibility, networkorganization and
managerial learning capabilities (Too et al., 2010). However again, CRE delivery function is
not studied from the perspective of the organisational setting of a corporation. Then et al.
(2014) come close to the organisational aspects of a business, but the nature of their
research takes them away from delving further into that topic. Ali et al. (2006) explored
the differences in corporate real estate strategies between the UK and Malaysia and
found that the CRE reporting is highly different between a mature and emerging market.
While not directly talking about organisational aspects the authors do stress on further
research on internal factors relating to CRE management and the relationship of
corporate management and that consequent effectiveness in delivering a CRE strategy.
Within the limited amount of literature on CRE functions in an organisation, it is worth
mentioning OMara, III, and Valenziano (2002) as they touched upon authority and
influence of the CRE function which is a direct narrative of their role in the organisation.
At that time they found that CRE intervention in global portfolios was more reactive than
active. Thus reiterating the fact that in the global world the CRE department faces
different challenges like cultural issues, lack of local knowledge, and corruption (OMara
et al., 2002). It is seen that even back in 2002 centralisation of the CRE function was bring
discussed as OMara et al. (2002) observed: " The degree to which central oversight adds
value appears to be a topic of much debate within many companies and certainly within
the corporate real estate profession.

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Figure 1 - How the CRE function has evolved into a smaller, more centralised function with an emphasis of
strategic partner. Source: 2011, CoreNet Global

Implications of Local culture in CRE strategies

While there has been enough evidence of the fact that the corporate real estate functions
of major companies are become highly centralised and globally oriented it still remains to
be seen how corporate real estate takes into account the local cultural implications. It is
important to understand that many CRE strategies affect the people working in the
company directly. It is thus important is understand and apply cultural differences in the
such strategies of real estate. Then et al. (2014) tested there model of CRE alignment with
an international group of respondents. While most of the scores were high, there were
various differences in the exact CREM strategies preferred by different countries/cultures.
This was attributed to local business requirements and cultural preferences (Then et al.,
2014). One real estate strategy that has off late become quite important and recognisable
in enhancing worker productivity is what is known as workplace management and
strategy. This is the aspect which has received the most attention from academia and
profession about how culture affects real estate strategies. Various researchers have
explored the relationship between culture and workplace design & management. A direct
link is created between cultural differences and consequent difference in workplace
strategies (Cole, Oliver, & Blaviesciunaite, 2014; Heeroma, Melissen, & Stierand, 2012;
Plijter, Voordt, & Rocco, 2014; Riratanaphong & Voordt, 2015). Of course, comparatively,
the other CRE strategies have not been associated as much with cultural differences as

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has workplace strategies. This can be assumed to be due to the fact the workplace
strategies most directly affect the people of an organisation.
Putting these four domains of knowledge together it is observed that these domain ar
actually mutually interdependent. Figure 2 makes clear the various relationships between
these four domains of study. The importance of corporate real estate management for
business wellbeing is well regarded and discussed extensively among the academia for more
than 2 decades now and even the industry has recognised the importance of aligning the real
estate strategies with the corporate strategies (Haynes, 2012). Substantial amount of
research has been done to explore how the added value of CREM can be measured and
communicated. Various measurement models and KPIs have been developed to study how
real estate is aligned with corporate strategy (Lindholm & Nenonen, 2006). Additionally, the
corporate real estate function within large multinationals is becoming more and more
centralized as the business and supply chains become increasingly global (Then et al., 2014;
Too et al., 2010). JLL executive(s) have specifically said that the approach of Acting Globally
and Thinking Locally is very fast becoming their preferred way of taking real estate
decisions(JLL, 2015b). Alignment with business strategy and corporate real estate has gained
further importance as firms look to hold on to their competitive advantage in a
hypercompetitive environment created by globalisation (Too et al., 2010). In order to handle
their global real estate portfolios, corporate real estate departments have increasingly taken
a position of centrality where decisions are made on a global level and there is an attempt to
execute the same within local contexts, conversely doing the opposite (decentralizing the
real estate decisions) is actually claimed to be detrimental to the functioning of the CRE
function (JLL, 2015b). However, a large part of corporate real estate operations (buying,
leasing, selling, land use, mothballing, sale and lease back, workplace strategies, FM) are
based on local issues and standards, since real estate is essentially immobile and thus
governed by local drivers/variables. These local issues become challenges for the
management of large global portfolios (OMara et al., 2002). Krumm (1999) states that there
are real estate organisations that coordinate, design and construct and manage real estate
portfolios on a global scale but still cannot do it without a strong local involvement which
handle the problems of legislative, cultural and economic differences. While this is quite an
old research most of the concepts of local issues are still valid as agreed by Evans (2012).
Therefore there is an conflict between local culture and global decisions regarding the
corporate real estate management.

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Figure 2: The various relationships and interdepencies between the four domains of study. (own illustration)

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Main Problem to be solved

The current research proposal emerges out an extensive
ex
review of current and future
trends in corporate real estate management. While alignment by itself is very important
and the academia has been researching
res
the same for the past two decades (Haynes,
2012),, the profession is talking about managing global portfolios
portfolio (Evans, 2012; JLL, 2011,
2013, 2015a, 2015b).. Additionally there is a lot of talk about the centralisation of the CRE
function so that that it can deliver more consistent real estate strategies across the globe
and align better to global corporate strategies.
strategies. However the importance of cultural
challenges in effective real estate
tate interventions, especially when it comes to workplace
strategies. Also local issues like legislation, politics, economy etc.
etc. are not that properly
understood
od at the central level. Thus as the CRE function in corporate is getting
centralised, it is important to look at how this will affect the strategic alignment that the
academia always talks about. Which type of strategies are most affected by this
centralisation and more importantly how does the position of the CRE function affect the
strategic alignment
ignment process in large corporate with global portfolios.
Thus, there is a global CRE input which has faces cultural filters and barriers in its goal to
achieve alignment which is the local output. Figure 3 illustrates the concept of local filters
which pose
ose a challenge to centrally made CRE decisions.

Figure 3 - Global input and local outputs

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Main Research Question

What are the implications of a centralised corporate real estate function for effective
delivery of CRE alignment strategies?
OR
How can the increasingly centralised CRE strategies of MNC's deliver successful
alignment with core business considering global cultural variations?

Research sub questions

What are the drivers for the centralisation of the corporate real estate function within
a multinational corporation?
What are the local challenges faced by the multinationals regarding their real estate
management?
How does the position of the CRE department in the organisational structure of the
multinational affect its ability to deliver CRE strategies?
How does a centralised real estate department handle the emerging markets where
transparency is low and reputational risk is high for the CREM team?
Why does alignment between CRE and business strategy become even more important
in the context of globalization?

To conclude, the research looks at emphasising the organisational aspects of the CREM
functions and explore how centralisation effects these strategies in adding value for
the competitive advantage of firms.
Additionally, a new framework will be explored. This will be derived from existing
models of measurement, but will feature the organisational aspect as well.

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`

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