Corporate real estate management in Singapore: a business management perspective.

ABSTRACT. Corporate real estate management (CREM) practices in Asia have been a relatively under-researched area compared with those from Europe and North America. This paper represents an attempt to enhance the current knowledge of CREM in Asia. Part I of this study provides a snapshot of CREM practices among Singapore multi-national companies (MNCs) and listed firms. Ninety-seven firms were surveyed on three main business management perspectives: corporate real estate planning, corporate real estate organizational structure and corporate real estate performance. The study found that in general, corporate real estate (CRE) is under-managed among MNCs and listed firms in Singapore. Creating awareness of the importance and relevance of good CREM practices is therefore the most pertinent task. Part II of this paper focuses specifically on CRE performance. A data-driven analytical technique is adopted to study the direct and indirect effects of performance factors on corporate real estate. The results indicate that only corporate real estate planning and the existence of a real estate unit have a direct impact on corporate real estate performance. This finding is both theoretically expected and important. The results reinforces current literature postulations on the importance of strategic planning as the key skills that corporate real estate managers need to be equipped with to meet the challenges ahead.

KEYWORDS: Corporate real estate planning; Corporate real estate organizational structure; Corporate real estate performance

KORPORACINIS NEKILNOJAMOJO TURTO VALDYMAS SINGAPURE: VERSLO VALDYMO PERSPEKTYVA

Korporacinio nekilnojamojo turto valdymo (KNTV) praktika Azijoje buvo mazai tyrinejama sritis, palyginti su Europa ir Siaures Amerika. Siame darbe meginama papildyti turimas zinias apie KNTV Azijoje. Pirmoje sio mokslinio darbo dalyje trumpai apzvelgiama KNTV praktika Singapuro multinacionalinese imonese ir i sarasus itrauktose firmose. Buvo apklaustos 97 firmos. Klausimai buvo susije su trimis pagrindinemis verslo valdymo perspektyvomis: korporaciniu nekilnojamojo turto planavimu, korporacine nekilnojamojo turto organizacine struktura ir korporaciniu nekilnojamojo turto rezultatyvumu. Tyrinejant buvo nustatyta, kad Singapuro multinacionalinese imonese ir i sarasus atrauktose firmose korporacinis nekilnojamasis turtas (KNT) valdomas nepakankamai gerai. Todel geros KNTV praktikos svarbos ir aktualumo propagavimas yra pagrindine uzduotis. Antroje sio mokslinio darbo dalyje daugiausia demesio skiriama KNT rezultatyvumui. Siekiant istirti tiesiogine ir netiesiogine rezultatyvumo veiksnio itaka korporaciniam nekilnojamajam turtui, buvo pritaikyta duomenimis pagrista analitine technika. Rezultatai rodo, kad korporaciniam nekilnojamojo turto rezultatyvumui tiesiogine ataka daro tik korporacinis nekilnojamojo turto planavimas ir nekilnojamojo turto padalinys. Si isvada yra ir svarbi, ir tiketina teoriskai. Rezultatai patvirtina siuo metu literaturoje pateikiamas prielaidas, kad strateginis planavimas yra esminis dalykas, butinas korporacinio nekilnojamojo turto vadybininkams, kad jie galeto atsakyti i laukianeius issukius.

1. INTRODUCTION

Corporate real estate management (CREM) is concerned with the management of land and buildings owned by companies not primarily in the real estate business. Over the last two decades, academic interests in this subject had remained high generating strong empirical evidence of the ability of corporate real estate to enhance corporate wealth and thus firmly establishing the academic and practical significance of research in this subject.

While the CREM practices in Europe and North America is well documented in an annual survey conducted by the Corporate Real Estate Management Research Unit (CREMRU) at the University of Reading since 1993, much less is known about the same in Asia despite the increasing corporate real estate holdings by many multi-national companies (MNCs) in this region as a result of rapid economic development. As such, Part I of this paper attempts to address this void by examining the corporate real estate (CRE) practices of MNCs and listed companies in Singapore. The importance of this study is that it enhances current understanding of corporate real estate management practices and promotes best CREM practices by providing evidence from a different business environment. In addition, the study exposes current inefficiencies in Asian corporate real estate practices and thus serves as the impetus for business firms to urgently review the role of real estate in the firm and how its value can be maximized.

The proliferation 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 the "hidden" real estate values (Liow, 1999; Carn et al., 1999). Consequently, CRE performance had been a key area of focus for many corporate real estate research (e.g., Veale, 1989; Nourse, 1994; Brounen and Eichholtz, 2005).

For many of the empirical studies on CRE performance, the theoretical propositions are often based upon pioneering studies such as those of Zeckhauser and Silverman (1983) and Veale (1989). Statistical tests are then carried out to test the theoretical propositions of these foundation studies. Based on these observations, Part II of this paper aims first; to review the critical factors influencing CRE performance because it has been more than two decades since the pioneering studies had been carried out. Second, unlike the traditional approach which is based on theoretical considerations, this study adopts a data-driven approach to identify and study the direct and indirect effects of factors on CRE performance. Schaefers (1999) opines that further studies should be conducted to determine their interrelationship and relative impact on corporate real estate performance. Consequently, this study is potentially important as it enhances current understanding of CRE performance by providing insights from another perspective. Further, the knowledge of factors that are current and critical in influencing CRE performance serves as a guide to firms on the allocation of resources to maximize the value of CRE.

The paper begins with a review of current literature on corporate real estate practices and the factors influencing corporate real estate performance. The research methodology used in this study is then discussed. Next, the findings from the study are presented and finally, the paper ends by providing some concluding remarks.

2. LITERATURE REVIEW

2.1. Corporate Real Estate Practices

In an extensive review of existing literature (from 1989 to 2001) on CREM, Manning and Roulac (2001) found a strong orientation towards a narrow financial corporate real estate perspective in current CREM research. A key recommendation by Manning and Roulac (2001) is to broaden the traditional financial focus to include a business management dimension that integrates real estate into the business strategy--real estate strategy implementation sequence of CREM decisions. From the current research, three areas appear important in the light of a business management focus: (a) corporate real estate planning to facilitate the development of CREM strategy that supports the overall business strategy; (b) corporate real estate organizational structure that allows the effective implementation of the corporate real estate strategy; and (c) corporate real estate performance measurement.

Avis et al. (1989) found little evidence of CREM strategic planning amongst firms. Instead, a reactive approach was often adopted to meet property needs. A decade later, a study by Schaefers (1999) showed minimal improvement as planning activities have only been accorded moderate importance in his empirical study on German companies. This is despite the fact that strategic planning has often been rated by managers as one of the top skill requirements for the future (Gibson, 1995; Bon et al., 2003). Similarly, the importance of developing a CREM strategy that is linked to business strategy had also been strongly advocated by many CREM researchers (e.g., Nourse and Roulac, 1993; Bon, 1994; Carn et al., 1999). Further, there is no lack of strategic planning models in the current CREM literature (e.g., Nourse and Roulac, 1993; Duckworth, 1993; Apgar, 1995). It appears then that while managers believe in strategic planning, there seems to be difficulties when it comes to implementation. Avis et al. (1989) suggest that this could be due to the fact that business and political decisions have short lead times which makes it difficult to accommodate the longer planning period required for property. Another reason for the lack of strategic CREM planning may be due to poor or nonexistent property information systems. Many studies had revealed inappropriate and/or inadequate property information systems that tend to gravitate towards accounting rather than decision-making data (Bon, 1994; Carn et al., 1999). The existence of a property information system that supplies 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 (Apgar, 1995). Consequently, Manning and Roulac (2001) recommend more research that would better link corporate real estate databases and analytic tools to key value drivers of business strategies.