Stuttgart, Germany, April 17, 2024. The digital transition and the use of artificial intelligence hold great potential for corporate real estate. They create greater transparency and will be the focus of increasing attention in the future. However, there is considerable room for improvement in the areas of user-friendliness, cost-benefit ratios and user skills. This is the result of the annual trend analysis, carried out by Drees & Sommer SE, regarding corporate real estate management. The consulting firm specializes in construction and real estate. The latest study aims to answer questions such as whether the trend towards the owners’ representative function through centrally organized CREM units will continue; how the awarding of property management mandates has changed; why real estate managers believe operating risks have declined; and why there is still optimization potential in the areas of ESG and sustainability despite noticeable change.
A total of 273 persons with responsibility for real estate in companies from different industrial sectors took part in the annual online survey. The representatives from industry, real estate companies as well as the financial and insurance area responded to questions about challenges and trend topics in real estate management. Most of the participants in the study were from Germany, Austria or the German-speaking part of Switzerland, and in terms of the size of their companies and their property portfolios they represented a wide range, from medium sized enterprises to large corporations.
Trend towards Owners’ Representatives and Centralized Organization
As in the previous year, almost three-quarters of those surveyed stated that they acted as owners’ representatives. When they assume this function, organizations take responsibility for the entire life cycle of corporate properties and are strategic partners with regard to locations, production and workplaces.
This shows the continuing trend for real estate managers to develop into integrated and reliable experts in the areas of ESG, sustainability and digital transition.
The trend towards central real estate management remains constant. 65 percent of those surveyed stated that they were centrally organized – just one percent more than in the previous year (64 percent in 2023 and 54 percent in 2022). Thomas Häusser, Partner at Drees & Sommer, has been watching this development for years: “In our experience, companies with a professional, central CREM unit clearly demonstrate the advantages of this organizational structure: they develop more efficient solutions for current challenges and implement these more quickly and successfully.” The benefits can be seen in the transparent management of costs and the implementation of ESG and sustainability principles.
Trend towards Integrated Facility Management Assignment across Regions
In the awarding of facility management assignments, cross-regional providers with a strong network and a broad range of services continue to be given preference, while piecemeal awarding of contracts is becoming increasingly rare, partly to minimize the work and costs involved and to streamline processes. Bernd Fisel, Associate Partner at Drees & Sommer, explains why it is worth taking a closer look at this development: “Companies often decide to combine facility management services and award them to providers with comprehensive service offerings. They do this with the aim of reducing their costs and for tax optimization purposes. However, there are situations in which it makes sense to award contracts for specific services individually, for instance where warranty issues may arise in connection with the construction of equipment or specialized manufacturing facilities.”
Artificial Intelligence and Digital Transition: the Struggle between Opportunities and Frustration
Some room for improvement remains with regard to the connection between real estate management and relevant topical issues. More than two thirds of the respondents thought that issues such as sustainability, wellbeing, mobility and digital transition were not sufficiently enough embedded in their real estate strategy. Those surveyed see much future potential in new technologies and artificial intelligence. 93 percent of the participants are of the opinion that digital processes will play an increasingly important role in real estate management. Accordingly, for them, the three most relevant added values are the optimization of processes (82 percent), the increase of efficiency and/or reduction of operational costs (74 percent) and higher transparency through digital documents (69 percent).
However, real estate managers are also increasingly critical of the fact that much of the potential is not yet being exploited, or that tools do not meet expectations. More than 80 percent of the respondents are not satisfied, in terms of cost-use ratio, with the implementation of new building technology. The lack of standardized tools (63 percent), missing competences of employees (58 percent) and high investment costs (56 percent) represent the most important hurdles. In order to enhance the acceptance of new technologies, the participants of the study suggest a higher level of user friendliness and more transparency with regard to the features and advantages of certain systems and tools.
Thomas Häusser explained: “Modern technologies and digital appliances, such as computer aided facility management (CAFM) systems or portfolio management tools, provide deeper insights into processes and deliver precise, up-to-date, and lasting knowledge.”
Appreciably Reduced Operating Risks
Operating risks have reduced noticeably in the past two years. In contrast to the previous year, around two-thirds of those surveyed stated that they have no unsolvable operating risks.
Only nine percent of the participants have problems of this kind – a significant change on last year’s responses (19 percent). “In the past two years, there has been an obvious reduction in operating risks – thanks to improved structures, more transparent reporting and better-defined delegation,“ commented Bernd Fisel.
More ESG Strategies, but Subdued Investments
Significant progress has been made in the implementation of ESG and sustainability strategies. These are increasingly incorporated into the corporate strategy in their entirety as a central element, and are being implemented more rigorously as part of real estate management. Just 22 percent of the respondents state in the current survey that they know little or nothing about ESG and the related requirements for their company. In 2023, this had been almost a third, and in 2022 it was about a half. There are also more companies with a clearly defined ESG strategy. Almost a quarter – five percent more than in the previous year – also stated that their CREM area has an ESG policy that is in keeping with the corporate strategy.
However, many companies are still very conservative with regard to ESG-relevant improvements. Only a third of respondents place significant emphasis on ESG-related measures in their capital expenditure planning, while ten percent disregard it altogether. Yet there are a number of reasons for giving ESG aspects greater priority. “In the medium term, companies will be giving away money if they continue to place so little emphasis on measures to meet environmental, social and corporate governance requirements in their capital expenses forecast. Not only are companies under increasing social and political pressure to adhere to sustainability principles – the buildings concerned will also fall in value, which will make them harder to find buyers or tenants for,” said Drees & Sommer Partner Thomas Häusser.