Real Estate as a Business Function

Real estate is often overlooked by senior managers as they delegate it to specialists who handle it on a deal-by-deal basis. However, some companies have recognized the potential impact of managing real estate as a business function, both in terms of cost reduction and increased productivity. By strategically managing real estate, companies like IBM and AT&T have saved billions of dollars and improved their competitive position.

The Dual Purpose of Real Estate Management

Companies that effectively manage real estate pursue two main objectives: cost reduction and improved competitive position. They achieve cost reduction by consolidating locations, simplifying layouts, and renegotiating leases. By doing so, they can optimize space utilization and reduce excess space, resulting in significant cost savings. Additionally, companies use real estate as a lever to improve their competitive position by aligning their real estate decisions with their business strategy. This can involve using real estate to support business goals, enhance communication across business units, and increase speed-to-market and competitiveness.

Evaluating Your Current Real Estate Situation

To assess the effectiveness of real estate as a company resource, managers need to evaluate their current real estate situation. This evaluation involves considering five key factors: amount of space, price, grade, area, and risk. By analyzing these factors, managers can identify areas for improvement and opportunities for cost reduction. This evaluation can be done using a corporate real estate scorecard that assigns weights to each factor based on its importance to the company. The scorecard then compares the performance of each facility to similar facilities in the company and industry, providing managers with a clear picture of their real estate effectiveness and areas for improvement.

A Framework for Real Estate Decisions

To make effective long-term real estate decisions, managers need to consider real estate within the context of a framework that encompasses functions, time, and space (F/T/S). Functions refer to the work that needs to be accomplished and how it affects real estate needs. Time relates to when the facility is in use and how it aligns with business operations. Space encompasses the physical resources and layout of the facility. By considering these three elements together, managers can make informed decisions about real estate that align with their business strategy and objectives.

The Essential Data for Real Estate Analysis

To support real estate decision-making, managers need access to essential data. This includes information about the company’s portfolio, such as location, facility type, and financial commitments. It also includes business data, staffing data, and market data to provide a comprehensive view of the real estate situation. This data can be organized into a specialized database that allows for detailed analysis and comparison of different real estate options. Financial, customer, and operational measures can then be used to evaluate the costs, productivity, and value of different real estate scenarios.

New Models for Real Estate Planning

Computer models are essential tools for visualizing the impact of real estate decisions on future space needs and costs. Staff models help determine the maximum employee load and how space can be used more efficiently. Space models identify excess and shortfall in space usage and guide decisions on space allocation. Scenario models evaluate real estate options based on different business scenarios, allowing managers to test alternatives and compare costs and benefits. These models enable managers to make informed decisions based on data and analysis rather than relying on traditional thinking or standard practices.

Dun & Bradstreet’s Real Estate Initiative

Dun & Bradstreet provides a successful example of how a large company can strategically manage its real estate portfolio. By analyzing location, layout, and leasing options, Dun & Bradstreet was able to reduce its occupancy costs by 17% and increase potential shareholder value by $600 million. Through consolidation, colocation, renegotiation, disposition, and virtual officing, Dun & Bradstreet was able to align its real estate holdings with its business goals and improve cost efficiency. Real estate specialists played a key role in driving these changes by focusing on corporate objectives and utilizing a planning process that integrated real estate with other business functions.

Accommodating Change through Effective Real Estate Management

As companies undergo restructuring and change, real estate management becomes crucial in accommodating ongoing transformation. By building flexibility into real estate portfolios and aligning real estate decisions with market and competitive forces, companies can ensure that their real estate resources remain affordable and support their evolving business needs. Real estate should be viewed as a strategic asset that can drive growth, enhance productivity, and improve cost efficiency.


Managing real estate as a business function can lead to significant cost savings and improved competitiveness for companies. By strategically evaluating the current real estate situation, considering real estate decisions within a framework of functions, time, and space, utilizing essential data and computer models, and aligning real estate with business goals, companies can optimize real estate resources and achieve long-term growth and cost efficiency. Dun & Bradstreet’s success in real estate management serves as a model for other companies looking to drive change and improve their competitive position through effective real estate management.

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