Is the much discussed agility of Corporate Real Estate visible in practice?: An empirical study of the relationship between business metrics and surplus property

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Very little work has been undertaken on the consequences of economic recession on Corporate Real Estate (CRE) and its realignment following strategy changes. Only those CRE portfolios with short term leases have a dynamic alignment capability allowing them to readily adjust to change. For those with longer leases this leads to the creation of a surplus property provision (SPP). This paper analyses the relationship between SPP and metrics for business and CRE through a period of significant change, by examining company annual reports using a distributed time lag auto-regression model. The results show an inverse relationship between SPP and profits but a positive relationship with both turnover and employment, suggesting that declining profits trigger the re-shaping of CRE. SPP is used to provide portfolio flexibility because of the lack of dynamic alignment capability. SPP increases as the commitment to short leases (<5 years) increases. The estimated time for SPP to revert to zero ranges from 3 to 9 years, but one category, financial services, is continuing to increase its liability. CRE agility has yet to be visible in the financial reports of companies, suggesting its impact remains limited, indicating the relationship between business parameters and CRE is more complicated than envisaged.
TaalEngels
ArtikelnummerVol 23: 4
Pagina's227-243
Aantal pagina's17
TijdschriftInternational Journal of Strategic Property Management
Volume23
Nummer van het tijdschrift4
DOI's
StatusGepubliceerd - 14 mrt 2019

Vingerafdruk

Empirical study
Surplus
Agility
Business relationships
Real estate
Lease
Profit
Alignment
Annual reports
Time lag
Recession
Turnover
Liability
Financial services
Regression model
Trigger
Autoregression
Realignment

Trefwoorden

    Citeer dit

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    title = "Is the much discussed agility of Corporate Real Estate visible in practice?: An empirical study of the relationship between business metrics and surplus property",
    abstract = "Very little work has been undertaken on the consequences of economic recession on Corporate Real Estate (CRE) and its realignment following strategy changes. Only those CRE portfolios with short term leases have a dynamic alignment capability allowing them to readily adjust to change. For those with longer leases this leads to the creation of a surplus property provision (SPP). This paper analyses the relationship between SPP and metrics for business and CRE through a period of significant change, by examining company annual reports using a distributed time lag auto-regression model. The results show an inverse relationship between SPP and profits but a positive relationship with both turnover and employment, suggesting that declining profits trigger the re-shaping of CRE. SPP is used to provide portfolio flexibility because of the lack of dynamic alignment capability. SPP increases as the commitment to short leases (<5 years) increases. The estimated time for SPP to revert to zero ranges from 3 to 9 years, but one category, financial services, is continuing to increase its liability. CRE agility has yet to be visible in the financial reports of companies, suggesting its impact remains limited, indicating the relationship between business parameters and CRE is more complicated than envisaged.",
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    author = "H. Cooke and {Appel - Meulenbroek}, H.A.J.A. and T.A. Arentze",
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