Business Management Executive Q&A
Nov 1, 2007
By: Suzann D. Silverman, Editor-in-Chief
CPN and CB Richard Ellis Inc. collaborated on the fourth annual joint roundtable discussion during the CBRE World Conference in September. This year, CPN editor-in-chief Suzann Silverman joined with CBRE vice chairman of global corporate services William Concannon and a number of top corporate real estate executives to discuss today's biggest issues affecting their businesses. Participants included Susan Chapman, global head of operations for Citi Realty Services; Sean McCourt, chairman of Ford Motor Land Development Corp.; Mark Nicholls, senior vice president & corporate workplace executive for Bank of America; Mark Schleyer, vice president of corporate real estate for AT&T Services Inc. and Stephen Barker, president of Boeing Realty Corp. What follows is an excerpt from the conversation on space consolidation issues. Other excerpts appear in the Nov. 1 issue.
Silverman: What are you doing now in your efforts to consolidate? What are the primary issues that you’re focusing on, and which are most effective and allow for the greatest flexibility later on?
Concannon: There are three things, really. Downsizing is one. Consolidation through merger activity is two—10 locations in a large city and you want to get to four, so that drives you. Then there’s this whole behavioral change where people can work at home … and get their calls patched straight through like they’re in their office. And that third element of alternative work strategies companies are deploying at (different) levels, some very aggressively and others not as aggressively. So space efficiency derives off of space standards and space occupancy standards and design standards. Consolidations are more financially driven around how you want to build. And then the third is just this whole wrapper of how we’re going to drive people to be more efficient by letting them work where they want to.
Schleyer: Ours is definitely consolidating locations. We’ve had very high vacancy in our administrative portfolio for several years. But once you begin consolidating and building up a new workplace, it goes hand in hand with different workplace strategies. So we have done several pilots, I would say—it’s fairly large. Not only do we use our footprint but we also put the sales force in hoteling kind of space, mobile space. And so we’ve decreased our footprint within,
Barker: I would add a fourth one in there, and that’s as you continue to lean out your business processes in your manufacturing especially, then you create empty space, unneeded for your current or future business practices. Airplane manufacturing is a great example simply because we’ve been making airplanes the same way for the last 60 years. Aluminum tube, rivet it together and then you move it to the next place. Well, our new airplane is carbon fiber and it’s spun, and so … they took a look at how could they change the assembly process of it. And so now we’re building twice as many airplanes in half the space, twice as fast. And they’re more profitable.
Concannon: But you call that the “leaning out” of space.
Barker: That is the leaning out of our business practice, which then is spun off of 1.2 million square feet, which we rezoned from industrial to retail, which increases the value from $6 a square foot to $19 a square foot, and a Target just opened and a Loews and the whole bit. And so that’s real estate adding value as you’re getting out.
Concannon (to McCourt): You’re doing the same thing?
McCourt: Absolutely. More tenants.
Barker: How do you optimize the operation of this asset you no longer need? In that case, it didn’t go away because of any bad news. It actually went away because of good news. Nobody lost their jobs because they leaned out—because of real estate opportunity. It was that the company got much more efficient in the way it makes airplanes. … It's a much smaller manufacturing footprint because of the way we do it. It’s now major sections come in and you put them together. So all that space requirement is permanently gone from our production facility. You don’t need it. You can make 20 airplanes or 10 airplanes a month in half the space that it took even just five years ago.
Schleyer: Our factory is spread out over 5,000 network locations, and you know, technology has driven down our footprint in those network locations dramatically over the last 20 years. So what we’ve been concentrating primarily on is getting out of admin space. That’s the only thing you can free, and half our portfolio is in central offices, and we have a lot of stranded space … and I think that’s our biggest challenge, to have a reuse of that space or redeployment. It’s hard to move the smaller switches out of there; it’s still tethered by wires. But I think there’s a parallel there with the factory being across nodes and networks.
By: Suzann D. Silverman, Editor-in-Chief
CPN and CB Richard Ellis Inc. collaborated on the fourth annual joint roundtable discussion during the CBRE World Conference in September. This year, CPN editor-in-chief Suzann Silverman joined with CBRE vice chairman of global corporate services William Concannon and a number of top corporate real estate executives to discuss today's biggest issues affecting their businesses. Participants included Susan Chapman, global head of operations for Citi Realty Services; Sean McCourt, chairman of Ford Motor Land Development Corp.; Mark Nicholls, senior vice president & corporate workplace executive for Bank of America; Mark Schleyer, vice president of corporate real estate for AT&T Services Inc. and Stephen Barker, president of Boeing Realty Corp. What follows is an excerpt from the conversation on space consolidation issues. Other excerpts appear in the Nov. 1 issue.
Silverman: What are you doing now in your efforts to consolidate? What are the primary issues that you’re focusing on, and which are most effective and allow for the greatest flexibility later on?
Concannon: There are three things, really. Downsizing is one. Consolidation through merger activity is two—10 locations in a large city and you want to get to four, so that drives you. Then there’s this whole behavioral change where people can work at home … and get their calls patched straight through like they’re in their office. And that third element of alternative work strategies companies are deploying at (different) levels, some very aggressively and others not as aggressively. So space efficiency derives off of space standards and space occupancy standards and design standards. Consolidations are more financially driven around how you want to build. And then the third is just this whole wrapper of how we’re going to drive people to be more efficient by letting them work where they want to.
Schleyer: Ours is definitely consolidating locations. We’ve had very high vacancy in our administrative portfolio for several years. But once you begin consolidating and building up a new workplace, it goes hand in hand with different workplace strategies. So we have done several pilots, I would say—it’s fairly large. Not only do we use our footprint but we also put the sales force in hoteling kind of space, mobile space. And so we’ve decreased our footprint within,
Barker: I would add a fourth one in there, and that’s as you continue to lean out your business processes in your manufacturing especially, then you create empty space, unneeded for your current or future business practices. Airplane manufacturing is a great example simply because we’ve been making airplanes the same way for the last 60 years. Aluminum tube, rivet it together and then you move it to the next place. Well, our new airplane is carbon fiber and it’s spun, and so … they took a look at how could they change the assembly process of it. And so now we’re building twice as many airplanes in half the space, twice as fast. And they’re more profitable.
Concannon: But you call that the “leaning out” of space.
Barker: That is the leaning out of our business practice, which then is spun off of 1.2 million square feet, which we rezoned from industrial to retail, which increases the value from $6 a square foot to $19 a square foot, and a Target just opened and a Loews and the whole bit. And so that’s real estate adding value as you’re getting out.
Concannon (to McCourt): You’re doing the same thing?
McCourt: Absolutely. More tenants.
Barker: How do you optimize the operation of this asset you no longer need? In that case, it didn’t go away because of any bad news. It actually went away because of good news. Nobody lost their jobs because they leaned out—because of real estate opportunity. It was that the company got much more efficient in the way it makes airplanes. … It's a much smaller manufacturing footprint because of the way we do it. It’s now major sections come in and you put them together. So all that space requirement is permanently gone from our production facility. You don’t need it. You can make 20 airplanes or 10 airplanes a month in half the space that it took even just five years ago.
Schleyer: Our factory is spread out over 5,000 network locations, and you know, technology has driven down our footprint in those network locations dramatically over the last 20 years. So what we’ve been concentrating primarily on is getting out of admin space. That’s the only thing you can free, and half our portfolio is in central offices, and we have a lot of stranded space … and I think that’s our biggest challenge, to have a reuse of that space or redeployment. It’s hard to move the smaller switches out of there; it’s still tethered by wires. But I think there’s a parallel there with the factory being across nodes and networks.
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