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Client
Corporate Real Estate Perspectives
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University of Connecticut
Real Estate Principles

Deloitte Consulting LLP

April 12, 2011

March 26, 2010
Why Corporate Real Estate?
What is Corporate Real Estate?… (and what its not)
As a discipline, real estate can be divided into two primary segments segments

Real Estate Market Segments

Corporate Real Estate Segment Real Estate Industry Segment

ü Users’ of real estate (demand) ü Characterized as ‘investors’ of real estate

(supply)
ü Operational business unit within
organization ü Funded through REITs, as well as
institutional and private equity funds
ü Reports to CXO
ü Measure asset performance in strict
ü Mandate to manage a company’s real estate
financial terms
and physical asset portfolio
ü Transaction oriented
ü Lease and transaction management
ü Driven by valuation/value opinion
ü Space management
ü Focus on regulatory issues
ü Move Management
ü Industry dependent on availability of credit
ü Facilities / Project Management
/ commercial real estate capital
ü Manage associated business processes
ü Measured by utilization and total cost of
ownership

-3-
Why does CRE Matter?
Real estate assets represent an enormous opportunity for cost reduction,
optimization, andFederal
Massive management
Over 1 trillion sq. 2nd or 3rd Property & real
portfolio – GSA Management of
ft. of facilities and largest operating estate represent
alone has 8,900 facilities exceeds
real estate are cost, accounting up to 50% of total
assets, totaling 12- 20% of a
owned and used for up to 30% of assets on a
over 380 million typical income
by Fortune 2000 total operating typical balance
gross square feet statement
companies expenditures sheet
nationwide

Over $10 Trillion dollars are invested in facilities typically with minimal management processes and tools

1 trillion sq. ft. | millions of people| hundreds of thousands of assets

-4-
What do they do?
Most organizations, in one way or another, have a need to manage the "where"
component of how work gets down. This generally falls to the Corporate Real
Estate (CRE) Division or equivalent. CRE organizations are entrusted to manage
three distinct aspects of the "where" equation:

Manage Physical environment and accompanying support services

Workplace that an organization relies on to execute its work

Manage Buildings, infrastructure and other capital investment

Assets required to support an effective Workplace

Aggregation and transaction of assets and workplaces

Manage within the contextual requirements of an organization's
Portfolio need for proximity to customers, suppliers, partners and
employees

-5-
Evolution of CRE Function Within the Organization
Increased organizational maturity has also helped to supporting the convergence
of the CRE function
Evolution of CRE Organizations

Target
Visionary
State
CRE focus is workplace strategy
Organizational Effectiveness / Maturity

CRE is responsible for workplace solutions that

seamlessly integrate all infrastructure requirements
(real estate, technology and human resources).
CRE elevated to the executive committee.
Strategist
CRE focus is enterprise value
Focus is not only on the needs of the individual business units
but proactively making real estate decisions that are aligned
with the company strategy, while minimizing risk and
maximizing returns.
Advisor
CRE focus on advising business units
CRE advises business units on real estate solutions
and provides value added services and expertise.
Some services may be out-tasked.

Task Manager
CRE is an order-taker
CRE serves customers through task oriented
activities, such as negotiating leases, building out
space and maintaining facilities.

Traditional Future
CRE Evolution
-6-
Corporate Real Estate Issues
and Challenges
CRE Segment, Functions & Business Challenges
Primary Market Core Corporate Real Key CRE
Segments Estate (CRE) Functions Business Challenges

1 § Workplace does not align to

workforce trends
Manage
Workplace § Occupancy costs continue to rise
while headcount decreases
Real Estate
Industry § Insufficient data relative to their real
2 estate portfolio

Manage § Cost allocation to business units

Assets
§ Companies are often overpaying in
lease expenses

§ Ineffective portfolio management

3
§ Reactive decision - making
Corporate Manage
Real Estate Portfolio § Heightened M&A activity

§ Decentralized decision making

§ Space utilization is under optimized

Enabled by Technology
-8-
Understanding CRE Business Challenges
Today’s business environment creates several challenges for CRE organizations
within Fortune 500 companies

Challenges Begin § Occupancy costs continue to rise even when headcount may be decreasing
With Increasing § Many organizations have insufficient data relative to their real estate portfolio and
Costs And have difficulty managing key dates and activities
Heightened § Budget cutbacks and heightened expense control have created the requirement to
Scrutiny On more accurately allocate facilities costs to individual business units
Corporate § Landlords are billing aggressively, companies may be overpaying in lease expenses
Expenditures… § Ineffective portfolio management often leads to excess inventory and over spending

…Are Magnified § Increased competition and customer demands require real estate to be proactively
By Time planned and quickly delivered
Pressures… § Heightened M&A activity has increased constraints on companies

§ Location management is typically decentralized and driven by the business unit,

leaving CRE groups little ability to leverage similar economies of scale
…And Are
“Institutionalized” § Reactive decision-making, service delivery, and real estate solutions are often sub-
By Traditional optimal & ineffective
Operating § Space acquired during periods of expansion may be idle or excess current needs
Structures § Excessive space is very difficult to dispose of in today’s real estate market
§ Optimizing space utilization often requires access to capital

-9-
Finding Data to Support Total Cost of Ownership (TCO)
TCO CATEGORY TCO COMPONENT
• Depreciation
• Lease Expenses
Cost to Own
• Insurance
• Taxes
• Utilities
• Repairs & Maintenance
• Facilities Management
• Space Planning
Cost to Operate
• Environmental Health & Safety
• Physical Security
• Project Engineering
Total Cost of • Software
Ownership
• Grounds
(TCO)
• Housekeeping / Janitorial
For Real Estate &
• Food Services
Facilities
• Transportation Services
Cost to Provide Site Services • Health & Wellness
• Child Care / Day Care
• Mail Services
• Common Conference Room Admin
• Stockroom Services
• Multi-Site Environmental Health & Safety
• Multi-Site Strategic Planning
Cost to Provide Multi-Site Services
• Multi-Site Warehousing
• Multi-Site Fixed Asset Accounting
Cost to Administer Services • Management Operations

- 10 -
Addressing the CRE Challenges
Core CRET Service Offerings
CRET offers eight critical services to help our clients identify and solve their most critical real
estate and facilities challenges
Affiliated IMOs and Practices Target Industries

HCLS (Pharma
Service Delivery
Transformation

Public Sector
Sustainability

Management
Consultative

& Bio-Tech)
(Oil & Gas)
Divestitures &
Restructuring

Services
Integration,

Energy
Talent
M&A

FSI
IMO

Portfolio Optimization
Core CRET Service Offerings

Operations Improvement

Workplace Strategies

Real Estate and Facilities Program Management

Capital Planning and Construction

Occupancy Planning and Facilities Management

Sustainability Planning and Management

Technology Enablement

- 12 -
CRET Service Offering Descriptions
Deloitte’s Real Estate Services consulting experience spans all phases of the real estate life-cycle and
provides consulting expertise to a wide array of stakeholders and industries, including strategic sourcing
Plan Assess
Acquire

Acquire
Assess Manage

Operations Improvement Portfolio Optimization Workplace Strategies Strategic Sourcing

§ Real Estate and Facilities § Strategic Planning § Workplace Diagnostic and § Outsourcing delivery
Operational Assessments § Co-location Strategies Business Case model advisory
§ Operating Model/Service § Transition Playbooks § Integrated RE, IT and HR § Service provider
Delivery/Outsourcing/ § Market Analysis Solutions for Workplace Mobility compliance review
Organizational Design § Cost Optimization § Change Management, § RFP documentation,
§ Process Improvement § Lifecycle Planning § Global Implementation Planning solicitation, and evaluation
§ Performance Mgmt § Lease Mgmt and Advisory and Transition Management

Capital Planning & Construction Asset Management and Technology Enablement Sustainability Planning and
§ Capital Planning Occupancy Planning § Real Estate & Facilities Management
§ Requirements Analysis § Occupancy Planning & IT Strategy § Green Capital Programs
§ Program Budget and Cost Management § Real Estate & Facilities § Energy Strategy and
Estimating § Space Planning IT Vendor Evaluation Implementation
§ Location Strategies and Site § Benchmarking § Real Estate & Facilities § Sustainable Facility
Selection § Facilities Maintenance Strategy IT Implementation Operations Solutions
§ Design & Construction Program Assessment Support and Program § GHG Inventories and
Management Management Emissions reduction

- 13 -
CRET Service Offering Descriptions
Deloitte’s Real Estate Services consulting experience spans all phases of the real estate life-cycle and
provides consulting expertise to a wide array of stakeholders and industries, including strategic sourcing
Plan Assess
Acquire

Acquire
Assess Manage

Operations Improvement Portfolio Optimization Workplace Strategies Strategic Sourcing

§ Real Estate and Facilities § Strategic Planning § Workplace Diagnostic and § Outsourcing delivery
Operational Assessments § Co-location Strategies Business Case model advisory
§ Operating Model/Service
Delivery/Outsourcing/ Cost Reduction Strategies
§ Transition Playbooks
§ Market Analysis
§ Integrated RE, IT and HR
Solutions for Workplace Mobility
§ Service provider
compliance review
Organizational Design § Cost Optimization § Change Management, § RFP documentation,
§ Process Improvement § Lifecycle Planning § Global Implementation Planning solicitation, and evaluation
§ Performance Mgmt § Lease Mgmt and Advisory and Transition Management

Capital Planning & Construction Asset Management and Technology Enablement Sustainability Planning and
§ Capital Planning Occupancy Planning § Real Estate & Facilities Management
§ Requirements Analysis § Occupancy Planning & IT Strategy § Green Capital Programs
§ Program Budget and Cost Management § Real Estate & Facilities § Energy Strategy and
Estimating § Space Planning IT Vendor Evaluation Implementation
§ Location Strategies and Site § Benchmarking § Real Estate & Facilities § Sustainable Facility
Selection § Facilities Maintenance Strategy IT Implementation Operations Solutions
§ Design & Construction Program Assessment Support and Program § GHG Inventories and
Management Management Emissions reduction

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Portfolio Optimization
Portfolio Optimization: Definitions

¡ Deloitte is engaged by clients on two types of portfolio management consulting services:

– Strategy and Process for use of Capital, e.g. buy vs. lease decisions
– Portfolio rationalization in support of an enterprise level initiative such as cost
reduction, merger and integration, consolidation, etc.
¡ The first type of portfolio optimization typically involves comparisons of various asset
classes and their risk-weighted returns to capital. Decisions boil down to comparisons of
a firm’s Weighted Average Cost of Capital (WACC) vs. the returns from owning property.
Other decision criteria include:
– the firm’s ability and appetite to be a landlord
– the firm’s ability to create and capture value through its tenancy
– the firm’s long term location plans
– industry norms, and
– views of Wall Street analysts and similar stakeholders
¡ A majority of our projects focus on the second type of portfolio optimization – the

Understanding_CRET_Asset_Optimization_04052011_DLC_Delivered.pptx
analysis of specific sites to develop a long term portfolio strategy

- 16 -
Issues and Opportunities

Issues Opportunities
Approach ¡ Companies and Federal agencies are advancing beyond once- ¡ M&A: Corporate Development often forces a review of
and-done location strategies to view portfolio optimization as an portfolio and consolidation, for which few RE&F departments
ongoing activity are adequately prepared, especially when they are
¡ Companies and Federal agencies want to optimize their simultaneously merging their own departments, systems,
portfolio on their own, but lack the resources, work rules, and business rules, etc. The current low cost of capital will likely
relationships with senior and business unit leadership create a moderate increase in M&A activity in the near term

¡ Portfolios have typically developed for historical reasons, rather ¡ Recession: Clients are turning to cost reduction strategies,
than as the product of deliberate development of site due either to shareholder pressure or as a proactive approach
strategy, taking into account workforce, customer base, to a declining economy. Real estate and facility portfolio
supplier/partner base, etc. rationalization offers significant reductions in the annual
expense base and also the potential for one-time capital gains
from the sale of owned properties

Scope ¡ Business Continuity requirements increasingly force firms to ¡ Workplace of the Future (WoF): Firms typically think about
think through the robustness of their workflows, and how they portfolio in terms of current (rather than WoF) environment -
will maintain their business through disasters how does the portfolio need to evolve to support the needs of a
¡ Disparate ownership of local site selections can block workforce that is increasingly mobile and team-based?
development of a cohesive global or even national portfolio ¡ Green: Clients increasingly are required or decide to meet
strategy sustainability or other green objectives. It will fall to CRE, for
¡ RE&F Departments may lack the capabilities required to example, to shift the workplace into LEED certified
execute a large scale portfolio transformation environments and to support ‘green’ behavior, e.g. recycling.

Information ¡ Expectations of RE&F in terms of the accuracy and ¡ Market: The extraordinary run-up in commercial property

Understanding_CRET_Asset_Optimization_04052011_DLC_Delivered.pptx
Management availability of relevant information have been raised by values offers an excellent opportunity for clients to re-align
improvements within other corporate functions their capital portfolio and realize capital gains. Low cap rates
¡ Business leaders are often uninvolved in RE&F issues until on commercial real estate have reduced the disincentive for
they escalate into crises, e.g. imminent lease expiration sale-leaseback arrangements

Metrics ¡ Optimizing space utilization often requires access to capital as ¡ Explosive growth: Companies and Federal agencies which
well as the trust of business and finance leadership that the have sustained several years of explosive employment growth
business case will be realized on time, on budget (or contraction) often grow their footprint in a series of one-off
moves; a portfolio view would better serve the business

- 17 -
Factors Influencing Corporate Real Estate Portfolio Optimization

Environment
¡ Government taxes, incentives
¡ Infrastructure: Utilities, Transport,
Communications
¡ Political environment / Risk
¡ Regulations / labor laws
¡ Buildings available

Suppliers
¡ Proximity to major inputs
Customers
– Raw materials Company Specific
¡ Retail strategy
– Energy ¡ Legacy locations
¡ Proximity to markets
– Real Estate ¡ Leadership preference
– Cost
– Supplier Base ¡ Appetite for change
– Timing
– Supply chain (ports, rail, air) ¡ BCP considerations
¡ Conduct targeted mgmt
interviews

Employees
¡ Talent base
¡ Talent pool (schools, competitors,

Understanding_CRET_Asset_Optimization_04052011_DLC_Delivered.pptx
supplies)
¡ Relative costs of labor
¡ Demographics/ attractiveness of locale

Issue: Developing long term portfolio strategy with capability to evolve, not a one-time decision

- 18 -
Portfolio Optimization: Benefits

¡ Significant cost reductions from reducing footprint and from moving to less expensive
space
¡ An asset mix that reflects the firm’s balance sheet strategy: potential one-time capital
gains from alignment of ownership structure with investment objectives
¡ A portfolio strategy that supports evolving workplace requirements, fostering an
environment that improves
– Collaboration and teaming
– Mobility and flexible working arrangements
– Employee engagement
¡ The capability to update that strategy in response to evolving corporate prerogatives,
including
– Baseline database
– Methodology for performing analysis
– Tools to drive decision-making

Understanding_CRET_Asset_Optimization_04052011_DLC_Delivered.pptx
¡ Improved employee morale, and presumably higher levels of productivity
¡ Improvements in sustainability/green metrics
¡ Reflection of corporate objectives including proximity to markets, etc.

- 19 -
Alternative Workplace Strategies (AWS)
- 21 -
Does Your Client’s Workplace Look Like This?

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

Work is What You Do, Not Where You Go

Changing Demographics &

Employee Preferences
There are several RE Cost Reduction

Factors driving
alternate workplace
strategies…

Virtual Collaboration & Environmental & Social

Mobile Technology Responsibility

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

…and the CRET team helps clients adapt to drivers of AWS and transform real estate from a
cost center to an enabler of the organization’s mission – lowering costs and increasing
effectiveness of real estate. To this end, the client requires a holistic approach that
incorporates real estate, technology, human capital, and financial considerations.

- 22 -
Workplace Strategy is…
…the alignment of work patterns and corporate strategy with the
physical work environment
Traditional workplace strategy entails:
• Predominately closed office environment, with hierarchal levels of work
spaces (small cubicle to corner office)
• 1 : 1 space assignment (one workspace for one employee)
• Lack of alignment with technological provisions and human capital strategy
and policies
• “Office Space”-like conditions

Alternative workplace strategy entails:

• Open space plans with minimal hierarchy and enhanced collaborative space

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

• Higher than 1 : 1 space assignment ratio (by employing ‘hoteling’ or similar
strategy for mobile employees to reduce RE footprint)
• Strong alignment with technology (to enable mobility) and human capital (to
ensure policies and hiring/retention strategies are synchronized)

- 23 -
Evolution of the Workplace

“The great agent of change which makes new ways of working Nearly 80% of workers say they would like more flexible work
inevitable is, of course, information technology, the power, options and would utilize them if they could do so without
reliability, and robustness of which are already evident in their consequences at work.
impact not only on work processes within the office but on every
Workplace Flexibility 2010, Georgetown University Law Center
train, in every airport lounge, at every street corner, in every
classroom, library and café. Work, no longer confined to office
buildings, is everywhere “

Frank Duffy, Reinventing the Workplace 2010

2000s

Untethering, Mobility and

Flexible Workplace
work of the
’90s Dotcom &
Future
Knowledge
(WOF)
’60s worker
’50s
Invention
Open of the
Industrial cubicle
tables & In a compensation survey of 1,400 CFOs, 46% said
revolution
offices telecommuting is second only to salary as the best way to attract

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

top talent. 33% said telecommuting was the top draw.
Robert Half International

Today’s workplace is about the dynamic combination of people,

process, technology and space. It is “anywhere, any time, any place.”

- 24 -
Business Drivers For Workplace Strategies

By 2012, there will be a 6M person gap

Shrinking Pool of
between the supply and demand of knowledge 1
workers in the U.S. Skilled Labor

Only 17% of households now have a husband

Changing Family
in the workforce and a wife who is not, down 2
from 63% in 1950 Structures

In 2007, women are 58% of college students, Increased Number of

51% of new workforce and 48% of workforce 3
Women

84% of male executives strongly agree or Workforce in

agree they want professional success while Changing
having more personal time 4 2010 and
Expectations of Men
Beyond
Gen X/ Y employees are less work centric and
more family centric then their Boomer Expectations of
5
predecessors Gen X and Gen Y

Innovation in technology makes it possible to

collaborate with co-workers while working 6 Impact of Technology
remotely or on the road

82% of students and 86% of experienced hire

Focus on Corporate
candidates consider a company's commitment 7
to socially responsible practices Responsibility

- 25 -
Value Proposition of Workplace Strategies

§ By creating workplaces that meet the changing workforce organizations are able to:
– Improve productivity by supporting the work styles the employees and work processes of the
organization
– Help in attracting and retaining employee by improving employee satisfaction

§ By reducing the consumption of space by matching space requirement to utilization, organizations can:
– Reduce capital investment
– Reduce operating cost
– Rationalize head count of real estate operations
– Reduce negative impact on the environment by reduces consumption of energy

$ IT Spend $ RE Spend Turnover People Served $ IT Spend $ RE Spend Turnover People Served
$150,000 6,000 $150,000 6,000
$137,500 $137,500
$125,000 5,000 $125,000 5,000
$112,500 $112,500
People Served

People Served
$100,000 4,000 $100,000 4,000
$87,500 $87,500
$ 000s

$ 000s

$75,000 3,000 $75,000 3,000

$62,500 $62,500

$50,000 2,000 $50,000 2,000

$37,500 $37,500

$25,000 1,000 $25,000 1,000

$12,500 $12,500

$0 0 $0 0
2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012

Base Case AWS Opportunity

- 26 -
Analysis and Findings: Work-Style Decision Tree
Utilizing data gathered in interviews, surveys, and observation, the AWS team must
work with HR to group employees in one of four “work styles”, as defined below
Does the employee have a high level of external § Traveler – spends the majority
mobility? of time outside of the office
No (traveling, attending off-site
Yes meetings in customer
Is the employee tied to site for people,
storage, or equipment access needs? locations)
§ Resident – spends the
Yes No
majority of time in the office at
Does the employee primarily Does the employee work closely a desk, where other
work alone without collaborating with colleagues and participate employees need to access
with co - workers? in multiple formal meetings?
them face-to-face
Yes No Yes No
§ Teamer – spends the majority
of time collaborating informally

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

Traveler Resident Teamer Independent with co-workers
§ Independent – spends the
majority of time at home or
other virtual location, with
limited face-to-face interactions
with clients or co-workers

- 27 -
Example Workstyle Profile Concept for Profiling
The matrix below shows the levels of interaction and collaboration for each work-style. After
employees are grouped into a work-style, a sharing ratio is assigned
Independent Traveler ¡ Job functions / families are profiled and
assigned an employee workstyle based on a
As independent, you spend the common set of work characteristics that
majority of time primarily at a As a traveler, you spend the
define where, when, and how they perform
work.
High

desk, with limited face-to-face majority of time outside your

interactions with clients or co- office (i.e., traveling, attending ¡ By defining space styles to meet the needs of
workers. You are not tied to a off-site meetings in customer the job, seat sharing ratios are defined.
specific location for storage or locations).
MOBILITY

equipment access. ¡ Upon application of the sharing ratios to the

space style and level designation, the space
Resident Teamer needs were estimated for the associate
population.
As a resident, you spend the
majority of time in the office, As a teamer, you spend the ¡ AWS program offers various technological
primarily at a desk, where other majority of time collaborating tools that allow associates to remain efficient
Low

employees need to access you informally with co-workers in

face-to-face on a daily basis. person (i.e., brainstorming,
and effective according to associates’
You may also require location white-boarding) and / or workstyle. Technology tools were identified to
specific storage or equipment formally in scheduled meetings. fit the workstyles.

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

access.

Low High

IN-PERSON COLLABORATION

HR plays a crucial role in successful workforce strategy implementation through developing

appropriate policies, and providing data and input for preliminary workstyle profiling

- 28 -
 Applying AWS to Traditional Office Space
In this illustrative scenario, the traditional office was 70% assigned and 80% individual, but after the
AWS study the office is only 20% assigned and 20% individual, resulting in a decreased footprint and
increased collaboration
Collaborative (20%)

Team-owned
Shared meeting spaces
meeting space
(15%)
(5%)

Collaborative (80%)
Shared meeting spaces, Open
Meeting areas workstations, Project team rooms,
near teams Informal collaboration & Café
(15%) workspaces
(65%)

Individually assigned & enclosed Drop-in

offices and desks spaces
(65%) (15%)
Individual (80%)

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

Individual ((20%)

Indiv. Space Drop-in spaces, Privacy Enclaves

(5%) (15%)

Assigned (70%) Shared (30%) Assigned (20%)

Assigned Shared (80%)

Before AWS Study After AWS Study

- 29 -
Deloitte Transformation: WOF Implementation
Workplace of the future can foster an adaptable, collaborative and flexible workplace environment and
respond to ever changing business needs and varied work style preferences

Collaborative &
Workspaces Teaming Spaces Offices Service & Support

Home Neighborhood Team Room Reservable Offices Business Center

¡ High density with high-co-visibility ¡ Ample provision of meeting areas ¡ Office configured with 1-2 desks ¡ Common location for supplies,
¡ Multiple clusters that are equipped with appropriate ¡ Can be independently reserved by copying, printing, etc.
tools to enhance collaboration 1-2 people at the same time
¡ Includes assigned admin stations
Videoconference Room
Quiet Zone Phone Booth
¡ Formal meeting room with high-
¡ Individual booths for short term
fidelity audio and video-
acoustic & visual privacy
conferencing capability
Quiet Zone Workspace
¡ Possibly include other interactive
¡ Individual workstations for privacy tools like Smartboards
and heads-down work
Teaming Space
¡ High density with some visual
¡ Informal, reconfigurable space for
privacy
team collaboration
¡ Free-address workstations without
Café Workspace
storage or phone
¡ Tied to pantry
¡ Intended for mixed use, meetings
or individual drop in

Collaborative and
Workspaces Offices Service and Support
Teaming Spaces

- 30 -
Workplace Solutions: Alternative Workplace Strategies
Is an integrated initiative to combine the processes, services, technology and people agendas to create
supportive and productive work environments

Human Resources Process & Technology

¡ Talent management and ¡ Mobility tools, “wireless”
mentoring ¡ Information and data
¡ Performance management: security
“results vs. presence” focus ¡ Service and support for
¡ Work contracts and policies mobile workers
¡ Enterprise-wide
collaboration tools

Alternative Workplace Strategies

Real Estate Finance

¡ Work space management ¡ Overall savings and
and assignment investments
¡ Facilities services for ¡ Corporate and individual
mobile workers tax jurisdiction impacts
¡ Business continuity ¡ Expense and
¡ Sustainability/green reimbursement policies
impacts

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

Reinforces Culture, Drives Cost Improves
Supports the People
Unity, and Image Effectiveness Satisfaction

¡ Enhances productivity ¡ Enhance sense of pride, ¡ Embrace space sharing ¡ Enhance employee comfort
¡ Encourages collaboration, identity, and belonging to and flexible office design and health
innovation, and teamwork the workplace options ¡ Heighten aesthetic qualities
¡ Create neighborhoods and ¡ Rationalize space ¡ Promote sustainability
interactive areas requirements
- 31 -
Information Technology Enables Mobility

Edge Collaborative Enabling

Laptop Sharepoint/ E-Room Hotelling Software

Remote Access Card WebEx / Live Meeting Technology deployment tools
Extension to Cellular Conference Calling Support
VOIP Phone Conference Rooms Data security policies procedures
SoftPhone E-Whiteboard Integrated Workplace Management
Software
PDA Instant Messaging
Printers
Aircard/ Router

¡ Key roles and responsibilities

– Provide up-to-date technical hardware and software to connect associates for business purposes
– Manage database and network

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

– Ensure data and network security
– Solve technical difficulties and problems
– Ensure efficient printer ratio
– Facilitate facilities sign-up and check-in for active

Technology is the single biggest factor to enable mobile workforce, most of which are
already in place and pervasive due to business process change and continuity

- 32 -
 Implementation: Change Mgmt & Communications
ILLUSTRATIVE
Create compelling awareness until each stakeholder owns the new workplace:
Having clearly defined
High vision
STAGES FOR and
BUILDING measurable
COMMITMENT strategic goals helps in developing
TO CHANGE

the change management and communicate the design to the stakeholders.

Targeted change Internalization
activities at each stage Individuals make the project their
own and create innovative ways
are a critical component to use and improve the
High of a change processes and systems
management plan Ownership
Finalize Stakeholders make
Mock Up And Design DesignInstitutionalization
WOF their own
Refinement Individuals accept that new processes
Design Implementation Guidelines
and systems are the way work is done
• Executive
COMMITMENT

Analysis of Concepts • Executive • Executive -- the new status quo

Commitment

Committee Meeting
Project Data and • Executive Committee Leadership
Meeting • Operating
Initiation Findings Committee • Operating
• Operating Committee Meeting
and Data • Executive Meeting Committee
Committee • Local Office AdoptionMeeting
Collection Leadership • Leadership Individuals are willing to work with
Committees
• Leadership Meeting Committee Meeting
• Site Committees • Localand adopt
Office PPDprocesses Institutionalization
and systems
Meeting • Leadership Meeting and Staff
Meetings • Local Office and WOF becomes the
• Operating • Operating
• Operating Staff new status quo
Committee Committee Positive Perception
Action
Meeting Committee Meeting Individuals understand how the impacts
Positive Stakeholders are
Meeting

CRET_Alternative Workplace Strategies_USCONS-2176_DLC Delivered_Updated(Apr6).pptx

• Leadership of the project will benefit
willing to work them
and
Understanding Perception
Interviews implement WOF
Build Stakeholders Stakeholders
• Survey
understand theUnderstanding
understands WOF
• Focus Groups Awareness Individuals understand how the
benefits of WOF benefits them
Stakeholders
Awarenessare project impacts the company
Contact aware of theare
basic
and how itand
impacts
their functional area
Establishhave
Individuals Individuals aware of
the company
Contact that the
knowledge scopescope
basic of WOFand concepts
project exists of the project
Low
Low
Status Quo T I M E Time Vision

- 33 -
Sourcing Strategies
Currently, CRE organizations are operating at the Intersection of
Commercial RE, Corporate RE, and RE Service Providers

Survey results show a wide variety of models are currently being employed. On average, 45% of FTE’s
are in-house and 55% outsourced. 35% of the respondents who indicated they are currently outsourcing
expect an increase over the next 3 years.*

“Infrastructure”
SERVICE
PROVIDERS
CORPORATE REAL
ESTATE
Org
Process REAL ESTATE
SERVICE
Systems PROVIDERS
Reporting

COMMERCIAL REAL
ESTATE

Changing CRE Operating Models Can Impact Commercial Real Estate and
Service Provider Operations
*Source: CBRE/CoreNet Special Report; Evolution of CRE, “Upskilling” the downsized CRE organization, Fall 2009

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Companies are choosing to outsource CRE execution capabilities
while maintaining more strategic functions in-house
Degree to Which CRE Capabilities Are Outsourced or Out-Tasked

100% In-house Outsourced

More Strategic
Strategic Planning

Portfolio Management

Lease Administration

Facility or Workplace Design

Project Management

Facilities Management

Construction Management

Transaction Management

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Less Strategic

All Work is Com pleted In-House

Activities are Out-Tasked on a Case-by-Case Basis
Som e Activities are Out-Tasked or Outsourced, but Not Necessarily in a Strategic Manner
Activities are Outsourced Through a Strategic Partner Relationship
N/A

Source: CoreNet Global / Deloitte Consulting Survey 2008; N=59 Senior Corporate Real Estate Executives

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Many CRE organizations evolved from a large in-house model to a
smaller, more strategic organization with a single partner
1980’s Early 1990’s Mid 1990’s
¡ Large CRE, but still an order-taker for ¡ CRE departments downsize ¡ Even smaller CRE dept.
business units ¡ First out-tasking push ¡ Smaller number of Preferred Vendors
¡ Some out-tasking ¡ Many vendors
¡ Small number of vendors

V PS
v V
V V PS PS

V V

CRE CRE CRE

V V

V PS PS
V
V V V V PS

Late 1990’s Early 2000 Mid 2000’s

¡ Small, strategically focused CRE ¡ Very small strategically focused CRE Staff ¡ Very small strategically focused CRE staff
¡ Small number of Alliance partners ¡ Small number of Strategic Partners function ¡ Single Strategic Partner held accountable for
accountable for services, regionally as highly integrated team for CRE Group service on a Regional or Global basis
¡ Tier 2 vendors ¡ Strategic Partner team held accountable
for service on a Regional or Global basis

V
V V
V V
V CRE
V CRE
A V V V V

Tier 1 Tier 2 V V
SP V
CRE SP
V
SP SP
V V V V
A A
V Tier 1 V V
V V V
V V V V V
V V V
Tier 2
Source: CoreNet Global (2004). Atlanta, Georgia: CoreNet Global, Inc.

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 Many vendors specialize in individual services across a continuum
while non-traditional players have begun to focus in the CRE space
CRE Service Provider Continuum

Contracted Services
In-House Services
Specialized Services
FM IFM
(Out-tasked or Outsourced)
§ ABM Industries Inc. § CBRE
§ Aramark § Grubb & Ellis
§ CBRE § Johnson Controls Inc.
§ Emcor Group § Jones Lang LaSalle
§ Grubb & Ellis
§ Johnson Controls Inc. (USI)
§ Jones Lang LaSalle
§ SBM Site Services
§ Sodexo
Representative Service Providers

Janitorial &
Architecture Project / Lab Landscaping & Pest
Trans Mgmt Engineering Specialty O&M O&M Security Food Service
& Design Const Mgmt Services Control & Waste
§ Cushman & § AI Architecture § CH2MHill § A/Z Corporation § Agilent Technologies§ ChemicoMays§ Electrical § Allied Barton § ABM Industries Inc. § Aramark
Wakefield\ § CRB Caribe, § Faithful+Gould § Affiliated § Applera Corporation § VWR Reliability Security § All Phase § Compass
§ CBRE LLP § Fluor Corporation Engineers Inc. § Commissioning International Services Services Landscape Group
§ Grub & Ellis § Gensler § Gilbane Inc. § Hart Engineering Agents Inc. § Emcor Group § Guardsmark § Diamond Cleaning § Metropolitan
§ Jones Lang § HLW § Parsons Corporation § Fischer Scientific Inc. § Securitas Services Food Services
LaSalle § HOK Corporation § Jacobs § GE Healthcare § Johnson § Wackenhut § SBM Site Services § Sodexo
§ RTKL § Sun Construction Engineering § Invision Engineering Control Inc. § Unicco
§ Turner § Murphy Corp. § Kenny Electric § Waste Management
Construction § Syska Henessey § Malcolm Pirnie Inc. Service Inc.
§ Wesley Thomas Group § PerkinElmer
§ Yonkers Industries § Washington Group § Siemens
Inc. International

Enterprise Governance, Vendor Management and Contract Management

Note: this diagram is illustrative and does not represent a comprehensive list of service providers

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Despite current trends, many organizations continue to use a
mixture of both in-house and contracted service delivery models

Corporate Real Estate Service Delivery Models

Localized
On-Site Support Out-Task
• In-house Lowsupport
Cost/at the local • Specialized services
Knowledge Transfer/
facility level performed by contracted
Defined Service Level Management Involvement
• Often fill the role of “facility employees
manager” • Usually performed on a one-off
basis at the local level

Center of Excellence Out-Source

• Centralized real estate • Specialized services
planning and management performed by contracted
function employees
• More strategic function, mostly • Leverage supplier know-how
kept in-house and expertise
• Usually contracted at a
Centralized national or regional level

In-House Contracted

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 Future service delivery models will deliver effective and efficient
services while aligning with overall business goals and strategies

V V
V
V V
V
V V V V
V V
V V SP – S FM / RE
V V (TM) V V V V
SP – G SP – G SP - SS
V FM / RE V V (TM, PjM, FM / RE (TM, PjM, V (TM, PjM,
V FM / RE V FM) FM) V FM) V
V V SP – S SP – S
V V
V Tier 1 V V (PjM) (FM) V Tier 1 V Tier 1 V
V Tier 1 V V
V V Tier 2 V V
V V
V V V V
Tier 2

Service Line Geographic Sole Sourced

Preferred Vendor Network
Strategic Partner Strategic Partner Strategic Partner
• Drive price down creating a • Needs of the business dictate • Leverage the size and • Importing best practices and
highly competitive environment the use of best-in-class relationships of the Strategic industry expertise into its
• Management Control vendors Partners to drive down cost service delivery model
• Possess unique FM/RE needs • Organization does not • Focus on the strategic aspects • Relieve cost pressure by
Drivers

or requirements internally possess the required of governance and quality transferring FM/RE staff to the
• Quality control skills, experience, or typically Strategic Partner
infrastructure • Address issues surrounding • Speed to implementation
• Cost Efficiency/ Staff transfer the risk inherent in sole-
sourcing to a single provider
• Need to possess a high • Coordination of multiple • Establish specific policies • Need to perform adequate due
number of experienced vendors with fewer staff regarding process, scope and diligence and research
Challenges

industry professionals internally • Combining the policies, performance • Clearly define staffing
• Internal org maintains focus on procedures, and practices of • Need to possess a strong and requirements
both strategic initiatives and multiple FM/RE providers into a reliable reporting platform • Identifying the most suitable
managing client relationships single, coherent service • Reduced control over service provider
with individual business units delivery process execution of operational tasks • Managing service performance

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There is still wide variability in market maturity, service delivery
platforms, and the availability of skilled labor around the globe

• Home to numerous multi-national organizations delivering integrated I-FM services on a global platform
• US I-FM providers typically offer Facilities Management, Project Management and Transaction
US Market Management services as part of their I-FM platform
(Mature) • The US I-FM market has seen significant merger and acquisition activity in the last several years, as
major players seek to broaden their service delivery platform by adding to their core services through
acquisition of peer organizations

• Has not traditionally exhibited a link between Facilities Management services and Transaction /
Brokerage services
• Increasingly, providers are beginning to expand their menu of services from what were historically
European Market maintenance/operations tasks (i.e. cleaning, food services) to more technical services (i.e. energy
(Evolving) management)
• The European market exhibits varying states of maturity in the field of I-FM services; The United
Kingdom and Germany are the early adopters of I-FM services and countries like Spain are only
beginning to take advantage of the benefits offered by the industry

• Fully evolved industries employing highly educated and skilled practitioners (e.g. Japan) exist alongside
nascent markets, where skilled labor is scarce and a track record of success is not yet present (e.g.
Asia/Pacific Market China)
(Variable) • The most common trait of the Asia/Pacific I-FM industry is the practice of multi-nationals entering the
market place through acquisition or joint venture
• Major European and US organizations are establishing footholds by teaming up with, or simply buying,
local service providers to gain market presence and obtain local knowledge.

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Service delivery trends are focused on centralization, performance,
bundling and partnership approaches

• 57% of those surveyed indicated centralized RE operations, 17% decentralized and 26% hybrid (CBRE-
CoreNet 2009)
Centralization • Opportunities exist to consolidate services across suppliers, geographies, and space types
• As companies transfer non-core delivery functions to strategic partners, they often build an internal COE
(Center of Excellence) focused on Planning & Management

• Span of control and performance metric analyses are being employed to ensure appropriate staffing levels in
managing internal and service provider staffing and performance
Focus on • Use of ratios such as FTE : Real Estate, # of projects, managed properties, etc
• Movement toward performance based vs. spec based contracts
Performance • Heavy reliance on KPIs to measure performance
Metrics and KPIs • Incentive based
• Scalable vs standardized SLA (menu driven)
• More transparency in fees and creating a cost baseline as part of a transition plan

• Increased focus on specialized services such as Energy Management, Program Management

• More than 70% of survey respondents indicated service providers were either wholly providing or supporting
workforce/labor analytics, Sustainability/Energy Management, Economic incentives (CBRE-CoreNet 2009)
Bundling Scope of • 50-60% of survey respondents indicated similar trends in Program Management, Alternative workplace strategies,
and cost segregation/tax strategy (CBRE-CoreNet 2009)
Services • General trend toward bundling Operation and Maintenance, Custodial and Security Services and Landscaping
and further bundling accomplished by including Transactions and Project Management
• Testing of the relationship with the admin portfolio, then migrate to the more technical portfolio

• Providers continue to grow in size and capabilities through mergers and acquisitions
Partnership • Service providers are investing in their own research and development of delivery solutions
Approaches with • Sophisticated providers train their own staff and their networked suppliers; also provide education for clients
Service Providers • Landlords and traditional real estate service providers are now competing for service revenue and are now
competing against traditional infrastructure service providers (data and voice networks)
• Service providers are being asked to put more “at risk”

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Key Takeaways
Delivering Value to CRE organizations
Initiatives that deliver tangible and intangible operational value that have a direct
impact on organizational performance
Impact of CRE Initiatives
High

Location
Strategy
Portfolio
CRE Operations &
Optimization
CRE Operations
Technology
& Technology
Resources Required /

Service Delivery
Strategic Service Delivery
Sourcing Model RedesignModel Redesign
Implementation

Strategic
Complexity

Chargebacks Souring

Facilities Consolidation Portfolio

Location
FacilitiesPlanning
Planning Capital Projects Consolidation
Capital Projects or DispositionOptimization
Strategy
&&
Space
Space Standards
Standards Reengineering & Disposition
Property Reengineering
Analyze Benchmark
Tax
Operating
Audit Leases Costs Cost
CostSegregation
Segregation

Chargebacks Energy
Energy Economic
Property Mgmt.
Mgmt Development
Tax Incentives
Audit Leases & Tax
Benchmark Monitoring/ Financial Tax Deferrals/
LL Chargebacks Appeals Financial Deferrals
CRE Costs Exchanges
Restructuring
Restructuring

Low
Implementation
Implementation High
Timing
Timing

Relative
RelativeLow
Low Med
Med High
Hi
Impact
Impact

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Estimated Savings Implementing Cost Improvement Initiatives

Cost Improvement Levers Description % Savings

Focuses on strategic outsourcing, space
Tactical RE Spend Reduction and
management, and asset management to 10-20%
Improvements Space Management
aggressively reduce external spend

Business Process Focus on streamlining business processes via

5-10%
Redesign simplifications, elimination or outsourcing

Focus on Real Estate portfolios, facilities,

Portfolio Rationalization 15-25%
projects and support rationalization

CRE Service Delivery Focuses on re-aligning CRE staff based on

Model and Organization method of adding value and relationship to 10-30%
Alignment business

Strategic
Structural Business Model Redesign Shift to a more cost-efficient business model 20-30%
Improvements

The spend for each category can vary greatly; To determine the highest
overall category savings simply multiple % Savings x Spend for each

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Market Opportunities and Advice
Commercial Real Estate Job Market - The SelectLeaders/Cornell Job
Barometer First-Quarter 2011 Update

The survey was emailed to Employers registered on the SelectLeaders Real Estate Job Site Network in the last week of
December, 2010, and also to registered Job Seekers who have opted-in for emails. The survey was conducted using a
web-based survey program. 751 unique responses were collected.

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Commercial Real Estate Job Market - The SelectLeaders/Cornell Job
Barometer First-Quarter 2011 Update

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Advice for Job Seekers

§ Seek internships in your area of interest, even if they are unpaid

§ Get involved in a professional organization
§ Network, network, network
§ Join LinkedIn
§ Conduct as many informational interviews as possible
§ Be overly prepared for your interviews
§ Send a thank you note
§ Be careful what you post on the Internet

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Questions

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