This week’s post is courtesy of Isilay Civan, a consultant with HOK. I first met Isilay while working as part of IFMA’s sustainability credential task force, since then she has served as a Member of IFMA’s Board of Directors and continues to contribute to the profession through her volunteer efforts.
In today’s work environment, the competitiveness of an organization is directly related with how effectively and efficiently that business manages its resources. Corporate real estate assets are termed as the fifth resource, after the traditional resources people, technology, information and capital. In addition, for many organizations, facilities-related costs are second only to the cost of labor.
Direct expenditures on real estate assets are generally regarded as a ‘sunk’ business cost, which cannot be avoided, and, unfortunately, the common view is that managing facility-related costs is not sophisticated enough to necessitate the skills of a specialist or the attention of the business’s senior executives. Some companies, however, to preserve their competitive edge, are recognizing the importance of treating their corporate real estate as assets and manage them accordingly.
Support & Image
They recognize that corporate real estate/facilities fulfill two critical roles in supporting the work of the organization and the realization of its competitive strategy. The first is to physically support the production process – a place for people to gather and for work to be done. The second is the symbolic representation of the organization to the world – that which is seen by employees, customers, and suppliers as the embodiment of the company’s values and goals. A sound corporate real estate strategy harnesses both the logistical and symbolic power of the workplace and puts it to work to complement its competitive strategy.
Failure to facilitate these goals imposes burdens on the organization and its users which may include lost productivity, increased operating costs (to overcome the mismatch of needs and facility capability), and/ or increased worker absenteeism and health care costs related to on-the job stress. Furthermore, the goals of users or owners may change, leading to requirements different from those the facility was initially intended to fulfill. These changes lead to rising expectations about the services and amenities a facility should provide. Rising expectations can effectively shorten the useful life of a facility and contribute to obsolescence.
Office buildings are typically designed to last for at least 50 – 60 years, and in their initial 15 – 20 years they are expected to serve to the original function for which they were designed. Yet, due to the rapid changes in technological advances, office buildings that are 20, 10, even 5 years old today can actually be subject to obsolescence. In today’s world, it is reasonable to consider almost any property not categorized as part of the market’s new-construction stock as an “older building” that is eligible for renovation and/or adaptive reuse.
Office buildings are one of the major assets of companies which enable them to maintain a competitive advantage. Successful and effective facility management of corporate assets requires highly efficient personnel, which can translate into minimum cost and maximum profit. Preventing office buildings from becoming obsolete by adapting to change and emerging technologies protects organizations from foreseeable and very high costs.
Types of Obsolescence
Obsolescence is often viewed by type. The aging of a facility should be regularly monitored for: changes to the uses a building or certain spaces within it are expected to serve (functional); the cost of continued use an existing building, subsystem or component in comparison with the expense of substituting some alternative (economic); the efficiency and service offered by the existing installed technology compared with new and improved alternatives (technological); or the broad influence of changing social goals, political agendas, or changing lifestyles (social, legal/political, market).
Sometimes the term “obsolescence” is used when a substantial action is needed to return a facility to full service. It is important to distinguish among the factors giving rise to this need and to consider: new facility uses and their new demands; new materials, technology, and procedures of construction and operation; new air pollutants; and new laws and regulations exemplifying changes that lead us to alter design methods and expectations of acceptable service long before older facilities are abandoned. Changes in organizations, variations in urban real estate markets, and the opportunities presented by new equipment and materials often lead us to renovate long before facilities and their parts are worn out.
Today’s phenomenon for such a change is widely known as “green” building, and its leading advocate is USGBC’s Leadership in Energy and Design (LEED) initiative. The LEED EB: O+M (Leadership in Energy and Design for Existing Buildings: Operations & Maintenance) rating system provides the single greatest opportunity for businesses to green their built environment and by implementing green building strategies to existing buildings, increase real estate value while significantly cutting operational costs.
Isilay Civan, MSc, Ph.D.s, LEED AP, is a Research & Strategic Innovation Specialist with HOK Consulting, where she is responsible for research-based intelligence, real estate development and repositioning strategies, facility management, and life-cycle/sustainability consulting, as well as business development and group-wide marketing.
Image Credit: Thye Gn via Dreamstime