Moving property planning into the 21st century

COMMENT

Much is said about the innovative “new New Zealand,” bursting with bright new and not-so-new businesses adopting fresh thinking and creativity over No 8 wire, backed by a government encouraging investment science and research.

So, with all this innovation in the air, why is it that too many businesses still adopt archaic approaches to property planning and decision-making?

It staggers me how many businesses (large and small/public and private) make poorly informed, poorly planned decisions committing their organisations to future long-term liabilities, significant capital expenditure and consequential effects on their people, brand and organisation.

The reality is, as with most things, “you don’t know what you don’t know”. The decisions businesses take in considering their premises/property requirements are full of hidden risks but also endless opportunities.

So, while it’s crucial for businesses to get the commercial aspects and the major transactions sorted out, if taken as the sole focus opportunities to drive cultural change and improve productivity through the innovative use of space are lost in the debate over open plan vs offices.

Only taken every 10-15 years

Property decisions are not business-as-usual decisions as a lot of organisations think. They are often big decisions that are typically only taken every 10-15 years.

In taking them there are obvious risks and implications. Property costs for a business (whether paying the rent or providing a return on capital used to buy a property) typically account for 8% to 10% of a businesses operating costs – usually second to staff costs.

Property decisions involve long lead times to plan and implement solutions, require long-term commitments, can create contingent liabilities and often put a strain on cashflow to meet the one-off capital costs of fitout and relocation. And at the moment, earthquake compliance and insurance are creating further headaches.

As well as the obvious risks, there are less obvious opportunities. Some “enlightened” organisations are starting to understand the wider effects and opportunities that come from a major property decision.

Rather than merely assigning the property decision making to the admin team, they understand that a property decision-point allows a fresh look at the business with a wide angle lens.

What new technology can be employed? How can the firm use its premises to better communicate its brand promise and values? How can the change process be used to support the planned organisational and cultural change? What features and facilities are considered important by staff? How can use the workplace be used to attract and retain key people?

These form a more innovative and sophisticated approach to property planning and procurement, opening doors that remain closed under the traditional one-dimensional system.

Focus solely on the numbers

Typically, the focus is solely on the numbers: the number of staff, number of square metres to accommodate them and the number of dollars per square metre for the space.

There is too much pre-occupation with the market and potential options well ahead of understanding the problem they are trying to solve and the nature of their requirements.

Take the recent well-publicised property decision of Auckland Council as an example of “putting the solution before the problem”. In 2012, as it was about to start a workplace strategy (a strategic review of its office requirements and work practices) it had at the same time another team buying the nearby ASB Bank Building.

While the pragmatists would argue the solution was obvious (a large building near to the current Aotea campus), the decision was made before the strategy was developed. This effectively eliminated any opportunity for a fresh and innovative approach to how Auckland Council could accommodate its staff in the future.

The brief was essentially limited to “how we use the space” rather than any fundamental rethink of “how we deliver services and create a vibrant organisation”.

We often see similar decisions as part of the RFP processes. Often the decision to upgrade and modernise facilities seems to be made far ahead of knowing whether there is a long-term need for the facilities in the first place.

Instead of asking fundamental questions such as what services are being delivered, where they are being delivered and how the firm could partner with someone else, the procurement team is appointing an architect to redesign what it’s got!

Procurement has become more important than getting the right answer. It’s therefore encouraging to see the Ministry of Business, Innovation and Employment trying to improve the government’s procurement process. At the moment, often these processes get 10/10 for procurement and 1/10 for innovation.

Taking a wider view on property decision-making is not some radical new-age fad. It is being adopted globally by many leading businesses. In New Zealand leading examples include Z Energy and IT service provider Intergen.

The government is even taking a more “strategic” approach looking at how it can more effectively procure and use office accommodation across all of its departments and agencies.

This all fits with international practice and is encouraging. The challenge is for more New Zealand businesses to adopt the same level of innovation for their own property planning. Rather than just seeing their premises as bricks and mortar they need to understand the concept that “place and space” is a fundamental part of their overall strategy.

As organisations seek ways to differentiate their products and services and attract customers and staff, their premises become a more vital tool for change and transformation. Elevating property planning in this way is another step along the innovation highway, part of the “new New Zealand” we aspire to become.

Dean Croucher is the managing partner of TwentyTwo Independent Property Advisers. www.twentytwo.co.nz