How to Develop Corporate Real Estate? a Decision Support Tool for CREM
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How to develop corporate real estate? A decision support tool for CREM ERES 28th June to 1st July 2017 Delft Content 1. Problem and research question 2. Methodology 3. Current state of research 4. Results from case study and questionnaire 5. Development of a decision support tool 6. Next step and open questions 29th June 2017 | European real estate society conference Delft | 2 Real estate managers have to decide regularly between different procurement forms New space demand „Many European Companies currently own „Real estate decisions often end up being some the freehold interests in most of their of the most complex a company can face.“ properties (e.g. Germany: 70%).“ Internal resources Project situation Budget Internal requirements Targets Organisation Decision-making process for a procurement form ? 29th June 2017 | European real estate society conference Delft | 3 Research questions § What alternatives to property development are open to a company and how do they differ from each other? § Which determinants have an influence on procurement decisions in companies' CREM? § How should the corporate decision-making process specific to a project be structured for the selection of a suitable form of procurement? 29th June 2017 | European real estate society conference Delft | 4 Content 1. Problem and research question 2. Methodology 3. Current state of research 4. Results from case study and questionnaire 5. Development of a decision support tool 6. Next step and open questions 29th June 2017 | European real estate society conference Delft | 5 After the literature review there are 4 steps to develop a decision support tool Source: Paper is accepted and will be published in Journal of Construction Engineering and Project Management 29th June 2017 | European real estate society conference Delft | 6 Case study: Project development of an office building Project details: § Office building for an IT-unit of a chemical company § 1,500 working places § 38,000 m² total floor area § Project volume: € 70m § Project term: 2 years Project targets: § Life-cycle approach § Modern, functional and energy-efficient offices Stakeholders Principal: User: IT-unit of the Total contractor: Investor Town representatives Chemical company principal value-added partner 29th June 2017 | European real estate society conference Delft | 7 Content 1. Problem and research question 2. Methodology 3. Current state of research 4. Results from case study and questionnaire 5. Development of a decision support tool 6. Next step and open questions 29th June 2017 | European real estate society conference Delft | 8 There are various differences between the allo- cation of responsibility in procurement forms insourcing outsourcing 29th June 2017 | European real estate society conference Delft | 9 Objectives and influence factors in property development – an excerpt from literature Source Objectives Influence factors Asson (2002) Reducing costs, increasing productivity, high customer satisfaction Bajec (2010) Own core competence and core activity Limited internal resources, limited Cánez (2000) Increasing responsiveness and quality, time certainty, procurement costs availability of in- house technologies, lack of specialist staff, high complexity Cox (1997) Aspired degree of control Internal resources, internal skills Speed of planning and construction, certainty of costs and timing, Love (1998) flexibility to requests for changes, quality, risk allocation, clear responsibilities, price competition and resolution of conflicts The necessary resources or capabilities McIvor (2008) Reducing production and transaction costs internally Speed, certainty of timing and price, level of quality, flexibility, Complexity, special management Ng (2002) responsibility and influence, complexity, price competition, risk requirements allocation, design, investment costs/budget Maximising strategic competitive performance, maximising management Padillo (1999) performance, minimising procurement risk, maximising financial performance 29th June 2017 | European real estate society conference Delft | 10 The decision for a procurement form depends on different factors Targets: § Time § Costs § Quality § Flexibility Institutionalisation: Project § Resources and competences Choice of procurement outcome § Management requirements and project § Organisation alternative success Project conditions: § Complexitiy § User requirements Source: Paper is accepted and will be published in Journal of Construction Engineering and Project Management 29th June 2017 | European real estate society conference Delft | 11 Content 1. Problem and research question 2. Methodology 3. Current state of research 4. Results from case study and questionnaire 5. Development of a decision support tool 6. Next step and open questions 29th June 2017 | European real estate society conference Delft | 12 Interview results: 15 decision criteria can be classified in four categories Control system Target system § Transfer of time risks to the contractor § Amount of the investment § Transfer of cost risks to the contractor § Amount of the life cycle costs § Transfer of quality risks to the contractor § Intent of a functional proposal § Reduction of interfaces § Intent of a detailed proposal § Creating transparency in the project with clear communication and sufficient information Organisational structure § Availability of planning resources Framework § Availability of control resources § Position of the building is onside § Planning competence for the specific § The corporate will be owner of the building building § The corporate will rent the building Additional input from group discussions § A consistent BIM process for digitisation § Transfer of the security risks to the contractor 29th June 2017 | European real estate society conference Delft | 13 Questionnaire results: Many criteria are important for decision makers in CREM Percentage of respondens with relevant or very relevant The Corporate will rent the building 26,5% The Corporate will be the owner of the building 31,6% Position on-site 36,8% Creating transparency in the project 47,4% with information and communication Internal planning competence for 47,4% the specific building type Detailed call of tenders 52,6% Internal planning resources for 52,6% the specific building type Optimising investment costs 52,6% Optimising life-cycle costs 68,4% Transfer the responsibilty for quality risks 68,4% Internal control resources 68,4% Functional call of tenders 68,4% Transfer the responsibilty for cost risks 73,7% Reduction of interfaces 73,7% Transfer the responsibilty for time risks 78,9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Paper is accepted and will be published in Journal of Construction Engineering and Project Management 29th June 2017 | European real estate society conference Delft | 14 Content 1. Problem and research question 2. Methodology 3. Current state of research 4. Results from case study and questionnaire 5. Development of a decision support tool 6. Next step and open questions 29th June 2017 | European real estate society conference Delft | 15 The decision making process can be structured hierarchically Decision problem Choice of procurement form Long-term programmable usage Availability of internal resources Dominance criteria requirements Framework Position on-site Determining Using internal Transfer of the full Creating transparency Optimising degree of Criteria resources responsibility for risks in the project cost factors details Informa- BIM for Internal Internal Reduc- Invest- Functio- Detailed Sub- Time Cost Quality Safety tions and linked Life-cycle planning control tion of ment nal call of call of risks risks risks risks commu- digiti- costs criteria resources resources interfaces costs tenders tenders nication sation In-house planning Implementing the Total Value-added with general Alternatives project in-house contractor partnership contractor Source: Paper is accepted and will be published in Journal of Construction Engineering and Project Management 29th June 2017 | European real estate society conference Delft | 16 With which method could the decision-making process be performed? Decision problem Choice of procurement form Long-term programmable usage Availability of internal resources Dominance criteria requirements Framework Position on-site Determining Using internal Transfer of the full Creating transparency Optimising degree of Criteria resources responsibility for risks in the project cost factors details Informa- BIM for Internal Internal Reduc-? Invest- Functio- Detailed Sub- Time Cost Quality Safety tions and linked Life-cycle planning control tion of ment nal call of call of risks risks risks risks commu- digiti- costs criteria resources resources interfaces costs tenders tenders nication sation In-house planning Implementing the Total Value-added with general Alternatives project in-house contractor partnership contractor 29th June 2017 | European real estate society conference Delft | 17 There are different methods for the decision- making process Scenario Analysis Point allocation Simple Additive Specific requirements: (PA) Weighting (NWA) • Multiple criteria decision- making (MCDM) problem Analytic hierarchy Multiplicative • 15 different criteria need to be process (AHP) Exponent Weighting considered Methods from • Individual prioritisation of the decision criteria should be allowed Simple multi- theory (depending on corporate attribute rating technique Conjoint objectives, etc.) Measurement (SMART) • The application