How new metrics are aiding today’s portfolio decision-making

As investors and large corporates rethink their office portfolios, new metrics are being used to analyse their current space and ensure they’re fit for purpose

September 30, 2020

For many companies reassessing their office space amid the rise of remote working, the focus on employee wellbeing and the need to reduce overheads, the old metrics they used to measure how well workplaces perform are no longer enough.

Today, metrics that go beyond the traditional space per person or space per desk are being sought so companies can better understand and compare how different offices across a portfolio are really faring – and what needs to change to better position their real estate for the long road ahead.

“Across sectors from insurance to manufacturing and tech, business plans are changing and so metrics are shifting,” explains Iain Franklin, head of consulting, Corporate Solutions at JLL. “Right now, the top questions among corporates are “what do we need post-Covid?” and “where?” as they look to readjust their portfolios in line with their current needs but also to ensure they’re agile and flexible for the future.”

As remote working becomes a more central part of many workplace strategies, companies can no longer simply look across their portfolios and base decisions on people being in the office.

“Clients are grappling with holding a large portfolio of offices for their employees who may now only come in two to three days a week,” Franklin says. “More companies are asking how they can spread demand for space across the working week and remove the traditional peak and troughs. That then allows companies to rethink their portfolios in terms of space and people requirements.”

A huge shift in the digital age

It’s fuelling interest in a growing range of non-traditional metrics, from how smart buildings are to the percentage of flexible or innovation space companies have in their portfolios. And these are set to become mainstream; some 70 percent of metrics that companies adopt in the next three years will be non-traditional, according to JLL.

Historically, corporate real estate teams have reported performance through the lens of operational efficiency measured through cost savings, operating costs and cost per square foot.

“Traditional KPIs don’t fully answer questions around how corporate real estate supports the business and portfolio strategy,” says Richa Walia, director, EMEA Research at JLL. “For example, a client wasn’t measuring portfolio agility. However, it turned out to be important as it got them thinking about the level of flexibility in their portfolio in relation to their business plan and the shift towards flexible and remote working.”

Other new metrics like technology obsolescence (which helps companies understand when it’s time to replace their tech) and energy balance (measuring the proportion of a building’s energy needs that come from sustainable sources) are also becoming more widespread. These can sit alongside more familiar metrics such as space utilisation and building connectivity.

Indeed, many of the metrics reflect the digital transformation of real estate, with more companies implementing sensors to monitor their spaces and their building infrastructure, collecting data to enable more sophisticated performance insights.

And there’s even a new metric to gauge how well they do this: predictive capacity. By systematically using big data, machine learning techniques and statistical algorithms, companies are identifying and predicting future trends as they move towards more data-driven occupancy planning.

“Using new metrics is possible in nearly all areas of real estate – and includes forecasting everything from occupancy rates and operating expenses to market behaviour,” says Walia. “Predictive techniques and artificial intelligence are being harnessed to inform complex CRE decision-making and drive improvement.”

Yet there’s still a way to go for companies to fully get to grips with the data and make the most of the opportunities it offers. Research last year from IBM found around 80 percent of data stored by companies is siloed and not business-ready.

“The lack of access to effective data and analytics is one of the top constraints in adding value,” Walia adds. “This is something many companies will need to overcome if they are to make their spaces work more efficiently.”

What’s more, the increase in technology capabilities over the coming years, including 5G and the wider deployment of Narrowband IoT and sensors, will bring new opportunities for portfolio performance measurement and optimisation.

“In the longer-term, portfolio management is changing in line with new data-driven insights in an increasingly digitised real estate industry,” says Franklin. “Forward-thinking companies need to adopt a strategic approach to metrics, supported by robust data collection and analysis, to future-proof their portfolios.”