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Summary
Accruent offers a software suite designed for what it calls real estate performance management. Few companies manage their real estate holdings as comprehensively as they should. Most corporations with substantial real estate holdings – and, therefore, large real estate departments – assume they do a “good enough” job of managing those costs; in our judgment, they could do better. Up to now, most companies have used desktop spreadsheets for their real estate management activities. For those with a limited number of facilities, this may still be a workable option, but Ventana Research believes that companies with more than 200 leased sites or more than US$100 million in annual lease payments would receive a substantial payback if they used an enterprise application to centralize real estate-related information and to manage related workflows across functional silos.

Assessment
Accruent refers to “real estate performance management” to emphasize that corporations need to take a strategic approach to managing this key business element. This is particularly true for corporations whose success depends on picking the right retail, office or branch locations, and for corporations that could enhance their profitability, and therefore competitiveness, if they managed their real estate costs better. Accruent’s software can collect and analyze a range of operational information, enabling executives and managers to better understand their strategic options – such as where to locate stores – as well as their tactical costs. This, in turn, should enable them to make better-informed decisions sooner and to analyze business and individual performance in greater detail.

Companies that operate a large number of sites (for example, retailers, restaurant chains and financial services vendors such as insurance companies or banks) have departments that manage the administrative and operating details. Yet few manage the complete real estate life cycle – selecting and acquiring a site, building out and obtaining permits, managing ongoing leases and assessing end-of-lease options – in a strategic and coordinated fashion. It’s not that they are doing a terrible job; they could not have grown to that size if they had. Yet they frequently miss opportunities to handle their real estate strategically. Even companies that are not consumer-driven can benefit from better management of their real estate; many Global 2000 corporations have substantial numbers of facilities and spend hundreds of millions annually on real estate leases.

Lease administration, a core capability of Accruent’s software, is the area where many companies can start to improve these business practices right away. According to Accruent, better tracking of the terms and conditions of leases and more effective management of exceptions can cut occupancy costs by 2 to 3 percent of the total spend. In some companies, real estate-related expenses are the second or third biggest cost category. Typically, the myriad activities related to managing their real estate portfolio fall across multiple functional silos that use large numbers of desktop spreadsheets, each of which may grow enormous. Spreadsheets have too many drawbacks, however. Managing real estate involves many handoffs between multiple departments or functional silos, but spreadsheets isolate information that ought to be shared. A dedicated application with built-in workflows can handle the sharing of this information much better than ad-hoc sharing in the form of e-mail messages with attachments. And while the key spreadsheets might have started out simple, they inevitably will have grown complex, so using the data and reporting from them becomes time-consuming and error-prone. While the cost savings from better lease management and greater automation of accounting and administration can be substantial, it is only one of several sources of value companies can achieve with dedicated software.

Accruent also helps companies decide where to locate stores, branches and other facilities. Working with information from partners such as MapInfo and CoStar, the software enables analysts to bring together data on demographics, transportation, competitive and complementary locations, and other factors. It replaces serendipity and gut feeling with a broad-based assessment using objective criteria. Companies in retail and consumer businesses, where opening and closing stores has strategic implications, must manage these activities strategically. Companies with an industrial focus seldom spend enough time considering the “right” number of offices and where best to locate them. Once a company acquires a site, managing the project (the build out, construction, permitting and so on) becomes critical. Accruent’s software helps manage these tasks as well. It recently added visualization to the user interface to make it easier to assimilate the implications of the often complex data sets related to locations, historical data and demographics that underlie siting decisions. 

Market Impact
The market for real estate performance management software is still in its infancy. We believe this partly reflects ingrained attitudes. Retail executives typically focus on merchandising and do not regard managing real estate as strategic. Large organizations consider real estate to be a fixed cost and do not manage this expense as actively as they could. Companies such as Virtual Premise and Skire offer software that manages real estate portfolios, leases and projects. Mainly, though, we believe that the competition for all of these applications is managing the process using spreadsheets. Accruent’s challenge, therefore, is to create greater awareness of the broad benefits that managing real estate more effectively and strategically can bring to businesses.

Recommendation
Ventana Research believes companies with more than 200 leased sites or more than US$100 million in annual lease payments should investigate software that will help them manage their leases better; the savings can be substantial and amply justify investing in the software. Moreover, companies for whom real estate is one of their top three costs also should examine whether they can manage their real estate cycle more strategically, particularly if they plan to expand rapidly. Doing a more effective job of managing this often underappreciated aspect of their business may provide an important competitive differentiator.