Creating Resilience

CRE Organizational Design Study

By: Mary O’Connor and Nataly Tran

October 3, 2024 4 Minute Read

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Introduction

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More than ever, Corporate Real Estate (CRE) leaders are redesigning their departments to accommodate an expanded set of priorities and responsibilities.

To support our clients in this endeavor, CBRE Institute conducted our largest-ever organizational design research study. CBRE interviewed CRE executive directors in 62 global corporations, as well as hospitals and government organizations. These CRE executives manage nearly 2 billion sq. ft. of facilities across industry sectors and portfolio sizes.

The findings in this report explore five strategic organizational design questions:

  • How is the CRE function contributing to enterprise goals?
  • Is my team fit for today’s purpose, or yesterday’s?
  • Is my leadership team best positioned for success?
  • Where is the outsourcing line drawn?
  • Is my delivery team appropriately sized?

How is the CRE function contributing to enterprise goals?

In recent years, the C-suite’s expectations of the CRE department have expanded—workplace is now seen as an enabler of business success.

These priorities are in addition to—not in lieu of—CRE’s longtime financial and cost savings responsibilities.

CRE’s North Star priorities ultimately translate in the team’s annual goals and drive organizational structure, including the roles of the internal team members, needed skills and the scope of service providers. Most CRE executives (78%) state that enabling the business is their top priority, so efficiency, reporting lines and the right skills matter.

Figure 1: CRE Goals and Initiatives

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Source: CBRE Institute, 2024.

Is my team fit for today’s purpose, or yesterday’s?

The last several years have seen significant portfolio optimization and enhancements to elevate the workplace experience. These transformational changes require reevaluating the CRE team and delivery model.

Our research reveals that CRE executives have evolved their teams and anticipate more changes—whether through recently added new roles (33.9%) or upcoming major team reorganizations (35.5%).

Figure 2: Reorganization Trends

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Source: CBRE Institute, 2024.

Technology/AI is the most in-demand new skill within the CRE team, not surprising given rapid technological change.

CBRE Institute clients cite strategic planning and financial acumen as the other top new or different skills needed, given ongoing portfolio optimization and cost pressures.

Figure 3: Skills in Greatest Demand

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Source: CBRE Institute, 2024.

Is my leadership team best positioned for success?

We interviewed CRE executives on an array of team structure considerations—from reporting hierarchy to functional roles of the CRE leadership team.

CRE departments most commonly report to the Chief Financial Officer, followed by the Chief Operating Officer. While reporting to the Human Resources function saw an uptick in recent years, only 13.5% of CRE departments in our study currently report to CHRO leadership.

Further, CRE Executive Directors have an average of 4.07 direct reports. The most common direct reports across all portfolio sizes are functional leaders in the areas of transaction management, facilities management and project management.

Figure 4: Internal CRE Team Reporting Structure

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Source: CBRE Institute, 2024.

Where is the outsourcing line drawn?

As the internal CRE department’s role shifts to focus on strategy and business enablement, tactical delivery is often moved to one or more service providers.

CBRE Institute calculated the number of Full-Time Equivalent (FTE) positions across the internal and Tier 1* service providers of each portfolio within the scope of our research and found the average composition of a CRE team is 21.5% internal and 78.5% Tier 1 service providers.

Figure 5: Allocation of Internal/Tier 1 Providers

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Source: CBRE Institute, 2024.
* Note: Tier 1 service providers include such service functions as transaction management, project management, facilities management and sub-services within those service functions (e.g., lease administration, energy management, maintenance) but do NOT include Tier 2 suppliers such as janitorial, landscaping, cafeteria, etc.

Is my delivery team appropriately sized?

Clients often ask CBRE Institute to provide FTE benchmarking of CRE team size. When sizing an organization, many variables must be considered including service levels, approach to outsourcing, geographic dispersion, number of Lines of Business (LOB), asset types, complexity of operations and more.

While some respondents have teams of 100 FTEs, others with the same portfolio square footage may have 500 FTEs. That doesn’t mean the larger-sized organization is inefficient; the portfolios likely have much different remits.

Square footage managed per overall team FTE can be a good initial pulse to gauge efficiency. The benchmark suggests an internal CRE team averages 1 FTE per 417,508 sq. ft.

This ratio differs greatly based on portfolio size and industry sector (see Figures 6 and 7). CRE leaders should conduct a thorough analysis with the support of a CRE organizational consultant to ensure their most relevant benchmarking.

Figure 6: Average Square Footage Managed per Internal CRE FTE – By Portfolio Size

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Source: CBRE Institute, 2024.

The ratio differs significantly by industry due to each sector’s unique requirements (e.g., financial services trading floors and life sciences R&D labs).

Figure 7: Average Square Footage Managed per Internal CRE FTE – By Industry Sector

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Source: CBRE Institute, 2024.

Summary

In recent years, CRE’s focus has expanded to include enabling the business. This increased responsibility, coupled with optimized portfolios, necessitates reviewing how the team is organized to achieve success.

Our research and ongoing client engagement highlight that CRE teams are undergoing significant change—from adding new roles to major team reorganizations.

As a best practice, CRE executives should compare their team structure and composition with staffing benchmarks; however, comparisons versus benchmarks must take into consideration various elements, including scope, geographic disbursement and portfolio asset types.

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