On the Verge of Transformation
India Corporate Real Estate Trends 2013
2 India Corporate Real Estate Trends 2013
In addition, companies in India encounter
numerous challenges, such as a complex...
Jones Lang LaSalle 3
Executive Summary
CRE in India has started to transform.
Increased exposure to the C-suite, more
inte...
4 India Corporate Real Estate Trends 2013
1 Strategic mindset is paving the way
for CRE transformation in India
India is o...
Jones Lang LaSalle 5
In 47%
of companies in India,
the global head of CRE
resides in a dedicated CRE
department, versus
39...
6 India Corporate Real Estate Trends 2013
An overwhelming majority (91%) of CRE heads in India report to the C-suite1
, wi...
Jones Lang LaSalle 7
Question: Within what department does
the global head of CRE reside?
With some exception, having a de...
8 India Corporate Real Estate Trends 2013
The development of shared services models over the medium term presents CRE lead...
Jones Lang LaSalle 9
Question: Please rate your current
attitude toward outsourcing on a scale of 1–5
where 1 means outsou...
10 India Corporate Real Estate Trends 2013
Overall, outsourcing behaviour in India is advanced compared with other countri...
Jones Lang LaSalle 11
Figure 6: Outsourcing activity by service line, today and three years from now
Question: How would y...
12 India Corporate Real Estate Trends 2013
2
On average, there is a ratio of
oneCRE employee
to 4,563
full-time employees ...
Jones Lang LaSalle 13
Talent caps On average, our survey shows a ratio of one CRE employee per 4,563 full-time employees
i...
14 India Corporate Real Estate Trends 2013
Even though collecting data may not be a serious issue, extracting value out of...
Jones Lang LaSalle 15
Figure 10: Improvement in ability to extract real estate metrics, and drivers of
this improvement
Qu...
16 India Corporate Real Estate Trends 2013
Lack of support
for workplace
transformation
projects is putting
CRE reputation...
Jones Lang LaSalle 17
Involved on a
permanent basis
Involved on an
ad hoc basis
No internal
procurement team
Procurement i...
18 India Corporate Real Estate Trends 2013
3
78%
indicate that demands to enhance
the productivity of the real estate
port...
Jones Lang LaSalle 19
Constraints and limitations described in the previous pages have a significant impact on
CRE teams’ ...
20 India Corporate Real Estate Trends 2013
Continued global economic volatility has led senior leaders to place an additio...
Jones Lang LaSalle 21
Anticipating demands will help CRE leaders to design an operational structure that is
equipped with ...
22 India Corporate Real Estate Trends 2013
Workplace
transformation is
the key to unlocking
productivity and
optimising po...
Jones Lang LaSalle 23
Getting ready for
portfolio growth in
India and overseas
CRE transformation and platform building ga...
24 India Corporate Real Estate Trends 2013
Question: Over the next three years, how
will your portfolio evolve in each of ...
Jones Lang LaSalle 25
Map 1: Net portfolio growth anticipated by India-based companies over the next three years
Question:...
26 India Corporate Real Estate Trends 2013
This report is based on answers received from 545 respondents from across 39 co...
Jones Lang LaSalle 27
Acknowledgements
Jones Lang LaSalle gratefully acknowledges the assistance of those CRE professional...
About Jones Lang LaSalle India
Jones Lang LaSalle is India’s premier and largest professional services firm specializing i...
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On the Verge of Transformation: India corporate real Estate trends 2013

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CRE in India has started to transform. Increased exposure to the C-suite, more integrated collaboration with other functions and a strategic outsourcing mindset indicate that the function is maturing and preparing to play a more significant role in corporate agendas.

However, the CRE platform is missing a few key elements, without which the performance of CRE teams may be compromised. Limited availability of trained CRE professionals, a lack of real estate experience from procurement teams in selecting the right strategic partners, limited analytical tools and the underinvestment in workplace transformation projects are some of the constraints that put the CRE function at risk of underperforming.

‘On the Verge of Transformation’ identifies three key trends for CRE in India. To learn more, please visit http://bit.ly/1iD142V

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On the Verge of Transformation: India corporate real Estate trends 2013

  1. 1. On the Verge of Transformation India Corporate Real Estate Trends 2013
  2. 2. 2 India Corporate Real Estate Trends 2013 In addition, companies in India encounter numerous challenges, such as a complex culture and lack of transparency, when building their CRE platforms. How to overcome both internal and external obstacles and how to be better prepared to respond to the escalating strategic demands will be the questions critical for CRE leaders operating in India to address over the next few years. We sincerely thank those of you who shared your thoughts and perspectives. Your input has proved invaluable in drawing a clear picture of today’s opportunities and limitations for the CRE function in India. These survey findings reinforce our conviction that CRE in India is on the verge of transforming into a more empowered and strategic function. Introduction We are delighted to introduce the first India edition of Jones Lang LaSalle’s biennial Global Corporate Real Estate Trends report, which provides powerful insights into the current state and future direction of corporate real estate (CRE). This report analyses the responses received from India against those received from Asia, as well as our global responses. Real estate is booming in India. Both Indian and Western companies are seeking to capitalise on economic growth, and we now see them optimally managing their real estate portfolios to contain costs and enhance workplace productivity. CRE leaders in India are demonstrating a more strategic mindset and have started to invest in transforming the CRE function to align better with business needs in a fast-changing environment. This, in turn, is increasing the complexity of the demands on CRE leaders. Yash Kapila Managing Director, Corporate Solutions and Head of Integrated Facilities Management, India yash.kapila@ap.jll.com
  3. 3. Jones Lang LaSalle 3 Executive Summary CRE in India has started to transform. Increased exposure to the C-suite, more integrated collaboration with other functions and a strategic outsourcing mindset indicate that the function is maturing and preparing to play a more significant role in corporate agendas. However, the CRE platform is missing a few key elements, without which the performance of CRE teams may be compromised. Limited availability of trained CRE professionals, a lack of real estate experience from procurement teams in selecting the right strategic partners, limited analytical tools and the underinvestment in workplace transformation projects are some of the constraints that put the CRE function at risk of underperforming. With increasing pressures and demands from senior leadership—on both tactical and strategic levels—CRE teams will need to reconfigure their structure, resources and aptitude toward more strategic practices. Fostering workplace productivity is paramount in proving the strategic value of the CRE function. With a multifaceted scope that includes employees, workplace, business and real estate asset productivity, workplace transformation is arguably the most crucial part of the CRE agenda. Yet, without a strong operational platform, there is a risk that CRE teams may underperform and reduce the value add that they can contribute to the broader business. Western companies operating in India that represent the bulk of our survey respondents are slightly ahead of the game. At the same time, domestic Indian companies realise that they need to transform their CRE function if it is to support corporate competitiveness. The task will not be made easier by the remarkable portfolio growth expected in India and in other growth markets that are often not the most transparent. • The shortage of CRE talent and a lack of dedicated educational programs hinder CRE upskilling and development. • A lack of effective data and analytics capabilities deprives CRE from accurate and up-to-date real estate portfolio information. • Insufficient investment capital is an obstacle to successful workplace transformation projects. • Complexity arising from cultural diversity is one of the most limiting factors in driving workplace transformation. • When unfamiliar with purchasing CRE services, decision makers risk missing out on the value of external partnerships. • CRE teams do not feel fully equipped to meet the increasing demands from the C-suite. Faced with enhanced expectations, CRE teams risk underdelivering. • Expected CRE attributes, such as an understanding of broader business, innovation and stakeholder management outside CRE, necessitate more elaborate operational structures. • In India, more than in most countries, enhancing workplace productivity is a strategic priority and calls for more commitment from CRE teams. • Rapid real estate portfolio growth requires CRE teams to be ready to respond to business expansion. Three key trends identified for CRE in India • Direct reporting lines to the C-suite promote a closer alignment with business strategy. • Working with other corporate functions starts to be more collaborative. • India’s business process outsourcing (BPO) culture nurtures the readiness to adopt outsourcing models and solutions. Strategic mindset is paving the way for CRE transformation in India1 Internal limitations and constraints are holding back faster progress2 Upgraded CRE function needed to meet increasing strategic demands3
  4. 4. 4 India Corporate Real Estate Trends 2013 1 Strategic mindset is paving the way for CRE transformation in India India is one of the countries where the CRE function has started to evolve and mature, suggesting a faster transformation when compared with global responses to our survey. Although most surveyed companies are Western corporations operating in India and appear to have taken the lead in this transformation, Indian companies have inherent elements that will enable them to move rapidly. With one of the best track records in the BPO industry, hosting multinationals from a large array of countries and sectors, and with a burgeoning real estate market, India provides a favourable environment for the development of a strategic mindset by CRE leaders.
  5. 5. Jones Lang LaSalle 5 In 47% of companies in India, the global head of CRE resides in a dedicated CRE department, versus 39% globally 91% of CRE heads in India report to the C-suite versus the global average of 58% 72% of respondents in India expect CRE strategy to be entirely aligned with the broader business strategy in three years’ time, in line with the global average (72%), but well ahead of their Asian peers (55%) In line with the global trend, finance is currently the function most integrated with CRE in India, Shared services type of collaboration between CRE and HR is currently lagging. This is expected to increase by 47% of respondents in India report a shared services type of integration between CRE and IT functions, ahead of the global and Asia averages (31% and 30%, respectively) 57% of respondents in India say their outsourcing preferences lean toward strategic relationships based on value, well ahead of the global response of only 30% 40% in the next three years—a huge leap, although not as dramatic as globally (67%) and in Asia (71%) with 53% of respondents reporting a shared services type of integration, versus 38% in Asia
  6. 6. 6 India Corporate Real Estate Trends 2013 An overwhelming majority (91%) of CRE heads in India report to the C-suite1 , with the remaining 9% reporting to the managerial level (Fig. 1). This reporting line is significantly more elevated than in many countries across Asia and the world, in which reporting structures are more likely to be related to managerial and executive levels. To some extent, this can be explained by the fact that a number of India-based CRE executives have a double reporting line to both local C-suite and global CRE department. Figure 1: Global CRE heads’ reporting lines Question: To what level of the organisation does the global head of CRE currently report? Note: Totals may not equal to 100% due to the exclusion of ‘Other’ responses. Hard-line reporting to the C-suite strengthens CRE’s strategic alignment Proximity to C-suite executives provides the CRE function more visibility to business drivers and challenges, enhances communication and facilitates a better understanding of corporate directions and goals. Currently, over half of India-based respondents report that CRE strategy is entirely aligned with the broader business strategy (Fig. 2). This score is the highest in Asia, and it is expected to grow even further to reach 72% in three years’ time. Figure 2: Alignment of CRE strategy with broader business strategies Question: To what extent is your CRE strategy aligned to your company’s broader business strategies/corporate goals, today and in three years’ time? Executive levelManagerial levelC-suite Operational level 9% 91% India 59% 23% 13% 3% Asia 58% 26% 14% Global Moderately aligned Minimally aligned Not aligned Entirely aligned Not aware of corporate goals 36% 19% 58% 72% 0% 3% 3% 3% 3% 3% In three years’ timeToday 1 The C-suite is primarily represented by the Chief Executive Officer (CEO), the Chief Operating Officer (COO) or the Chief Financial Officer (CFO) throughout this report.
  7. 7. Jones Lang LaSalle 7 Question: Within what department does the global head of CRE reside? With some exception, having a dedicated CRE department is commonly considered a sign of maturity for the CRE function in developed markets. Today in India, almost half of those surveyed have created a dedicated department to cater to their CRE needs (Fig. 3). This is closer to the findings in developed countries than those in emerging markets. This can be explained by the large proportion of multinationals in the survey that tend to replicate global CRE structures within their India operations. Figure 3: Global CRE head’s department While gaining more autonomy and recognition, CRE needs to proactively work with other functions to lead collaborative efforts 11% Finance 47% Dedicated CRE department Supply chain and logistics 3% Administration/ Shared services 8% Corporate office/ General management 22% 6% Other No global head of CRE 3% Another area where CRE in India is quickly changing is the best practice of cross-functional collaboration (Fig. 4). Here, collaboration has to be understood in a broad sense, ranging from reactive ad hoc, project-based teamwork, to more proactive and integrated practices. Closer relationships with the C-suite, as illustrated by reporting lines, is an important factor facilitating cross-functional partnerships. • Among all countries, it is in India that IT is most integrated with CRE, with 47% of respondents already having a shared services type of integration, and another 25% collaborating on an ad hoc basis. Being one step ahead, there is less pressure to integrate further. Therefore, there will be slower progress in this regard in India as compared to most countries around the world. • Currently the most integrated function globally, finance has been at the forefront of collaboration with CRE in India as well. The majority (53%) of CRE executives in India report shared services type of integration with finance, and 10% expect this to increase three years from now. • HR is the least integrated with CRE among the three functions analysed in the survey. Yet, it is expected to demonstrate the biggest leap (a 40% increase) toward shared services type of integration in three years’ time, still somewhat slower than the global and regional trends.
  8. 8. 8 India Corporate Real Estate Trends 2013 The development of shared services models over the medium term presents CRE leaders with a unique opportunity to lead change. Rather than resisting a perceived loss of influence or specialisation, CRE leaders should embrace the next generation of collaboration structures as the vehicles for transforming their organisations. We believe CRE teams have the ability to take a strong leadership role in these new configurations in order to establish creative and productive workplaces. In adopting a position as a company-wide workplace change agent rather than a tactical specialist, CRE will extend its relevance and mitigate any risks of becoming marginalised. Question: How would you describe the collaboration of CRE with the IT, finance and HR functions respectively today and in three years’ time? Note: Totals may not equal 100% due to rounding. Figure 4: Collaboration of CRE with other support functions In three years’ timeToday 47% 31% 25% 47% 0% 19% 25% 3% 3% IT Shared services integration Ad hoc/project basis Only between functional heads None/hardly any interactions 58% 53% 22% 28% 17% 17% 3% 3% Finance Shared services integration Ad hoc/project basis Only between functional heads None/hardly any interactions 10% 39% 39% 39% 28% 28% 19% 3% 6% HR Shared services integration Ad hoc/project basis Only between functional heads None/hardly any interactions 40%
  9. 9. Jones Lang LaSalle 9 Question: Please rate your current attitude toward outsourcing on a scale of 1–5 where 1 means outsourcing represents a tactical transaction, mainly with the lowest cost supplier, and 5 means outsourcing represents a strategic relationship. Note: Totals may not equal 100% due to rounding. BPO has permeated India’s business culture and is influencing the way companies operate their CRE in the country. In addition to being a key segment of the economy, outsourcing is becoming a more common solution in corporate India, as today’s management practices emphasise the need to focus on core competences. Consequently, outsourcing the delivery of CRE services to external partners has become an accepted—or, at the very least, an acceptable—option. Survey respondents in India are showing the most strategic attitude toward outsourcing among all regions. The majority (57%) of respondents identify their outsourcing intention as a strategic relationship based on value; very few (3%) see it as a tactical transaction based on cost (Fig. 5). Our interpretation of these answers must take into account the fact that our sample base is not averse to outsourcing (those we surveyed are either our clients or companies we are in discussion with). Nonetheless, survey responses reflect a willingness of companies in India to outsource part or all of their CRE services, even though this potential is not always realised when it comes to actual implementation. This shows a clear trend: CRE outsourcing rapidly becoming a wider-spread practice across more companies and sectors. With this level of maturity, India can be trusted to be one of the first among emerging markets to create new outsourcing models and solutions. Figure 5: Current attitudes toward outsourcing India’s BPO culture helps to promote outsourced CRE solutions 3%3% 26% 11% Outsourcing represents a tactical transaction, mainly with the lowest cost supplier Outsourcing represents a strategic relationship, where I assess longer-term value add with a partner 57% India Asia 8%8% 9% 21% 33% Outsourcing represents a strategic relationship, where I assess longer-term value add with a partner 30% Global Outsourcing represents a tactical transaction, mainly with the lowest cost supplier 6% 18% 29% Outsourcing represents a strategic relationship, where I assess longer-term value add with a partner 38% Outsourcing represents a tactical transaction, mainly with the lowest cost supplier
  10. 10. 10 India Corporate Real Estate Trends 2013 Overall, outsourcing behaviour in India is advanced compared with other countries. More complex services are now being outsourced in India (Fig. 6), reflecting the strategic mindset of CRE leaders and the existing in-house capability challenges. • Requiring temporary resources, project management, design and build-out are currently the most easily outsourced services, with almost half of companies fully outsourcing them to external partners, and only 6% keeping them fully in-house. The delivery of these services is expected to shift to a mixed outsourcing model in the next three years. • Property management as well as portfolio and facilities management are the next most outsourced CRE services in India. Around a third fully outsource these services, the rest opting for a hybrid service delivery combining in-house and outsourced solutions. • Transaction services are less outsourced in India. Corporate leaders prefer to have control by keeping them in-house, relying more on established relationships with developers. However, as a larger number of Indian companies expand into less familiar markets (where they don’t have connections), they will be more prone to entrust these functions to service partners. Transaction services outsourcing is expected to pick up in India, with just above a third of respondents anticipating to fully outsource transaction services in three years’ time.
  11. 11. Jones Lang LaSalle 11 Figure 6: Outsourcing activity by service line, today and three years from now Question: How would you best describe the current delivery of the following CRE services, where 5 stands for fully outsourced and 1 for fully in- house? Note: Totals may not equal 100% due to rounding. Project management/build-out/design 6% 21% 48%18% 0% 18%12% 30% 18%22% 14%11% 26% 22%28% 6% 18% 36%39% Portfolio and facilities management 6%9% 26% 29%29% 14%21% 22% 22%21% 17%25% 25% 13%19% Transaction services 9%17% 26% 26%23% 11%11% 11% 34%31% 15%22% 27% 15%21% 14%18% 22% 23 %23% Portfolio strategy 19%44% 52% 32% 42% 22% 12% 32% 9% 12% 21% 12% 20% 5%11% 15% 3%8% 15% 12% Property management 6%6% 16%6% 12%26% 20% 23%19% 15%34% 18% 18%16% 12% 41%35% 19% 34%25% 9% Energy and sustainability services 17% 10% 28% 18% 30%27% 13% 29% 18%23% 26%19% 23% 19% 24% 11%17% 15%9% Lease administration 11%31% 12% 28%19% 12%42% 14% 19%13% 26% 15% 29%24% 9%33% 24% 21%12% 6% 23% 6% 6%3% 15% 38%38% India in three years' time Global in three years' time Global today India today Fully outsourced 43Fully- in-house 2
  12. 12. 12 India Corporate Real Estate Trends 2013 2 On average, there is a ratio of oneCRE employee to 4,563 full-time employees in companies in India, as compared to 1:4,000 globally In line with global responses, 75% of companies in India that have improved their ability to extract real estate metrics did so through data collection by the CRE team of respondents indicate that procurement teams are involved in CRE affairs on a permanent basis; this is more than globally or in Asia (36% and 40%, respectively) 57% 44% in India consider the lack of effective data and analytics to be the most important constraint hindering CRE from enhancing itself as a strategic value add; this is more than the rest of the world (34% globally, 40% in Asia) in India have improved their ability to extract real estate metrics due to purchase and population of database systems; this is significantly lower than global (32%) and Asia (23%) responses Only 3% Internal limitations and constraints are holding back faster progress While the CRE function in India is quite advanced in terms of thinking and approach, implementation is still trailing. Talent and technology caps are preventing CRE from reaching its full potential. Companies in India are missing out when it comes to developing internal knowledge and skills, and many lack adequate real estate analytical tools and systems to draw insights about portfolio efficiency and forecast performance. Furthermore, there is a lack of support, in terms of investment capital as well as top-down sponsorship, to deploy much needed workplace transformation programs. In addition, when the procurement teams involved in CRE decision making are not CRE savvy, their contribution can end up being counterproductive.
  13. 13. Jones Lang LaSalle 13 Talent caps On average, our survey shows a ratio of one CRE employee per 4,563 full-time employees in companies in India (Fig. 7). This ratio indicates smaller in-house CRE teams in India than in most developed countries. In Australia, for example, the ratio is one CRE employee per 1,100 full-time employees (FTE). This can either indicate that the CRE function in India is more outsourced, or that CRE teams are understaffed. The professionalisation of CRE is just starting to gain momentum. Companies in India suffer from a shortage of trained CRE professionals, mainly because of the lack of formal education in the real estate sector. In fact, there is no well-established community of real estate academics in India. Apart from short-term courses offered by industry bodies such as the Royal Institute of Chartered Surveyors (RICS) and a ‘Master of Corporate Real Estate’ (MCR) degree recently launched by CoreNet Global, no full-time program is preparing students to assume CRE leadership positions. Most real estate programs are likely to deal with infrastructure and construction, but often miss CRE subjects such as leasing or portfolio management. When self-taught or being trained on the job, CRE executives often gain top-notch capabilities, but run the risk of being stuck in a tactical professional stage, not realising that they, or their teams, need upskilling to progress. Working with global external partners who bring in best practices from around the globe is one way to unlock their careers and move on to the next, more strategic dimension of CRE. Figure 7: CRE to FTE ratio breakdown in India-based companies Question: What is the size (number of full-time equivalent employees) of your CRE team globally? Approximately how many employees does your organisation have globally? 3% < 1:100 8% 1:101-1:200 1:201-1:50019% 1:1,001-1:500014% 39% 1:501-1:1,000 17%> 1:5,000
  14. 14. 14 India Corporate Real Estate Trends 2013 Even though collecting data may not be a serious issue, extracting value out of this data and automating the process represent a challenge (Fig. 9). CRE teams in India rely more on manual data collection rather than on systems and technology. When asked what has driven the improvement in extracting real estate metrics, very few respondents in India mentioned ‘commitment to spend on data collection and systems’ and only one respondent indicated ‘purchase and population of database system’ (Fig. 10). In contrast, a total 70% of respondents globally attributed the improvement in extracting real estate metrics to investment in and implementation of data analytics systems. Figure 9: Ability to extract real estate metrics at facility and portfolio levels Question: How would you rate your current ability to extract real estate metrics (e.g., space held, costs, vacancy) on demand? Note: Totals may not equal 100% due to rounding. Information is power CRE in India is challenged with inefficiency in providing detailed, accurate and timely real estate data. This undermines CRE’s strategic promise, as no reliable analysis can be conducted if real estate cannot be properly measured, valued and forecast. Respondents in India rank the lack of effective data and analytics as the first constraint hindering CRE from demonstrating its business value (Fig. 8). This is unique compared with other countries, where financial constraints are seen as the most important. Figure 8: Constraints hindering CRE teams from demonstrating the value they contribute to the business Question: In your opinion, what are the top two constraints that are hindering CRE from enhancing itself as a strategic value add to your organisation? Note: ‘Others’ include comments about organisational culture and management and quality of manpower. Portfolio level Facility level 39% 31% 44% 56% We have everything we need Adequate capability 17% 11% Limited capability 0% 3% No capability India Global Lack of effective data and analytics to measure value Financial constraints Lack of sustained/ consistent C-suite commitment 44% 34% 42% 48% 31% 32% Fragmented or decentralised team 22% 27% Internal skill sets/ knowledge 14% 26% Lack of technology 11% 8% Poor vendor relationships 8% 6% Others 28% 19%
  15. 15. Jones Lang LaSalle 15 Figure 10: Improvement in ability to extract real estate metrics, and drivers of this improvement Question: Has your ability to extract real estate metrics improved since 2010? What do you think has driven this improvement? Note: Respondents were able to select multiple responses for the second part of the question. Question: What technological tools would most enhance your performance as a CRE professional? Please rank the top three tools, where 1 is the tool that most enhances your performance. Building analytical tools and systems can fill the gap and make data analytics possible. According to India respondents, occupancy planning and financial modelling tools are the technological apparatus most expected to enhance the performance of CRE teams (Fig. 11). However, building or acquiring these tools requires investment that is not always readily available—financial constraints rank as the second most limiting factor in CRE evolution (refer back to Fig. 8). Figure 11: Technological tools enhancing performance of CRE professionals Occupancy planning data Financial modelling Portfolio dashboards Rental benchmarking Lease management Retail network planning Electronic document repository 17%47% 19% 19%25% 11% 25%14% 17% 14%8% 14% 11%3% 25% 3%3%3% 11%11% Rank 1 Rank 2 Rank 3 11% No 89% Yes Data collection by the CRE team Commitment to spend on data collection and systems Outsourcing of lease administration to service provider 75% 25% 22% Purchase and population of a database system 3% Others 9%
  16. 16. 16 India Corporate Real Estate Trends 2013 Lack of support for workplace transformation projects is putting CRE reputation and positioning at risk Workplace transformation projects offer CRE a unique opportunity to demonstrate the value that the function can contribute to the business. However, a lack of support often represents an obstacle to the successful completion of these complex projects. A lack of investment capital is consistently appearing as the most limiting factor in driving workplace transformation across the globe. Yet, this is not the only critical factor for driving workplace transformation in India (Fig. 12). Unlike in any other country, complexity arising from cultural diversity is just as important in the Indian context. An identical proportion (22%) of respondents in India stresses the need for investment capital and points out cultural diversity as a limiting factor in workplace transformation. This ranking derives from the inherent cultural diversity in the country, including an astounding variety of religions, languages and cultures. Accommodating diversity in the workplace is challenging, especially while at the same time companies need to create productive and coherent spaces. Figure 12: Most limiting factors in driving workplace transformation Question: : In your organisation, what is the single most limiting factor in driving workplace transformation? Note: Totals may not equal 100% due to the inclusion of the most limiting factors only. India Global Lack of investment capital 22% 22% Complexity arising from cultural diversity 22% 7% Employee resistance 14% 14% Lack of continuing C-suite sponsorship 7% 8% Lack of management engagement 8% 10% Difficulty to build a compelling business case 6% 5% Diffiiculty to change management styles 6% 15% Others 6% 6% None 8% 4%
  17. 17. Jones Lang LaSalle 17 Involved on a permanent basis Involved on an ad hoc basis No internal procurement team Procurement is not involved Use external procurement consultants Other India 57% 14% 20% 0%0% 9% Global 36% 33% 23% 3% 3% 2% 40% 25%25% 4% 2% 3% Asia High involvement of procurement The role of procurement in CRE buying decisions in India cannot be underestimated. Over half (57%) of respondents in India indicate that procurement teams are involved on a permanent basis, and 14% mention that procurement is involved on an ad hoc basis (Fig. 13). This engagement is much more active when compared to global responses, in which permanent involvement is only at 36%. One of the explanations for the remarkable level of involvement of procurement in India is the need to ensure more transparency and better governance in corporate processes. In 2011, India ratified the United Nations Convention Against Corruption (UNCAC) and, in 2012, the country introduced the Public Procurement Bill. In the wake of these legislative changes, corporations in India have put a special effort into developing policies and procurement guidelines. Figure 13: Procurement teams’ involvement in CRE worldwide Question: Is your internal procurement team actively involved in CRE? Note: Totals may not equal 100% due to rounding. There is a lot that CRE teams can gain from procurement support in terms of transparency, supplier selection and vendor management. However, the active involvement of procurement may not always be beneficial for CRE. Respondents in India believe that among the procurement teams involved in CRE, 60% have limited knowledge about what it takes to secure quality real estate services (Fig. 14). Unchecked and ad hoc involvement of procurement teams may not yield the desired result when it comes to CRE services outsourcing. Figure 14: Degree of involvement of procurement teams in CRE in India Question: How knowledgeable is your internal procurement team about CRE? (Those who responded that procurement is involved on a permanent or ad hoc basis.) Knowledgeable about CRE 40% Limited knowledge of CRE 60%
  18. 18. 18 India Corporate Real Estate Trends 2013 3 78% indicate that demands to enhance the productivity of the real estate portfolio are increasing; again, this is more than globally and in Asia (68% and 70%, respectively) 33% perceive real estate market transparency as the greatest challenge in emerging markets; this is considerably more than the global data and in Asia (19% and 26%, respectively) Upgraded CRE function needed to meet increasing strategic demands The perceived internal limitations and constraints make CRE teams in India less confident of being equipped to deliver all that is expected from them. At the same time, CRE teams in India are aware that the senior leadership demands placed on them will only keep increasing in both tactical and strategic terms. Expectations to improve productivity, a factor that ranks higher in India than the global average, are moving beyond the workplace to include people, business and asset productivity. Portfolios are expanding in India and beyond borders, often in growth markets that lack transparency. In line with the low global response, only 28% of respondents in India believe that they are well equipped to address all the demands of senior leadership; only 16% feel well equipped in Asia In line with the low global response, only 28% of respondents in India believe that they are well equipped to address all the demands of senior leadership; only 16% feel well equipped in Asia 92% report more demands to increase the utilisation of existing buildings in the portfolio; this is significantly more than globally and in Asia (74% and 78%, respectively) 80%of respondents anticipate workplace quality to increase in the next three years, slightly higher than globally (73%) 42% 71% of CRE executives worldwide expect to expand their real estate portfolios in India, and 4% expect to reduce it; 89% of organisations in India have high expectations about CRE improving workplace productivity, this is more than the global average (72%) of India-based respondents expect to further increase their portfolio in India, and 8% expect to decrease it
  19. 19. Jones Lang LaSalle 19 Constraints and limitations described in the previous pages have a significant impact on CRE teams’ performance and result in a low proportion (28%) of CRE executives feeling well equipped to meet all demands being placed upon them (Fig. 15). Figure 15: CRE leaders’ ability to meet demands of senior leadership Faced with enhanced expectations, CRE teams in India run the risk of underperforming Question: How are the demands of senior leadership/C-suite on the CRE team changing in the following areas? (Those who responded that demands are increasing.) Question: How well equipped do you feel to meet these senior leadership demands? The concern they express will intensify further if nothing changes, as C-suite expectations are increasing in number and complexity. More and more, senior leadership demands are not only tactical, but also strategic. CRE teams are being solicited to impact and add value to a wider range of strategic agenda items. This observation is even more relevant in India, where our survey findings demonstrate that local demands are increasing faster than the global average (Fig. 16). • ‘Increasing the utilisation of existing buildings in the portfolio’ is the demand gaining more traction in India, where 92% report an increase in demand. • ‘Reducing direct and run costs’ is the next most increasing demand in India, in line with global and regional trends. • ‘Getting clear on the portfolio size and opportunities’ is requested to a much higher degree in India compared with the global average. This highlights the importance of data and analytics when it comes to a company’s leadership, and probably indicates that, currently, real estate data is not being effectively used to evaluate portfolio size and opportunities. Figure 16: Tactical demands being placed on CRE teams 28%69%3% Ill equipped to meet the demands Can meet most demands Well equipped to meet all demands 92% 74%Increasing the utilisation of existing buildings in the portfolio India Global 88% 73%Reducing the run costs of the real estate portfolio 86% 75%Reducing direct real estate costs 83% 57%Getting clear on the portfolio size and opportunities via data 77% 63%Limiting exposure to future real estate costs 71% 64%Challenging the business on its presumed space needs 49% 49%Reducing the size of the portfolio 37% 28%Running own vs. lease assessments 23% 19%Increasing the size of the portfolio
  20. 20. 20 India Corporate Real Estate Trends 2013 Continued global economic volatility has led senior leaders to place an additional set of strategic demands on CRE (Fig. 17), in particular, around the transformation of real estate portfolios to enhance asset, workplace and worker productivity. • Enhancing real estate portfolio productivity is considered to be the most pressing demand by 78% of respondents in India. This now standard requirement in companies all over the world is nonetheless a rather complex task for CRE, as it requires combining the multiple dimensions of workplaces (cultural, technological, etc.) and a smooth collaboration with other support functions. • Presenting scenarios and solutions to the business on demand is becoming more important for strategic decision making, even though CRE teams in India might have limited internal resources and lack confidence in their contribution to achievement of corporate goals. • Holding CRE accountable for driving the sustainability agenda is more frequent in India than in most other countries. This may be due to an overall move toward more transparency and sustainability across public and private sectors in India. While companies around the world gradually embrace the importance of real estate in their sustainability agendas, India respondents have already started to include it in their corporate strategy. • Another strategic demand with particular importance in India is attracting and retaining talent. With multinational and domestic companies alike competing for the same high- calibre candidates, senior leadership insists on promoting attractive workplaces to retain top performers and better attract potential talent. Figure 17: Strategic demands being placed on CRE teams Question: How are the demands of senior leadership/C-suite on the CRE team changing in the following areas? (Those who responded that demands are increasing.) 78% 68%Enhancing productivity of the real estate portfolio India Global 74% 65%Presenting scenarios and solutions to the business on demand 67% 54%Driving the sustainability agenda 67% 65%Transforming the quality of the portfolio/workplace 63% 56%Bringing more flexibility to the leasehold portfolio 63% 46%Attracting and retaining talent 50% 46%Delivering a platform for growth in select markets 44% 55%Enabling remote or mobile working 44% 53%Aligning CRE with business drivers and functional areas
  21. 21. Jones Lang LaSalle 21 Anticipating demands will help CRE leaders to design an operational structure that is equipped with the relevant tools and staffed with adequate skills, ultimately enabling an optimised service delivery and ensuring the recognition of the strategic value of CRE. CRE leaders should pay particular attention to specific attributes that have the potential to elevate the CRE function in India (Fig. 18). Having business acumen and an understanding of the broader business, being focussed on innovation, forward thinking and efficient in stakeholder management outside CRE are some of the highest-ranked attributes that organisations in India think CRE should possess. Most are non-traditional real estate competencies, meaning skills development is a critical component in meeting these expectations. Figure 18: Attributes ranked the most important for CRE Question: : Please select the three most important attributes to your organisation by placing ‘1’ next to the most important, ‘2’ next to the second most important, and ‘3’ next to the third most important. 14%22% 8% 11%19% 17% 14%17% 19% 11%17% 8% Business acumen/ understanding of broader business Focus on innovation Forward thinking/ challenging status quo Efficient stakeholder management outside CRE 14%8% 11% Improving CRE team communication/ relationship skills 11%8% 11%Providing data and insights 6% 3%8%Improving internal reputation of CRE 11%17%Presenting real estate options and scenarios 11%3% Adding new skills (e.g., change management, financial acumen etc.) Rank 1 Rank 2 Rank 3 Upgraded skills are required to meet increased expectations
  22. 22. 22 India Corporate Real Estate Trends 2013 Workplace transformation is the key to unlocking productivity and optimising portfolios Boosting productivity is a strategic priority for companies across the globe. While it appeared as an emerging trend for best-in-class workplace strategy in our Global CRE Survey 2011, it is now highly expected and is moving beyond the workplace to include people, business and asset productivity. In India, the proportion of respondents reporting high productivity expectations is greater than the global average. Workplace productivity is the outcome most expected from CRE in India, with 89% of respondents indicating high expectation (Fig.19). Improving people productivity is highly expected by 75% of respondents in India. These expectations could be explained by the high concentration of financial services and technology companies in India that traditionally put more emphasis on workplace and people productivity, as well as by the dominance of larger companies (those having over 100,000 employees) in our India sample base. Figure 19: Company expectations of productivity outcomes from CRE Question: : What productivity outcomes does your organisation expect the CRE function to deliver? (Those who responded that expectations to deliver in these areas are ‘high’.) Over the past three years, the workplaces of India-based companies have undergone significant transformation. Their portfolios have been increasing in size much more than the global average (Fig. 20). Along with that, the quality of workplace (from either a design or environmental point of view) increased in 80% of surveyed companies—one of the highest rates worldwide. While the increasing quality of workplace transformation is expected to maintain its rate in the next three years, the size of portfolios will slightly decrease (in contrast to a much stronger decrease globally). India Global Improve workplace productivity Improve people productivity Improve asset productivity 89% 72% 75% 61% 75% 47% Improve business productivity 61% 57%
  23. 23. Jones Lang LaSalle 23 Getting ready for portfolio growth in India and overseas CRE transformation and platform building gain a sense of urgency when put in the perspective of a rapid increase in the size of real estate portfolios. CRE teams need to be ready and well equipped to enable business expansion both in India and in other countries. While companies worldwide are downsizing their real estate portfolios in developed markets, most are expecting their portfolios to grow in emerging markets. India is second only to China in the net expected growth of real estate portfolios over the next three years (Fig. 21). Figure 21: Global CRE expectations of portfolio expansion — top ten countries by net portfolio growth Question: Over the next three years, how will your portfolio evolve in each of the following regions? Responses from global respondents related to global real estate portfolios. Note: Net portfolio growth percentages are obtained by deducting responses anticipating portfolios to decrease from responses anticipating portfolios to increase. Question: To what extent has your global corporate workplace transformed over the last three years/will transform over the next three years? 44% 38% 31% 20% 16% 13% 12% 11% 8% 5% China India Brazil Russia Mexico UAE Turkey Saudi Arabia South Africa Australia IncreasedDecreased India - last three years India - next three years Global - last three years Global - next three years Quantity Quality Utilisation Density 69% 80%80% 73% 67%65% 42% -11% -6% -6%-4%-9% -9%-14%-12% -26% -11% -15% -9%-7% -15% -31% -36% 48% 71% 77% 68% 79% 66% 51% 72% 62% Space utilisation rates have been increasing in response to demands from senior leadership and in line with the global trend. Density rates have been more varied in India, but are expected to experience significant increase in the next three years. Figure 20: Extent of global corporate workplace transformation
  24. 24. 24 India Corporate Real Estate Trends 2013 Question: Over the next three years, how will your portfolio evolve in each of the following regions? (Responses from global respondents as related to India real estate portfolios.) Globally, 42% of CRE executives expect to increase their real estate in India, and only 4% will decrease their portfolios in the next three years. The technology sector will experience the highest net increase, followed by the energy and banking sectors (Fig. 22). Figure 22: Global CRE expectations regarding their real estate portfolio in India by sector Increase Decrease No change IncreasedDecreased -7% Technology Energy Banking/ financial Retail Pharma/ life sciences Consumer products Government Other industries 42% 15% 12%15% 58% 45% 29% -4% -3%-3% -2% 40% 16%16% 23% 3% 44% 14%14% 41% 38% 19% -13%-12% Total (average) Companies based in India expect their portfolios to grow most in Asia (Map 1), with a net 63% planning to further expand in India. Most of the countries where they expect the highest portfolio growth (India, China and South East Asia) are semi-transparent markets, according to Jones Lang LaSalle’s Global Real Estate Transparency Index 2012. This resonates with our survey results that indicate real estate market transparency as the greatest challenge when operating in emerging markets (Fig. 23). Compared to the global average, where political, economic and real estate market transparency rank equally as the important challenges, real estate market transparency in India is almost twice as critical as the other two, while the lack of unified real estate standard is also perceived as a great challenge.
  25. 25. Jones Lang LaSalle 25 Map 1: Net portfolio growth anticipated by India-based companies over the next three years Question: Over the next three years, how will your portfolio evolve in each of the following regions? (Responses from India-based respondents as related to global real estate portfolios.) Note: Net portfolio growth percentages are obtained by deducting responses anticipating portfolios to decrease from responses anticipating portfolios to increase. Rest of region Country Stability (0% Net Growth) 1%-10% Net Portfolio Growth Negative Net Portfolio Growth (10%-1%) 11%-30% Net Portfolio Growth 30%+ Net Portfolio Growth China 53% SEA 44% India 63% Question: In your opinion, which of the following is the single greatest challenge when expanding into developing/emerging markets? Figure 23: Perceived greatest challenges in developing markets India Global Real estate market transparency 33% 19% Economic transparency 19% 17% Lack of unified real estate standards 17% 7% Political transparency 14% 18% Lack of suitable real estate offer 8% 10% Start-up costs 3% 7% Others 3% 8% None 3% 14%
  26. 26. 26 India Corporate Real Estate Trends 2013 This report is based on answers received from 545 respondents from across 39 countries through a combination of online and telephone interviews, including trends culled from multiple responses of Indian organisations. This respondent pool reflects a representative section of the corporate community in India, ranging from mid-tier companies to large multinational organisations. It represents a diversity of sectors where technology and financial services dominate. Jones Lang LaSalle was supported by the market research company Kadence International in collecting, compiling and segmenting the rich research data set generated. About the Survey Responses by organisation size (number of employees) 6% 5,001- 10,000 19% 10,001-50,000 17% 1,001-5,000 36% More than 100,000 22% 50,001-100,000 Responses by CRE team size (number of CRE employees) 17% 1-5 11% 6% 6% 8% 17% 6% 31% 26-50 51-1006-10 11-15 101-200 Over 20016-25 banking and financial services 25% technology 33% others 32% telecommunica- tion services 8% manufacturing and industrial 11% professional services 6% 8% consumer products retail 6% India respondents breakdown by sector
  27. 27. Jones Lang LaSalle 27 Acknowledgements Jones Lang LaSalle gratefully acknowledges the assistance of those CRE professionals who participated in this survey. We are also grateful to Kadence International, our research partner for this project. We welcome any feedback on the published results to continue to improve future editions and make them as meaningful as possible for our readers. If you have any comments or would like to participate in future surveys, please email insightteam@jll.com. Research for this report was conducted by Kateryna Kyryllova and Holly Yang from Jones Lang LaSalle’s Corporate Research team in Asia Pacific. Visit www.jll.com/globalCREtrends to explore the global trends in more detail. See how CRE executives based in your region responded and compare your answers with the global survey results. Additional reports for specific countries and industry sectors will be posted to this site as they are released. Yash Kapila Managing Director, Corporate Solutions and Head of Integrated Facilities Management, India yash.kapila@ap.jll.com Sudarshan Malpani Head of Transaction Management and Integrated Portfolio Services, India sudarshan.malpani@ap.jll.com Nitish Bhasin Managing Director, Markets, India nitish.bhasin@ap.jll.com Anurag Mathur CEO, Project and Development Services and Head of Emerging Businesses, India anurag.mathur@ap.jll.com Manisha Grover Managing Director, Business Excellence and Head of India Corporate Account Management manisha.grover@ap.jll.com Report Contributors
  28. 28. About Jones Lang LaSalle India Jones Lang LaSalle is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 6100, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. The firm was named the Best Property Consultancy in India (5 Star Winner) at the International Property Awards - Asia Pacific for 2012-13. About Jones Lang LaSalle Corporate Solutions A leader in the real estate outsourcing field, Jones Lang LaSalle’s Corporate Solutions business helps corporations improve productivity in the cost, efficiency and performance of their national, regional or global real estate portfolios by creating outsourcing partnerships to manage and execute a range of corporate real estate services. This service delivery capability helps corporations improve business performance, particularly as companies turn to the outsourcing of their real estate activity as a way to manage expenses and enhance profitability. www.joneslanglasalle.co.in

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