CREM refers to real estate in use by corporations. Dewulf et al. (2000, p.32) defines CREM as follows: “The management of a corporation’s real estate portfolio by aligning the portfolio and services to the needs of the core business (processes), in order to obtain maximum added value for the businesses and to contribute optimally to the overall performance of the corporation”. CREM deals in different management fields like general Real Estate Management, thought you have to take into account also core business perspective and strategic focus.
Differences between Public and Corporate Real Estate Management
In theory, Public Real Estate Management incorporates the same disciplines as Corporate Real Estate Management in the area of general management, asset management, facilities management and cost control. The three main stakeholders (government, users and Treasury) can be recognised in the first three disciplines. Although some of the developments are similar, the theories, opinions and experiences described in corporate real estate literature are not always applicable to a public setting, because there are some important differences between managing corporate and public real estate; these are:
- First, private and public sectors are fundamentally different organisations. For instance, in the private sector, business leaders are driven by the profit motive; whereas, government leaders are driven by the desire to get re-elected. Businesses get most of their money from their customers; governments get most of their money from taxpayers. Businesses in the private sector are usually driven by competition; governments are usually driven by monopolies (Osborne and Gaebler, 1992). Thus, there are fundamentally different incentives in public organisations from those in corporate organisations. For example, public organisations do not normally think about making a return on investment. Governments focus on the cost of government services. The same applies to real estate: politicians hardly ever consider the buildings they use as an investment that should be made profitable. Moreover, because of the specific nature of some public buildings, their economic value is often considered to be zero.
- Second, the difference between the way corporate and public real estate is managed has to do with political steering and governance. Within public organisations, the financial profits – or rather the costs- of real estate for the organisation are less important than in corporations. Besides adding value to the primary processes, the public manager has to consider social goals and policies. This political return on investment is defined by feelings, positions of power and is measured against continuously changing criteria. Public buildings, therefore, very often have a symbolic meaning and serve purposes other than simply a workplace for civil servants or a capital investment. Moreover, public buildings have to add value to many different political goals, each of them serving a different policy field (e.g. economy, culture, protection of the environment, employment, etc). These political goals correspond in some way with a company’s overall strategy, but the difference lies in the fact that, oftentimes, political goals weigh much heavier than a corporate strategy, since many of the political risks are connected to these social goals, which greatly influence public perception. The importance of social goals also becomes clear when looking at the cultural significance of public buildings.
- Third, the difference between public and corporate real estate is somewhat connected to the previous point. In addition to political steering, public real estate managers are confronted with many more external stakeholders than their colleagues in the private sector. Whereas corporations have to listen to their stakeholders, and also to the public, public organisations often have to deal with a whole regiment of stakeholders: special committees, various interest groups, the general public, individual members of parliament, and so on. The greater the number of stakeholders, the tighter and more difficult the boundaries of the playing field become in which a public real estate manager has to operate.
Fourth, the difference between public and corporate real estate is security. Security measures for a public building differ from the ways in which most corporate buildings are guarded. Public buildings have to address two opposing interests: a) to protect the authorities; and b) but at the same time most of these buildings have to be open to the public.
