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Relocation process: What services do tenants need? Work in progress Miikka Putto Aalto University Real Estate Business.

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Presentation on theme: "Relocation process: What services do tenants need? Work in progress Miikka Putto Aalto University Real Estate Business."— Presentation transcript:

1 Relocation process: What services do tenants need? Work in progress Miikka Putto Aalto University Real Estate Business

2 Content BackgroundAim & methodologyPreliminary findingsDiscussionFurther research 2

3 Background 3

4 Background: why study relocation? Office occupiers’ relocation decisions have an impact on •On all actors within the built environment and society at large •On the relocating organization itself –Organisation –Individuals  Understanding where and how organizations relocate is important! 4

5 What is relocation? Optimal location -Neo-classical approach -Behavioral approach -Institutional approach Process focused -Organizations are comprised of people -Decisions are made - and affected – by people Relocation is “a change of address of a firm from location A to location B” (Pellenbarg et al. 2002) -> Organisation’s address changed from A to B -> Office occupiers, short and medium distance 5

6 Previous research, examples *1: Pellenbarg, P.H. & Wissen, L.J.G. van & Dijk, J. van, (2002). "Firm relocation: state of the art and research prospects,“ Research Report 02D31, University of Groningen, Research Institute SOM. *2 Greenhalgh P. (2008) ‘An examination of business occupier decision making: distinguishing small and large firm behaviour’, Journal of Property Research, 25(2) 107- 126 *3 Rasila, H.M., Nenonen,S. (2008) "Intra-firm decision- maker perceptions of relocation risks", Journal of Corporate Real Estate, Vol. 10 Iss: 4, pp.262 – 272 *4 Rothe, Peggie; Sarasoja, Anna-Liisa (2012) Power or activity? Roles of individuals in relocation processes. Joint CIB W070, W092 and TG72 International Conference, Cape Town, South Africa, 23.-25.1.2012 Firm relocation: state of the art and research prospects *1 An examination of business occupier decision making: distinguishing small and large firm behaviour *2 Intra-firm decision-maker perceptions of relocation risks *3 Power or activity? Roles of individuals in relocation processes *4 6

7 Risks Relocation includes several risks •financial risks •functional risks •corporate culture risks •interest group risks •future risks. (Rasila & Nenonen 2008) On the employee level: •increased absenteeism •substantial reductions in productivity •low morale and a poor attitude toward the company that may persist for months and years •an increase in work errors •the loss of experienced, hardworking people •even attempts to sabotage the move. (Attwood 1996) 7

8 Relocations in Finland 8

9 The Finnish context: what do tenants think they need? Change management Taking care of practical arrangements Lease agreement negotiation Legal advice Comparison & Selection of option Searching potential premises Determining work environment criteria Space requirement analysis Have used; Have not used but a need exist; No need; Can not say 9

10 Tenant representation •Commercial tenant representation •Occupier representation •Relocation management •Relocation services •Leasing advisory services Tenant representation Characteristic •Service provider (consultant) offers services related to relocation process, often searching suitable premises and negotiating lease conditions. •Other services might be included •Principal is tenant •Implicit characteristic is the relationship between tenant (as a client) and a consultant. Consultant have to represent exclusively the client. •Earning logic varies: fee can be paid by the tenant or by the landlord 10

11 Tenrep market in Finland The majority of lease negotiations is done without Tenrep consultant -Some markets even 80…95% might use consultant Typical client for Tenrep consultant -Large, international company -Sensitive for economic fluctuations -Centralised CREM -Consultant company -Brand orienteed companies TenRep association 11 Ounasvuori 2012

12 Triggers to hire a Tenrep consultant -Expiring lease contract -Organisational changes -Business expansions / cut downs -Hurry -Premises have to support special functionalities -Lack of supply (specific requirements) 12

13 Research aim and methodology 13

14 Research aim •To understand the nature of relocation processes •To understand challenges that tenants come across •To identify service needs •What kind of relocation processes do tenants have? •What challenges do tenants come across? •What services should be developed? 14

15 Research methodology •Multiple case study •Semi-structured interviews Landlord interviewsTenant rep consultant interviewsTenant interviews Describe practices, Identify challenges Develop service concept related to relocations 15

16 Preliminary findings 16

17 Challenges that organizations come across Tenant interviews: -Signifigant time is spent on the process -Relocation project management is hard to handle -Often employees were not involved to process -The emphasize of communication was in the later phases •Suprisingly the respondents (at least so far) did not considered that advice in lease negotiation would have been be beneficial •Tenants are interested about real estate services but pay willingness is low •Some of the respondents indicated that external advice would have been beneficial 17

18 Added value – consultant experiences •Savings •Tenrep consultant is able to negotiate better lease conditions •Time spend •In-house knowledge does not exist •No need to waste time to long lists •Consultant knows the real estate market •Professionalism •Possibility to concentrate only to essential issues •Tacit knowledge •Consultant can find all alternatives – access to silent market information •Tenants benefits are continuously guaranteed •Special knowledge available (taxation eq.) 18

19 Discussion 19

20 Discussion •More emphasize to relocations is needed –Awareness –Relocation should be seen as an investment not a cost •In-house versus outsourcing •Tenants are interested in real estate services but willingness to pay is low •Should landlord integrate some services to their budgets? •For example, technology parks are offering already wide range of services. Could they built up a business concept to support potential tenants to move in? 20

21 Possible benefits for the real estate industry •Space providers –To understand relocation processes -> Supply side of the market develops -> Letting process more effective •User organisations –Perceive understanding of all aspects of relocation –Less risky relocation process –More efficient relocation process –Take financial, social and environmental aspects better into account •Service providers and consultants –To identify service need and develop services 21

22 Summary and further research Relocations •Significant impact •Organisations confront challenges •Finnish market is undeveloped, business potential exists •In order to understand location decisions, the relocation process needs to be investigated further Current study continues, so far challenges have been recognised. Next step is to understand office occupiers’ service needs 22

23 Thank you! Miikka Putto 23

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