When most people think about real estate, they think about the building itself and the employees inside that are doing work. However, that view is missing a giant chunk of what real estate is all about. At its heart, real estate is about your risk management.
Think about it, you could put your critical data center in New Orleans but once every few years you may have some “unexpected” downtime. Probably not good for the KPIs. Or you could put your primary call center 100 miles from Boseman, Montana. Great labor cost but can really really find all the people that you need?
The location you choose for your real estate is first and foremost about risk management. Don’t put a headquarters in Brussels if you don’t do business in Europe. Similarly, why would your headquarters be in Miami if 90% of your customers and suppliers are in New England? The same is true of every critical (or even non-critical) operation you have – whether in-sourced or outsourced.
If real estate was actually about cost as everyone says it is, there would not be a single company in Manhattan. No one would even be in Salt Lake. Every corporation in the world would be somewhere where no one else was. It’s easy to find low cost – it’s just probably not anywhere you need to be. After we eliminate the true low cost option every other location decision is a matter of balancing trade-offs. And guess what, trade-offs are all about managing your risk!
So this begs the question: Why does real estate usually flow up to the CFO instead of the Chief Risk Officer?