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    Current State Assessment: The First Step of CRE Portfolio Optimization


    In business, there are many instances where economic change directly affects company strategy and goals. When the economy dips, organizations may choose to downsize their workforce or outsource tasks where possible. When the economy thrives, new product lines may emerge, or the workforce may grow. 

    Just like business goals, your corporate real estate portfolio should adapt to economic change as well. 

    The best way to ensure the assets in your portfolio continue to positively impact your bottom line is through portfolio optimization. Real estate portfolio optimization is the process of analyzing your real estate assets to identify opportunities for growth, reduce costs, and support strategy. 

    The portfolio optimization process ultimately involves four strategic steps:

    1. Current state assessment.
    2. Future state assessment.
    3. Scenario planning, strategy, and action plans.
    4. Implementation.

    In this post, we’ll walk you through exactly what to expect during a current state assessment. 

    For everything you need to know about portfolio optimization, download our free whitepaper

    Why Start With a Current State Assessment? 

    Before we can talk strategy and future real estate needs, it’s critical to evaluate your existing portfolio. A current state assessment helps identify all the supportive, unsupportive, and missing (gaps) assets in your CRE portfolio, while also taking into account the people, processes, and technology that impact your real estate. In order for real estate to align with business goals, we must understand your existing assets—which are supporting your business and which no longer add value?

    An effective current state assessment should have two goals in mind: understand your assets, liabilities, and opportunities within your CRE portfolio, and establish the baseline for all status quo costs. Projected cost savings will be compared against the status quo.

    A Current State Assessment Task Checklist 

    During the current state assessment phase, partner with a trusted real estate advisor to review all of the owned and leased properties within your portfolio. As you review, categorize the assets as supportive (add value to your business), unsupportive (do not support your goals), or missing (assets that should be added to your portfolio). 

    As part of this review, consider completing the following tasks: 

    • Conduct a lease and asset valuation for your real estate portfolio.
    • Identify existing policies and internal processes.
    • Understand the tools and technologies you currently use.

    Key Takeaways From Your Current State Assessment

    When done correctly, you should walk away from the first phase of portfolio optimization with clear performance benchmarks, a utilization model of your CRE portfolio, and a baseline financial model.

    Having a clear understanding of your commercial real estate portfolio is an essential step in optimizing your overall business strategy. By knowing which properties in your portfolio are no longer advantageous, you can shed those unnecessary investments and hone in on the ones that move your business forward. 

    Remember: Conducting a current state assessment is a critical first step in portfolio optimization and will likely serve as a critical inflection point in your path towards an optimized CRE portfolio. 

    Align Your CRE Portfolio With Business Strategy   

    Corporate real estate optimization is fundamental to achieving your business goals and responding to new challenges. Learn more about assessing and adapting your CRE to meet changes in business by downloading our free guide, Portfolio Optimization: The Essential Corporate Real Estate Guide