, , ,

It is generally understood that every building has a life cycle and that the time in that cycle where decisions can make the biggest difference is during the design and construction phase.  The difference in the impact of a decision between “before” and “after” is instructive.

After this phase, the main effect of most decisions (e.g. attracting the right kind of tenants, negotiating a lease, making sure that the snow is plowed well enough that a building is accessible) is on the financial performance of the asset.  These decisions are necessary and there is a difference between a good decision and a bad decision.  Many of these things transfer wealth from one person to another without adding much value to society as a whole.

During the design and construction phase, a decision can increase or decrease operating costs for decades into the future.  This perspective affects the debate over sustainability.

During this phase, a decision can affect the well-being of people in ways even if they could not categorize that decision specifically.  A recent article in the Globe and Mail notes how years of research has informed the design of hospitals.  A couple of years ago, we had a guest speaker who talked about why the apparent minutia of office design are important to making employees feel happy; an organization’s success depends on the warm fuzzies associated with the word “happiness” because, over the lifespan of an office building, a tenant spends far more on wages and benefits than on rent or a mortgage.

Many people act as though the real estate part of a business is a cost centre; i.e. that the goal of a real estate professional is find new ways to lower the cost of operations.  We encourage our students to see all of the different ways in which real estate decisions can add value to an organization (e.g. [1], [2]).