What is it about?

Many Norwegian owners and users of commercial and public buildings emphasize short-term financials and seem to overlook recent research concerning factors that creates long-term value such as life-cycle planning and the buildings’ elasticity, flexibility, generality. Respondents employed by private enterprises seem to have shorter time horizon than respondents employed by hybrid organizations and public administrations. The economic logic is clearly dominant among the respondents. Short-term financials and real estate (RE) issues seem to be far more important than long-term value creation and facilities management (FM) issues. However, RE is far more capital intensive than FM, and FM’s influence on the core business’ performance is not always straightforward and easy to recognize. Hence, the conclusion is that increased emphasis during early-phase planning of buildings on aspects that actually create long-term value can significantly increase the buildings’ value creation for owners and users.

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Why is it important?

In Norway commercial and public buildings usually have a use phase of about 60 years. Increased emphasis during early-phase planning of buildings on factors that facilitate long-term value creation, such as FM can significantly increase the buildings’ value creation for owners and users.

Perspectives

I hope this article can serve as an eye opener for those involved in early phase planning of buildings and among those who make the investment decisions. Writing this article with co-author and colleague Alenka Temeljotov Salaj was a pleasure.

Associate professor Knut Boge
Norges miljo- og biovitenskapelige universitet

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This page is a summary of: Practice vs theory: short-term financials trumps long-term value creation, Journal of Corporate Real Estate, September 2017, Emerald, DOI: 10.1108/jcre-06-2016-0022.
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