Jul 05, 2022
By Kate Camerlin

The Importance of Capital Planning in Real Estate Decision Making | How Software Can Help

What Is Capital Planning and Why Is It Important?

Capital planning is the process of evaluating investment scenarios so you can direct your budget and get the most out of your organization’s assets and infrastructure over the long term. It is a complex process involving coordinating many moving parts and collaborating across departments—including facilities, space, and real estate teams. Although capital planning initiatives are important for any organization, the process only becomes more complex the bigger the organization is and the more assets and facilities it owns.

Capital planning software enables companies to track and manage their buildings, equipment, processes, and data, so they have deeper insights into the performance of their facilities and can make more informed decisions.

The importance of this was highlighted in a recent webinar run by IFMA and presented by Lara Paemen, Managing Director of IFMA EMEA; Erik Hakonsen, Director of Global Facility Support at Circle K; Felix Haas, Senior Manager of Digital Transformation at Lionpoint Group; Chad Coombes, Director at Sircle; and Oliver Ridgwell, Regional VP at Nuvolo.

 “You’ve got to collect data in a consistent fashion and put it into a system, which can help you with the calculations and the computation of that information so you can make informed decisions,” said Oliver Ridgwell, Nuvolo. “The larger the organization and volume, the harder it becomes to do that manually.”

Many software solutions are available on the market to help solve this problem, so how do teams decide which is right for them? The following article highlights what to look for when evaluating these solutions and covers some of the benefits of adopting software to help with your capital planning initiatives.

Capturing Key Data and Metrics

Software solutions can help you track real-time data about your facilities, giving you better insights into performance.

However, it is important to take a step back and ensure you’re capturing the right data.

“When it comes to collecting data, it’s really about understanding what you want that data for, and then how you want to use it…. It is vitally important to understand what you’re asking for.”—Chad Coombes, Director at Sircle

To establish this, your team should figure out what your company’s goals for its facilities are. These goals should align with how each building helps your business deliver its service. The building then needs to be measured against these items. Different industries will need to track different metrics (e.g., a retail store’s performance metric is customer experience, a prison’s performance metric is security, and a railway station’s is efficiency and safety).

Once you know your KPIs and goals, you can begin exploring solutions that help you track and manage those metrics.

More Easily Run FCAs to Prioritize Projects and Align Them with Business Objectives

Software solutions can help you during the process of running a facility condition assessment, in which you analyze the physical condition of your overall facility, individual spaces, and equipment. You can track the status and condition of your assets in one place to create a comprehensive evaluation of the performance of your buildings. This evaluation is one input that can then inform your capital planning decisions.

The Association of Physical Plant Administrators has this to say about FCAs: “A thorough physical condition assessment, based on building inspections and data collection… permits detailed cost estimating and project scheduling. Thus, results of an assessment based on field inspections can be translated directly into projects and assembled for sorting into a capital projects plan.”

RICS (The Royal Institution of Chartered Surveyors) identifies the type of data you should gather to help make decisions, which includes:

  • “The construction and condition of the property on the date it was inspected
  • Any defects that need urgent attention or are serious
  • Things that need further investigation to prevent serious damage to the fabric of the building
  • Defects or issues which may be hazardous to safety”

Ultimately, once you’re tracking all this relevant facility condition assessment data in one place, you can see the high-priority areas where you need to focus your attention. You can then align these focus areas with business requirements to inform your capital planning process.

Collaborate Across Departments

Additionally, technology solutions can help you share data and collaborate across departments. For example, with the right software platform, you can combine facilities data (such as how often you’re cleaning a room or performing corrective maintenance on an asset), with space and real estate data (such as how often are rooms being used, what the desk sharing ratio is, and occupancy rates).

“The head of FM has to provide all this information and data and has to leverage technology. This is the person who constantly is managing the balance between space supply and demand and is leveraging input from all these departments. This is the ecosystem that every organization is in, and we can see the head of FM is playing a major role in this.”—Felix Haas, Lionpoint Group

This combination of information from different departments gives teams a much clearer cross-functional picture they can use to make investment decisions. For example, if real estate and facilities data are captured in one place, you can see whether a lease is due to expire or if a building is being disposed of, so you know not to factor updates to those facilities into your plans.

“Capital planners have got to be able to interpret business demands and priorities and then apply the data that they’ve got to understand what investments they need to make and to make sure they’re not duplicating investments. You don’t want to invest in an office space that you then in nine months need to completely refurbish because it doesn’t fit your sustainability model.”—Oliver Ridgwell, Nuvolo

In one example highlighting this, a UK retailer occupied a location that had a particularly old escalator. Parts for the escalator were no longer available, meaning any serious malfunction would put it out of service indefinitely, significantly impacting footfall to the store’s upper floors and resulting in lower sales.

However, undertaking a total replacement is a major, expensive project due to the nature of the building. To decide on the best course of action, the facilities and lease teams need to be able to share data and collaborate. A significant repair cost may mean the store should consider moving locations when the lease expires—whereas if the business renews the lease, the facilities team needs to plan for the replacement work necessary early in the new lease term.

By sharing data and forecasting risks and costs across departments, the business can make better long-term decisions.

Putting Your Capital Planning Initiatives into Motion

The right software solution also helps you develop an investment plan by making it easier to build out multiple scenarios you can then analyze and evaluate.

This is vital, as it is important to visualize different options and clearly assess the associated risks, benefits, and costs. For example, by creating different plans, you can see how Scenario A might be better for the environment, Scenario B might be better for health and safety, while Scenario C might be the most cost-effective. Then you can compare and contrast these options and make a decision accordingly.

Using manually built spreadsheets, it can take months to gather data and build out different scenarios. With a software solution in place, running these kinds of analyses becomes far quicker and more efficient.

A Connected Capital Planning Solution

Nuvolo Connected Workplace connects your data, processes, and teams in one solution. This allows capital planners to work closely with lease administrators, facilities teams, space planners, and others to ensure that the business makes evidence-based decisions.

When everything is in one place, you can more easily prioritize projects against business goals and then communicate your analysis to key stakeholders. You can then manage those projects and ensure you’re meeting your organization’s objectives.