Real Estate Consulting: An Inside Look

Estee Lauder, the international cosmetics company, will move its Korean offices to Yeoksam-dong in southern Seoul from Shinsa-dong on February 5.

Just two years ago, Estee Lauder did not have plans to move its Korean offices. Fees for moving offices are not budgeted into its Asian region management plan.

But in April 2004, a Korean real estate consulting firm, BHP Korea, visited the offices of Estee Lauder Korea, and suggested Estee Lauder move its offices since its current office’s competitiveness had fallen below the standard set for the company’s size and growth.

The consultants analyzed the office’s building environment for work efficiency and the office surroundings, Estee Lauder’s domestic sales, and market trends of rival cosmetics companies. The consultants suggested an office move would be in order, and Estee Lauder agreed.

“We Don’t Just Find You Empty Office Space”–

Global companies seek advice from corporate real estate consulting firms when looking for office space in Korea and in any other country.

It is more economical for the company to use a consultant rather than manage its real estate affairs on its own, and it is easier for consultancies to find the perfect space for companies. Standard Chartered, Warner Brothers, Porsche, British Telecom, Microsoft, AMD, and other companies all consulted with BHP Korea when moving their Korean offices.

Porsche had planned to move its offices to a rented building, but taking the advice of the real estate consultants, the vice chairman of the company visited Korea and bought the office building. The consultant analyzed the asset value of the building, the company’s financial situation, the situation in the Korean import automobile market, and advised the company to buy the office building.

Corporate real estate consultants analyze a building’s value, a company’s finances, company preferences, the situation of the company’s rivals, and the potential growth of the company, and select the most appropriate building for the company.

Overnight Negotiations, Lots of Walking –

When consultants find the right building for a company, they must convince the owner of the building to rent or sell. At times, the consultants must negotiate for months with the building owners to reach an agreement fitting their client’s conditions.

When buying the office building for Porsche, for example, BHP Korea consultants spent three days in front of the building owners’ house. The owner did not want to sell because the building was relatively new.

When AMD was moving their offices, the consultants convinced the owner, who had already made an agreement with another company, to re-sign with AMD.

The consultants’ main task is to first visit every office building in order to fully understand the market.

Guk Jeong-hoon of BHP Korea’s corporate real estate advisory team said, “When researching the Gangbuk area of Seoul, I walked from the northern part of the Dongho Bridge to Ehwa Women’s University and inspected every building. Hence, the location and the layout of major buildings in downtown Seoul were naturally organized and memorized in my head.”

More Korean Companies Seek Counsel from Consulting Companies –

There are many agents that just find empty office spaces according to the clients’ requests for location, size, and price. This is different from professional consulting.

Real estate accounts for 25 percent of most companies’ assets, but corporate general affairs departments manage most companies’ real estate.

“People are not too aware of the field of corporate real estate consulting,” says BHP Korea’s managing director Goh Eun-hee. “As more companies recently enter foreign markets, some large Korean corporations requested our services for the first time last year.”

Yoon Sook-hyun, an assistant manager with the corporate real estate advisory team said, “We analyze every aspect of the building, from the initial construction process and length, extra space for office expansion, the number of electrical and phone outlets, the number of fire hydrants, and the location of exits. Building owners used to avoid us because they thought we were too picky. But now they think they receive fair compensation for their buildings from us, so they contact us first.”

imsoo@donga.com