Editor’s Note: The American Builders Quarterly team was saddened to hear of the passing of Doug Noonan on Feb. 23, 2016, shortly before the publication of this article. We’re fortunate to have had the time to talk to him and gain his insights on the industry and his leadership skill set. We join his family, friends, and colleagues in mourning his passing, and hope that his words and example serve as an inspiration to current and future executives in the construction and development industries.
To Doug Noonan, buildings are never just buildings. Often, they’re barometers. Like a fortune teller reading palms at a carnival, Noonan can look at a corporate real estate portfolio and instantly see a company’s future, the sum of each brick in each building adding up to a business strategy that will either make the organization or break it.
“Unless they’re managing it, companies have no idea how much they’re spending on real estate,” says Noonan, vice president of group corporate real estate at German footwear and apparel giant adidas Group. “When they actually take the time to look at how much money goes out the door for rent, operating expenses, and depreciation, they realize what a huge, huge number it is. It’s a tremendous asset that can cost you millions of dollars if it’s not managed properly.”
Noonan doesn’t just read companies’ fortunes, however. By rebalancing holdings, renegotiating agreements, and redesigning workspaces, he also shapes them. For companies that are stagnant, stale, or failing, the result can be transformative.
“There’s no doubt about it: Effective real estate management can help turn a company around,” Noonan says. He should know. Noonan spent the first part of his career as a project manager before transitioning to corporate real estate in 1995, when he joined Reebok International Ltd. as its director of corporate real estate and facilities.
Reebok, according to Noonan, is a “textbook example” of a turnaround fueled by real estate. “When I joined Reebok, its fortunes were good but slowly fading,” he says. “We were in six different facilities and our chairman and CEO, Paul Fireman, wanted a single place that Reebok could call home.”
Reebok’s brand had lost its luster, and its nondescript facilities were making it difficult to attract creative talent with which to breathe new life into its product designs and marketing. A change of venue, Fireman hypothesized, would stimulate a change of heart. So, he charged Noonan and outside architects NBBJ with building a new world headquarters in Canton, Massachusetts.
“Fireman told us, ‘Go learn about my company and express what you’ve learned in the architecture,” Noonan says.
The resulting 44-acre site—which encompasses a 525,000 square-foot office building, including a 30,000-square-foot fitness center, an 8,500-square-foot cafeteria, a 13,000-square-foot conference center, and seven outdoor athletic fields—was completed in 2000 at a cost of $70 million. It immediately bolstered Reebok’s bottom line.
“Reebok’s stock price, which had been dropping steadily since I joined the company, had lost 80 percent of its value by 2000,” Noonan says. “When we moved in, the stock price started to rebound, and over a three-year period it went back to where it had been in 1995, and even surpassed those levels. Sales that had been decreasing all of a sudden started increasing again. Attracting talent was no longer a problem. The company’s fortunes turned around significantly.”
The project even earned Reebok new business: Tours of its new headquarters helped Reebok secure 10-year licensing agreements with the National Football League and the National Basketball Association.
When adidas acquired Reebok in 2005, it saw what Noonan had accomplished and asked him to establish the company’s first corporate real estate function.
“When adidas took over, the corporate real estate portfolio tripled in size,” he says. Noonan went from managing 160 properties in 30 countries to managing more than 500 properties in 56 countries. To help him scale up, he outsourced what he could to commercial real estate services firm Jones Lang LaSalle. “I did that because it gave me global resources that would have been very hard to justify having on staff. It gave me tremendous leverage in the marketplace at a variable instead of fixed cost; I only pay for the resources I’m using.”
Those resources—including not only people, but also in-depth market research—have helped Noonan meticulously rebalance the company’s real estate holdings.
“Prior to the acquisition, local business units would handle their own real estate,” Noonan says. “In some cases, the deals they struck were just awful. We’ve added a lot of top-line value by driving better deals.”
In some cases, leases have been re-evaluated and renegotiated to reduce costs and improve terms. In other cases, leasing has been abandoned entirely in favor of ownership, which helps the company earn returns on accumulated cash that would otherwise sit idle in banks. That helped adidas become more dynamic in terms of rebuilding its supply chain and distribution.
“We hit the ground running with a number of major distribution centers around the world,” Noonan says. In the past decade, he has renovated or built from scratch 10 owned and leased distribution centers.
Included among these is a 236,000-square-foot central distribution center in Rieste, Germany, purpose-built to supply adidas retail stores in Northern Europe. As stores typically order shoes by the case instead of by the pair, the company-owned facility—completed in 2012—was built around an automated order fulfillment system featuring multiple cranes that pick and deliver inventory in an entirely “lights-out” environment.
In 2015, the company also completed its renovation of a 115,000-square-foot leased distribution center in Embu, Brazil. The largely manual facility was expanded by 40 percent to accommodate increased demand for product during the 2016 Summer Olympics in Rio de Janeiro.
In July 2016, adidas is scheduled to complete its 1 million-square-foot distribution center in Brantford, Canada. The facility was designed to be semiautomated, supporting manual order picking, but also automated sortation. The single distribution center replaces four leased facilities and supports all of Canada.
There is also a 125,000-square-foot manufacturing plant that makes golf balls for adidas subsidiary TaylorMade in Liberty, South Carolina. Completed in 2014, the plant helped the company realize cost efficiencies and also enabled it to keep its manufacturing operations in the United States.
Each new facility in each new location brings its own set of challenges. No matter what the project, however, one thing remains consistent, according to Noonan: real estate’s positive impact on the bottom line.
“I don’t profess to know all the ins and outs of all the different lines of business that we’re in,” Noonan concludes. “But I do profess to know about real estate, and the real estate decisions we make help the company execute its strategy in the most efficient way possible.”
Canada Distribution Center
Location: Brantford, Canada
Size: 1 million sq. ft.
Owned or Leased: Owned
Business Case: Consolidate Canadian distribution centers to reduce costs, enhance customer service, and standardize operational processes.
Reebok World Headquarters
Location: Canton, MA
Size: 44 acres, 525,000 sq. ft.
Owned or Leased: Owned
Business Case: Help Reebok reinvigorate its brand, attract top talent, and stimulate new business.
Brazil Distribution Center
Location: Embu, Brazil
Size: 115,000 sq. ft.
Owned or Leased: Leased
Business Case: Increase capacity to meet projected business goals ahead of the 2016 Summer Olympics in Rio de Janeiro.
TaylorMade Golf Plant
Location: Liberty, South Carolina
Size: 125,000 sq. ft.
Owned or Leased: Owned
Business Case: Reduce costs while maintaining US manufacturing operations.
Central Distribution Center
Location: Rieste, Germany
Size: 236,000 sq. ft.
Owned or Leased: Owned
Business Case: Consolidate wholesale, retail, and e-commerce businesses under one roof to maximize availability and inventory use and to improve service levels to customers.