Real estate outsourcing Featured

7:00pm EDT January 29, 2008

Oftentimes, if a corporation is faced with reducing expenses, especially in the expensive arena of real estate, it should evaluate the technical and strategic benefits available through outsourcing.

“Essentially, organizations whose core business is not real estate should consider outsourcing real estate functions in order to achieve portfolio optimization and cost efficiency,” says John Ferguson, senior managing director at CB Richard Ellis in Atlanta.

Smart Business spoke with Ferguson about corporate real estate outsourcing options and how to determine if it’s the right choice for your organization.

What are the trends in corporate real estate?

Emerging trends in corporate real estate (CRE) that increase the value of outsourcing include:

  • Having the right labor pool available, which will dictate where the company chooses to lease or own space

  • Increased openness to alternative strategies for a mobile work force

  • The integration of CRE with HR, IT, finance, accounting and the C-suite

  • The role of the CRE manager as a strategist and business unit relationship manager — The workplace is now the intersection of technology, HR, operations and real estate.

  • Real estate evaluated with a different lens in the era of corporate strategy and intense competition for customers, employees, resources and transparency imperatives

  • Evaluation of global models for noncustomer-facing activities

What types of services are available?

Outsourcing can encompass a number of different management and administrative functions. Many businesses take advantage of one or more of these services:

Facilities management: Corporate, institutional, not-for-profit and government entities can outsource facility management. This allows them to draw on experts who can customize their knowledge, technology, procurement leverage and processes to create a competitive advantage.

Portfolio management: Specialists ensure all the vital portfolio details — data, critical dates, rent payments, cost structures and other processes — are in place and operating efficiently and effectively. Proactive portfolio management lowers costs, improves space utilization and provides a solid basis for creating a strategic real estate plan.

Global client strategies/consulting: Consulting drives superior business performance by maximizing value from real estate assets and management practices. Top-quality solutions integrate business intelligence with portfolio optimization, location analysis and organizational strategies.

Transaction management: Skilled transaction managers can harness local market knowledge and work closely with organizations to develop and manage a consistent, portfoliowide process for managing transactions on a global level.

Project management: Professional real estate project managers can plan and execute a full menu of services for organizations that occupy and invest in real estate.

Portfolio administration: These services help you find, collect, manage and analyze key portfolio and operational data to identify portfolio trends, spot opportunities and make sound real estate decisions.

Move management and transition manager: You can minimize your transitional downtime and costs by outsourcing transitional management, coordination and implementation functions during relocations, mergers, consolidations and renovations.

What are the advantages of this outsourcing?

Your company can experience cost savings through access to high-caliber tools, staff and strategies. Outsourcing also gives you the flexibility to expand and contract your real estate department in response to events like corporate mergers or special projects.

How can corporations decide if this is the right option for them?

You and your executive team should ask yourselves the following questions:

  • Are we currently evaluating alternative workplace solutions to determine the impact on our work force?

  • What is the financial impact of a reduction in our vacant/stranded space?

  • How do our real estate expenses benchmark to similar corporations?

  • How are our current service providers held accountable for results?

  • What performance measures are used to track real estate performance?

What first steps should businesses take if they are interested in these services?

Executives should look for a company and a representative that fits well with their company strategy and culture. Some other critical success factors include:

Transition plan: A smooth transition is critical to a successful outsourcing initiative and communication is the most important transition success factor.

Data transfer: Accurate and timely transfer of existing portfolio and vendor data from the company to the service provider

Financial information: Existing baseline operating and capital expenditures need to be well defined by the business and understood clearly by the outsourcing company.

Executive and location manager buy-in: Outsourcing success is ensured when all levels of management are in full support of the outsourcing decision and the resulting service delivery.

JOHN FERGUSON is senior managing director with CB Richard Ellis in Atlanta. Reach him at (404) 504-7870 or john.ferguson@cbre.com.