by Brianna Crandall — June 29, 2015—Corporate real estate outsourcing is beginning to look and feel like progressive information technology (IT) outsourcing, with a small in-house staff, shared outcomes and a focus on workplace productivity, according to a new report from JLL, a global professional services and investment management firm offering specialized real estate services.
According to the The Converging Priorities of CRE Outsourcing, instead of looking for traditional vendors, some of the world’s leading companies are seeking real estate service partners who act more like management consultants than property service providers. These partnerships are more collaborative and innovative, and help drive the entire enterprise to become more profitable and productive. This is JLL’s definition of “Outsourcing 4.0”, the firm’s name for the new era of commercial real estate (CRE) outsourcing.
According to JLL, real estate strategy has a direct impact on employees and can influence worker productivity, employee well-being, employee experience, recruitment and retention.(Click on image to enlarge)
“For today’s real estate managers, it’s all about developing true partnerships that work to drive their clients’ business results forward,” said Maureen Ehrenberg, executive managing director of JLL’s global Integrated Facility Management business. “Companies are making a huge shift in what they demand from their real estate service providers.
“And if this sounds like the transformative outsourcing model we’ve seen in the IT sector, it’s no coincidence. C-level executives realize that innovative and effective real estate, workplace and portfolio management can unlock business value and deliver additional margin, as well as help to recruit and retain talent and facilitate cultural change.”
Cornerstones of change
The JLL report explains that with Outsourcing 4.0 the focus has expanded from physical real estate assets to include the workplace and people. With this, the role of CRE service providers has evolved in the following ways:
- Companies are getting “thin.” Major companies are adopting the “thin client” model, consolidating the bulk of their real estate infrastructure, support personnel, enterprise services and software applications with one or two CRE vendors. They are leveraging service providers’ advanced technologies to reduce costs, deliver services, manage risks and globalize the real estate function. In fact, 73 percent of respondents to JLL’s 2015 Global Corporate Real Estate Trends survey say their mandate to globalize is stronger or much stronger than three years ago, and 61 percent expect greater centralization and control in the CRE function in the next three years.
- Doing more with more. Today’s leading outsourcing CRE providers are expected to be innovators, proposing new ideas to meet strategic objectives. They are also expected to use advanced data and analytics techniques to provide insights and guide decision making.
- Metrics matter, but outcomes matter most. Key performance indicators (KPIs) and service-level agreements (SLAs) still count, but overall outcomes such as employee productivity that advance the business are essential. Also, shared risks and rewards are being negotiated into contracts, providing incentives to align service provider actions with corporate objectives.
- It’s all about people. The CRE industry is shifting its strategy from just the physical real estate assets, to include the workplace and, ultimately, the worker. This means that real estate experts are connecting with other corporate functions such as human resources (HR) and IT. Additionally, real estate strategy has a direct impact on employees and can influence worker productivity, employee well-being, employee experience, recruitment and retention.
- From CRE managers to C-level strategists. The internal CRE executive’s role is evolving along with the outsourcing model. As service providers assume greater responsibility for outcomes, CRE executives are turning away from a day-to-day focus and toward managing overall CRE business performance, supplier performance and risk, and internal customer relationships—and more are reporting to the C-suite.
“CRE Outsourcing 4.0 is a new way for a company to engage in a strategic partnership in which real estate management improves productivity, profitability and the employee experience,” concluded Ehrenberg.
Ehrenberg discusses the trend in a new video, “The Journey to Outsourcing 4.0.”
