Outsourcing or vendor management is a fundamental skill of the effective real estate manager. Real estate brokerage, architecture, general contracting and furniture procurement have traditionally been outsourced to independent resources so the real estate manager has vast experience in RFP’s, sourcing, bidding and contracting. Outsourcing, however, has expanded into project management, facilities maintenance, lease administration and nearly all aspects of corporate real estate. The largest real estate companies continue to merge and CB Richard Ellis, Jones-Lang-Lasalle (JLL), Cushman/Wakefield now dominate the real estate/facilities services of many fortune 500 companies
So the challenge facing real estate directors today is how to manage these huge outsourced partners. Many use metrics, contract provisions and periodic performance reports to ensure the services are working and cost effective. Contracts generally run between 3-5 years and provide some illusion of competitive bidding. In reality it takes a year or so for these firms to train staff on the specific portfolios, internal processing procedures and for their staff to build trusted relationships with your key stakeholders. It simply is not prudent to change firms and start the learning curve again. You will pay more for outsourced services but the prejudice of CFO’s is a preference for “outside services” and reduced staff. The price multipliers are not as great as architectural firms, but I would estimate fees are probably double the in-house team. The advantages include economies of scale, functional expertise and accountability.
Competency in lease administration and reporting should be expected as outsourcing firms have invested heavily in database technologies. Project and facilities management skills are not as advanced as scalability is difficult and the lack of continuity in customer service is less about metrics and more about building relationships.
The key to building effective outsourcing partnerships is demanding documented improvements in key occupancy metrics, budget variances and how they have applied best practices to show improvements. Real estate managers get buried in daily issues and emails. The value of stopping once a month to evaluate key metrics is that you can make adjustments and can report on key wins and losses. Being strategic is not a strength of the outsourced partnership. It is up to the real estate director to conduct the orchestra and shift priorities and make the tough decisions. Outsourcing is a tactical approach to real estate management so your role is to take the 30,000 foot view and determine if your focus is linked to the strategic objectives of the firm. Outsourcing great benefit is its scalability so apply it as needed to meet schedules, budgets and demonstrate value. And finally insist on your partner pushing innovation; bring you best practices in real estate management.
Next topic is sustainability…the most notable trend in facilities management.