Corporate real estate outsourcing is beginning to look and feel like progressive IT outsourcing. According to JLL's new report, 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 the definition of Outsourcing 4.0, the new era of commercial real estate (CRE) outsourcing.
For today's real estate managers, it's all about developing true partnerships that work to drive their clients' business results forward. 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 Outsourcing 4.0 expands the focus 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're 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 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.
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $55.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.