Firms outsourcing RE functions

Real Estate Weekly, Feb 5, 2003 by Susan Goodman

To outsource, or not to outsource, that was the question at a recent CoreNet Global luncheon.

For the majority of firms, the answer is a resounding yes. A significant number of corporations already outsource their real estate functions and experts argue this trend will be even more apparent in 2003, panelists told audience members at the event.

Panelists including Raymond P. Meglio, vice president, corporate real estate at Thomson Financial; Michael T. Cohen, president and CEO of GVA Williams; Cher Zucker-Maltese, vice president, corporate real estate at Prudential Financial; and John Santora, executive vice president of Cushman and Wakefield, discussed the evolving role of end users and service providers at a luncheon sponsored by CoreNet Global, (Corporate Real Estate Network) on Jan. 23 at the Roosevelt Hotel. The panel was moderated by Thomas W. B ogle, managing director, real estate advisory services at Ernst & Young.

The results of a recent Ernst & Young survey, "Corporate Real Estate "Outsourcing: 10 Years Later" produced in conjunction with CoreNet Global and Columbia University, provided the context for the panel discussion. Over 400 real estate professionals were canvassed on their outsourcing habits for this survey. According to the respondents -- 83% of whom represented companies with over $1 billion in revenues -- corporations have outsourced significantly over the past 10 years and will continue to look to professional service firms for an increasing amount of value-added services in the future. A majority of survey respondents stated that outsourcing delivered significant cost savings.

Panelists fielded a series of questions from Bogle on their own outsourcing habits. Zucker-Maltese of Prudential Financial spoke to the criteria she uses in choosing a service provider. "Proving you know what you're doing and that you've done it in the past is key, as is establishing one main contact," she said.

Santora of Cushman and Wakefield agreed that a single contact was essential to an efficient, relationship with outside providers.

"Although transaction management is the most lucrative, you don't get to do that if you don't handle lease administration, facilities. and project management successfully," said Michael T. Cohen, of GVA Williams Transaction management continues to be the #1 outsourced service, followed by lease administration and portfolio management.

"Consistency of service is the biggest challenge," continued Cohen, "creating centralized control with small teams--people who are graduates of corporate real estate--is essential."

"Any global organization has a multitude of cultures--within regional hubs and across the ocean. Acclimatizing to those nuances is paramount,." said Raymond P. Meglio, of Thomson Financial.

Do firms care whether work is done inhouse or outsourced? Although Zucker-Maltese conceded she had no mandate to do one or the other at Prudential, she cited cost and risk. "We look at how much risk do we want to delegate?"

"When someone has decided to delegate a function, you have to understand the risks involved," said. Mr. Cohen of GVA Williams agreed "The right team is everything."