Outsourcing in Corporate Real Estate: A Corenet Global and Deloitte Consulting LLP Survey Research Project 2017

Outsourcing in Corporate Real Estate
A CoreNet Global and Deloitte Consulting LLP

Survey Research Project 2017
December 12, 2017
© 2017. CoreNet Global. All rights reserved.

Introductions
Francisco J. Acoba MCR SCLR Griffin H. James MCR Deeksha Sahni Sonali Tare
Managing Director Senior Manager Senior Consultant Director, Knowledge & Research
Deloitte Consulting LLP Deloitte Consulting LLP Deloitte Consulting LLP CoreNet Global
Copyright © 2017 Deloitte Consulting LLP. All rights reserved.

Copyright © 2017 Deloitte Development LLC. All rights reserved.
2
Executive Summary
 CoreNet Global and Deloitte Consulting LLP conducted a survey to better understand
how Corporate Real Estate (CRE) organizations are approaching outsourcing
decisions
 This effort follows a related study conducted in 2013 and shows areas of consistency
and evolution over the past four years
 The survey received responses from 34 end users and 45 service providers
Background
 A large majority of the respondents were global or regional leaders of their CRE
organizations which served a mix of companies of varying scale, scope, and
complexity
 The top three represented industries are Technology, Financial Services and
Manufacturing, while a majority of the respondents were headquartered in
North America
 The survey results provide an opportunity for respondents and survey recipients to
evaluate their outsourcing practices, including operating model, selection of services
and capability areas outsourced, key drivers and metrics tracked, among other areas
Outcomes  Since the last issuance of this survey in 2013, service provider capabilities and end
user practices have evolved, but survey respondents are still seeing common
opportunities around several key areas such as capabilities to outsource and
geographic basis for outsourcing

3
End User Results

Level in the Organization and Industry Representation
The majority of respondents are Executives / Global Leaders in their organizations; the industry that is most
represented is Technology with 24% of respondents
Respondent’s Level in Organization
Percentage of Respondents
Industry Representation
Industry
Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

5
Headquarters Location and Regions with Significant Presence
The vast majority of respondents’ companies and RE&F organizations are headquartered in the United States.
Additionally, over three quarters of respondents have a significant real estate presence in North America
Company’s and RE&F Organization’s Headquarters Location Regions with Significant Real Estate Presence (over one
million RSF) that RE&F Organization Supports
Percentage of Respondents Percentage of Respondents

6
How many employees does your RE&F organization support?
11% of respondents’ organizations support more than 10,000 employees
Number of Employees RE&F Organization Supports
Percentage of
Respondents
Number of Employees
Number of Employees by RE&F HQ Region
8%
4%
Percentage of Respondents 7%
82%

7
What is the size of your portfolio?
Over 60% of respondents have a total portfolio size of more than two million square feet
Size of Owned and Leased Portfolios (sq ft)
Percentage of
Respondents
Size of Portfolio (sq ft in ‘000)

8
What is the level of RE&F centralization?
The vast majority of respondents follow a Direct/Center-led model, while only 6% respondents use an Influence model;
Technology organizations most frequently use a Direct/Center-led model, while Financial Services and Government
organizations were the most common industries to use an Indirect/Advisory model
Level of Centralization
Level of Centralization
1%
Industry Definitions:
Direct/Center-led Model:
All RE&F staff report through one global lead
Indirect/Advisory Model:
Some RE&F staff report centrally, some through BUs
Influence Model:
Small RE&F group that acts as a center of excellence and provides ‘voluntary’ guidance to
BUs, as requested

9
What is your RE&F organization's primary reporting relationship?
Over 70% of respondents’ RE&F organizations report through Finance or Operations
Reporting Relationship RE&F Organization’s Primary Reporting Relationship
Industry Percentage of Respondents

10
To what degree, if any, are your company’s RE&F capabilities outsourced
or out-tasked?
Facilities Management and Lease Administration are most frequently outsourced through a strategic partnership,
while Business Engagement / CRM is most frequently carried out in house
Capability Outsourcing Frequency for RE&F Capabilities
Degree of Outsourcing

11
If a capability area is outsourced, what is the geographic basis for the
outsourcing contract?
Regional and Global outsourcing are more common than Local outsourcing across most of the capabilities
Capability Geographic Basis for Outsourcing RE&F Capabilities
Geographic Basis for

Outsourcing

12
Are there certain regions where selected capabilities have been more
difficult to outsource?
Asia Pacific is viewed as the most difficult region to outsource across most capabilities, while Australia/New Zealand
and North America are viewed as the easiest
Capability Difficulty to Outsource RE&F Capabilities by Region
Region

13
Number of Service Providers
The majority of organizations have six to ten major service providers, with only 13% of organizations having over
20 major providers (for the services they reported in the survey)
Number of Service Providers per RE&F Organization

Number of Service
Providers

14
Drivers For Outsourcing
The primary driver for outsourcing is to reduce cost, while the secondary driver is to increase flexibility
Primary Drivers for Outsourcing

Driver

15
Drivers Against Outsourcing
The top two deterrents for outsourcing are organizational resistance and cost
Primary Drivers against Outsourcing

Driver

16
For CRE capability areas that are outsourced, please indicate where you
have incentives and / or performance penalties in-place
Both incentives and penalties are more common for the more tactical and commonly outsourced activities of Facilities
Management, Project Management, and Transaction Management
Capability Incentives / Penalties for Outsourced RE&F Capabilities
Response

17
Does your organization “bundle” CRE services on a global or regional
basis?
42% of the end user respondents do not bundle CRE services at global / regional basis
CRE Services Bundling – By Industry
Industry
Definition:
Bundling - To “bundle” services means to contract for multiple services from the same CRE strategic
service provider under the same contract (e.g., contracting for facilities management and project
management from one supplier under a single contract)

18
What would you highlight as the benefits of service bundling?
The most commonly perceived benefits of bundling are to improve management economies of scale, and end-to-end
integration of service delivery
Benefits to Service Bundling

Benefits

19
What are the limitations of service bundling?
The top two limitations are turning over too many capabilities and too much control to one service provider, and
service provider’s ability to deliver consistently across the globe
Limitations to Service Bundling

Limitations

20
For which capability areas/services does your RE&F organization have
service level standards in place?
More than half of the respondents do not have service level standards in place for Strategic Planning, Business
Engagement/CRM and Portfolio Management
Capability Areas for which Service Level Standards are in Place

Capability
Response

21
Do you feel that your CRE outsourcing contracts provide the right level of
flexibility to suit your service delivery requirements?
The vast majority of respondents feel their outsourcing contracts provide the right level of flexibility; performance
measures are viewed as the top lever to provide flexibility and manage service delivery
Right Level of Flexibility Levers for Flexibility and

Lever Managing Delivery
Do you feel that your

outsourcing contracts
provide the right level of
Percentage of
flexibility to suit your
Respondents
service delivery
requirements?
Regarding how to structure contracts to be more flexible, respondents suggested the following:
 Become more outcome based, rather than the current task-driven
 Mutually build and design statements of work and service level expectations
 Use open book full disclosure accounting and clear financial baseline set if incentives are used
 Leverage incentives and penalties, change KPI annually
 Have cancellation option for any reason
 Define performance standards in detail and an incentive plan to match for the benefit of both the Provider and End User
 Put in place better performance based accountability
 Use staffing levels that float up and down with portfolio activity, as well as language specific experts in market when needed

22
Pricing Structure
34% of respondents’ strategic service provider contracts have cost plus pricing, while 31% have fixed pricing
Pricing Structure
Percentage of
Respondents
Industry

23
Benefits from Gain-Sharing Provisions
Respondents note that there are multiple benefits from gain-sharing
Benefits from Gain-Sharing Provisions

24
Negatives from Gain-Sharing Provisions
Respondents note that the biggest negatives from gain-sharing come from inability to achieve gains
Negatives from Gain-Sharing Provisions

25
In your opinion, which services can a “single service provider" deliver for
a global portfolio? (Select all that apply)
Lease administration, transaction management, and project management are viewed as the top three services that
a single service provider can deliver for a global portfolio
Capabilities Services that Can Be Provided by a Single Service Provider

26
When was the last time your organization went through a
service provider selection process?
38% of end user respondents have gone through vendor selection processes in the last 12 months
Percentage of Respondents Latest Vendor Selection Process
Time of Last Vendor Selection Process

27
On average, what is the average number of KPIs in a strategic service
provider contract?
54% of end user respondents keep the average number of KPIs in a strategic service provider contract below 10
Average Number of KPIs

Number of KPIs

28
Do you feel that your providers bring innovative ideas to the relationship?
More than half of end user respondents feel that their providers bring innovative ideas to their relationship
Do Providers Bring Innovative Ideas to the Relationship?
Response:

29
Would firms consider implementing CRE Integrator-led
Service Delivery Model?
54% of respondents said that they won’t consider implementing a CRE Integrator-led Service Delivery Model
Would You Consider Implementing a CRE Integrator-led Service Delivery Model?
Response:
n = 13
Top Benefits of the CRE Integrator Model
Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017 Percentage of Respondents
30
From your perspective as an end-user, how much does it cost an RE&F
service provider to respond to / propose on a typical multi-service RFP?
85% of respondents believe that it costs less than $100K to respond / propose on a typical multi-service RFP
Cost to Respond to / Propose on Typical Multi-Service RFP
Percentage of
Respondents
Cost to RE&F Organization

31
Service Provider Results

Please indicate your level in your organization
The majority of service provider respondents hold either a Global or Regional Capability Leader position in their
organizations
Level

33
What is the most challenging aspect of working with corporate clients?
(Select the top three choices)
For the majority of service providers, responding to RFPs in the competitive bidding process and building trusted
strategic partnerships are the most challenging aspects of dealing with corporate clients
Challenges of Corporate Clients

34
What is the pricing strategy that your firm pursues for most
RE&F contracts?
The majority of service providers pursue a fixed price pricing strategy, with GMP being second most frequently used
Pricing Strategy Pursued

35
Do you find that a vendor management function within your corporate
clients is helpful to managing the relationship and contract?
Service provider respondents that use Cost plus and GMP pricing strategies often don’t find vendor management
functions useful
Percentage of Respondents Who Find Vendor Management Helpful
Response:
n = 44
Respondents Who Find Vendor Management Helpful by Pricing Strategy
Pricing Strategy
Do
Respondents
find Vendor
Management
Helpful?

36
On average, what is the optimal number of KPIs in a contract?
88% of service provider respondents believe that the optimal number of KPIs in a contract is 1-10, while only 54% of
end-user respondents classify 1-10 as the average number of KPIs
Optimal Number of KPIs

Number of
KPIs

37
On average, what is the optimal term for a contract?
The majority of service providers feel that three to five years is the optimal term for a contract
Optimal Term of a Contract
Term

38
What is the most difficult aspect of being a RE&F service provider?
(Select the top three choices)
Respondents agree that the most difficult aspects of being an RE&F service provider are increased competition in
the service provider market and finding and retaining the right talent to service corporate clients
Difficulties of Being a Service Provider

39
Would your company be interested in providing a fully outsourced
RE&F offering?
More than 50% of the service provider respondents are not interested in providing a fully outsourced RE&F offering
Interested in Providing a Fully Outsourced RE&F Offering
Response:

40
As a real estate & facilities service provider, has your organization put the proper
management and compensation structures in place for your people, to serve as
an effective CRE Integrator?
Other than individual contributors, the majority of service provider respondents believe that they have the proper
management and compensation structures in place to serve as an effective CRE Integrator
Are Management and Compensation Structures in Place to Serve as CRE Integrator?
Response:
n = 43
Management and Compensation Structures in Place? – By Level

Level

41
What do you see as the top challenges relative to wide-scale deployment
of the CRE Integrator model? (Select the top 3 choices)
The most widely acknowledged challenges facing wide-scale deployment of the CRE Integrator model are the risks
associated with the changing roles and responsibilities, potential for increased cost, and competitive landscape
Challenges to Deployment of the CRE Integrator Model

42
Selected Key Findings
Extent of outsourcing remains similar for most capabilities

Outsourcing degrees have not changed significantly for the major CRE capabilities - Facilities Management,
Lease Administration and Transaction Management continue to remain heavily outsourced while Strategic
Planning and Portfolio Management are less commonly given to a provider
KPIs are viewed differently by Service Providers and End Users

88% of service provider respondents believe that the optimal number of KPIs in a contract is 1-10, while only
54% of end-user respondents classify 1-10 as the average number of KPIs in their strategic contracts; end
user respondents have a greater appetite for performance information than service providers view as
necessary
Service Providers face persistent and growing challenges

While the majority of service providers face consistent challenges, increasing competition and finding the right
talent have become more prominent than the pricing pressures noted in prior years
Continued maturity evolution for the industry

Results reflect ongoing maturity evolution of the CRE industry, but limited consensus around the optimal
service delivery model; as the capabilities of service providers continue to grow, CRE end users have a wide
array of service and contracting options to suit their business circumstances

43
Contacts
Francisco J. Acoba MCR SCLR Griffin H. James MCR Deeksha Sahni Sonali Tare
Managing Director Senior Manager Senior Consultant Director, Knowledge & Research
Deloitte Consulting LLP Deloitte Consulting LLP Deloitte Consulting LLP CoreNet Global
Additional Contributors from Deloitte Consulting LLP

 Komal Havelia
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related
entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to
clients. Please see www.deloitte.com/about for a detailed description of DTTL and its member firms. Please see www.deloitte.com/us/about for a detailed description of
the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
© 2017.Copyright © 2017
CoreNet Global. Deloitte
All rights Development LLC. All rights reserved.
reserved.

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Outsourcing in Corporate Real Estate

A CoreNet Global and Deloitte Consulting LLP

December 12, 2017

© 2017. CoreNet Global. All rights reserved.

Copyright © 2017 Deloitte Consulting LLP. All rights reserved.

Copyright © 2017 Deloitte Consulting LLP. All rights reserved.

© 2017. CoreNet Global. All rights reserved.

Respondent’s Level in Organization

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Percentage of Respondents Percentage of Respondents

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

11% of respondents’ organizations support more than 10,000 employees

Number of Employees RE&F Organization Supports

Number of Employees by RE&F HQ Region

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Size of Owned and Leased Portfolios (sq ft)

Size of Portfolio (sq ft in ‘000)

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Over 70% of respondents’ RE&F organizations report through Finance or Operations

Reporting Relationship RE&F Organization’s Primary Reporting Relationship

Industry Percentage of Respondents

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Capability Outsourcing Frequency for RE&F Capabilities

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Capability Geographic Basis for Outsourcing RE&F Capabilities

Geographic Basis for

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Capability Difficulty to Outsource RE&F Capabilities by Region

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Number of Service Providers per RE&F Organization

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Primary Drivers for Outsourcing

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Primary Drivers against Outsourcing

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Capability Incentives / Penalties for Outsourced RE&F Capabilities

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

CRE Services Bundling – By Industry

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Benefits to Service Bundling

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Limitations to Service Bundling

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Capability Areas for which Service Level Standards are in Place

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Right Level of Flexibility Levers for Flexibility and

Do you feel that your

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Respondents note that there are multiple benefits from gain-sharing

Benefits from Gain-Sharing Provisions

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Negatives from Gain-Sharing Provisions

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Capabilities Services that Can Be Provided by a Single Service Provider

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Percentage of Respondents Latest Vendor Selection Process

Time of Last Vendor Selection Process

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017

Average Number of KPIs

Source: CoreNet Global / Deloitte Consulting LLP Survey, 2017