In late March, the New York City Chapter of CoreNet Global held its second luncheon-learning program of the year entitled “CRE Outsourcing – Boom or Bust?” An expert panel, comprised of end-users, service providers and consultants involved in all sides of outsourcing in corporate real estate, discussed the pros and cons of the trend and how it has been impacted by the recession.
The discussion was moderated by Paul Garity, partner, Capstan Advisors and panelists included Alan Scott, managing director and regional head, Americas, Corporate Real Estate Services for Deutsche Bank; Mitra Meshgin-Poosh, senior vice president, Global Real Estate Services for The McGraw-Hill Companies; and David Arena, president, Grubb & Ellis New York.
Paul Garity of Capstan Advisors, a consulting firm that advises clients on outsourcing issues, began the program with an overview of the growing number of services being outsourced and the increasing sophistication of end-user clients that are carefully examining contracts and increasing expectations of service providers.
Grubb & Ellis’ David Arena, who has previously served as a corporate end-user, agreed that an increasing number of corporations are using firms like his to help rapidly shed costs, particularly in the current economy.
“Outsourcing is hot right now, and it’s making up for the deceleration in transactions,” Arena said. As the number of outsourced services increases, it is important to develop a mutual trust and “treat service providers as if they’re on your team,” he added.
Alan Scott oversees Deutsche Bank’s North and South American real estate portfolio, with more than half of the locations in the New York tri-state area. In this region alone, the company has three service providers. Scott said he realizes that an internal client might not have enough understanding of what is needed and looks to service providers to drive value.
“A one size fits all approach is not the way to go. I wouldn’t want to take on that operating risk,” Scott said.
McGraw Hill’s Mitra Meshgin-Poosh has been working on a strategic partnership with the global media company’s service provider to develop procedures that can be rolled at various locations. “Our service provider needs to fully understand what our customers want,” she said. “It’s my job to make sure we get there.”
Scott said he feels one of the main reasons end-user/service-provider relationships might end is not a result of poor performance on the service-provider’s part, but rather a lack of performance by the client. “At one time we were a terrible client,” he said. “We didn’t know what we wanted.”
All of the panelists agreed that greater transparency and better communication between service providers and end-users immensely benefit the relationship and, ultimately, the bottom line.
Meshgin-Poosh added that McGraw Hill had sought out a single service provider to produce one integrated report for an entire portfolio encompassing many different businesses. She found that it was easier to dissect the lease terms and costs of operation when working with a service provider from site selection forward.
In contrast, Scott felt that consolidating real estate services in the financial services industry could be a great practice for delivering value if it works well, but is not necessary. “It really comes down to the people delivering quality service,” he said.
Arena also spoke about how the current economic environment provides an opportunity to upgrade talent and get rid of “non-performing human capital.” He said his firm is continually looking to hire corporate real estate professionals because they are the firm’s clients and have a better understanding of the business functions.
“It’s difficult to find great people who understand clients’ objectives,” Arena said. “We frequently look for them in the corporate real estate world. Managing a corporate real estate portfolio is one of the hardest things to do.”