Real estate outsourcing and dynamic partnerships

The workplace in flux

Real estate is working through one of the greatest shifts it has ever seen. The role and value of the workplace has shifted dramatically in the past four years and is still shifting; there is a greater focus on the workplace and how it is delivered, how it is used, how efficient it is and its wider impact on organizational strategies.

The day-to-day management and longer-term strategies for real estate are becoming increasingly complex, with greater consideration of issues such as sustainability, social impact, wellness and experience, as well as leveraging data and technology. 

While hybrid working has become the norm, the role of the office remains crucial.

Economic uncertainty has created two opposing forces for many organizations and real estate leaders: they need to transform their real estate strategies to align to new requirements and expectations, while continuing to drive organizational efficiencies. 

In this report, we explore how evolving workplace strategies are changing the way organizations are partnering with external advisors. We set out key drivers, benefits and the future for partnership models.

Over the past decade, there has been a shift in real estate strategies as companies seek to maximize efficiencies by engaging with a strategic partner and outsourcing parts of their operations to experts. Traditionally, outsourcing was focused on tasked-based facilities management. Today, CRE leaders use outsourcing to help them rise to the challenge of hybrid working, and to transform their real estate to align with the needs of their organizations and people, whilst also embracing advances in technology and sustainability.

Outsourcing can be used to support day-to-day facilities management or wider portfolio and strategy change. It can be used at a small or local scale, or on a large and global scale. The drivers for outsourcing are varied and depend on each individual organization. They may vary from a straightforward need to save time or money all the way to using expert partnerships to support a transformational shift and manage increasingly complex risks.

Companies partner with external companies and outsource their corporate real estate functions under three broad categories:

These are naturally interlinked: ensuring a healthy workforce means providing healthy buildings for example. Furthermore, there are overarching themes which impact all categories, such as ESG, macroeconomics and transformational goals.

For most organizations, outsourcing is a journey which has traditionally started with the tactical out-tasking of some services to multiple suppliers. That approach is now being reframed towards a strategic alliance with an outsourcing partner, globally integrated and collaborative with senior in-house management.

However, the manifold and growing concerns of corporate real estate executives, overlaid with hybrid working practices and macroeconomic uncertainty, demand a more strategic and tech-enabled outsourcing model which relies on real-time intelligence and data, and that can adapt to constantly changing demands.

Static provision of services does not necessarily match with hybrid working. Office occupancy can vary widely throughout any given week or month, leading to sometimes empty spaces, excess facilities management capacity and unnecessary operating expenses.

Corporate real estate partnerships have traditionally been based on prescriptive KPIs or operational metrics that focused on how to deliver services which match what companies want. However, dynamic workplaces and a dynamic business environment demand something more.

A key part of dynamic partnerships is a move towards outcome-based contracts which specify what must be achieved, such as boosting employee satisfaction, rather than detailing how, such as cleaning bathrooms four times a day. These contracts empower service providers to match the dynamic needs of employees working in different spaces at different times.

There has been a move towards considering the provision of workspace as a service, maximizing efficiency with the bundling or unbundling of real estate services and amenities as required. This dynamism should also be part of outsourcing partnerships to ensure maximum flexibility and efficiency.

A dynamic partnership with a service provider is a flexible and tech-driven approach to understanding people and buildings in order to shape strategies and deliver what the client company needs. This model places trust in the service provider to leverage its expertise, best practices and systems to achieve the client’s desired top-line outcomes.
 

Dynamic partnerships in action

What was outsourced?
This client wanted to form a long-term vested partnership to transform the way Facilities Management services were delivered and strengthen delivery capability across their global real estate portfolio.

The project involved global integration of previously regionalized operations, across portfolio services, capital management and workplace experience and operations, creating a one-team approach and standard set of reporting capabilities, playbooks and governance.

Result highlights

• Completed a global transition in under 3 months

• Captured 1,200+ leases and ancillary documents in year 1, creating and maintaining a reliable database to inform RE estate planning

• Dealt with the financial management of nearly 100 leases with an annual rent roll of $126M, improving governance and accuracy around billing validation and payments

• In year 1, dealt with 170 critical lease events including expiries and options, which resulted in the client being able to reduce their office footprint by nearly 500K SF, saving more than $12M pa and the remaining portfolio by more than 1M SF, delivering capital receipts of $160M

• Analysis of occupancy planning data has led to 20% of one campus location being closed on Friday, enabling cost savings and potential contribution to net zero targets

• Management of sensor and reservation systems has allowed data-driven approach to optimizing space utilization and facilitating office operation

What was outsourced?
A global client wanted to significantly reduce energy, water and waste consumption. In 2010, the company adopted a public-facing target to cut energy use by 20% from a 2010 baseline by 2020. JLL designed a Sustainable Operations program that aligned to the client’s goals and supplemented the in-house team with additional support from JLL’s sustainability experts and proprietary digital tools.

Result highlights

• JLL’s technology platform is deployed across client sites to provide data-driven maintenance for HVAC systems which automatically directs to the JLL facilities management team on site

• 22% reduction in energy consumption across the portfolio, surpassing goal by 10%

• 75% reduction in water consumption

• 36% reduction in waste

• Cut non-recyclable waste from 97% to 0.05%

The economic impact of Corrigo

Corrigo is a Computerized Maintenance Management System (CMMS) and facilities management platform offered by JLL Technologies. It is designed to empower facility managers in navigating high-volume work order, asset, and vendor management at scale. Corrigo provides a range of features and benefits to optimize maintenance operations and improve efficiency. A review of Corrigo highlights the following benefits:

• Cuts FM spend by 10%, including cost, time and people savings

• Saves $3.3 million within three years

• Delivers a 238% ROI in just three years and a payback period of less than 6 months

• Accelerates employee workflow completion by 75%

• Eliminates the cost of adding additional staff while supporting more locations

At the most basic level, hybrid work is impossible without technology. Furthermore, technology can make it more productive and efficient, using in-office collaboration and remote working solutions. Combining software with Internet of Things (IoT) devices, smart building platforms monitor various building systems, analyze the data and generate insights about usage patterns and trends which can be used to optimize the building’s environment and operations. AI-enabled intelligent buildings can turn HVAC on and off in response to real-time occupancy and can also direct cleaning and maintenance. Creating “digital twins” of buildings allows AI-speed solutions to real-world problems.

Data is the fuel for corporate real estate decision-making but requires a platform for managing it: turning data into information.

The benefits are clear: energy monitoring platforms and apps can reduce energy costs by 20%, and using technology to create the ideal office layout, density and amenity balance can cut costs by 40%.

Tech and data streamline decision-making and increase efficiencies, particularly from a facilities management and sustainability perspective. Linking real-time provisioning data with usage means FM teams can prioritize services, amenities and space types to meet specific business needs. Real-time data can show where space is being used effectively and where changes are necessary, which is also more efficient from a sustainability perspective.

However, technology is expensive and often specialized, which means a partnership with a trusted service provider can help employ bespoke strategies and solutions as required, particularly where there is a knowledge gap in organizations or where changes are at scale.

The past five years have seen massive changes in the way we work, from mainly office-based to home-based and then to hybrid, with that evolving to today’s office-led hybrid work model.

The workplace is still evolving and, with this, so is technology. In this context, dynamic partnerships offer a strategy for creating workplace value while controlling costs in the face of constant change. Leading organizations are recognizing the potential of dynamic partnerships to deliver what they need, when they need it. Data on the use and performance of buildings and people will form an increasingly important part of strategic decisions for companies and their real estate.

Creating dynamic partnerships for hybrid working is a journey and great partnerships don’t happen by accident. Companies setting off on this journey need to collaborate with stakeholders to identify priorities and clarify their goals. They should explore the options available to achieve their goals. The endgame for a strategic partnership is a collaborative, rather than transactional, relationship which delivers improved services alongside efficiencies, and is aligned with the organization’s goals.