Commercial Real Estate (CRE) Market - 2016

  • Increased momentum in the global real estate market has been visible, with major markets characterized by optimism and confidence 
  • Strong investment markets and growing confidence in office leasing markets are translation to a steady-growing global economy 
  • The global market for CRE was valued at $1,036 billion in 2016 and is expected to grow 9 percent by 2018

commercial-real-estate-market-sizeGlobal CRE Industry - Drivers and Constraints 


  • Transfer of operational risk: Outsourcing allows buyers to transfer the operational risk to their service providers. The legal responsibility for regulatory compliance would still be the buyer’s, but risk can be transferred to the suppliers through regulatory compliance contract clauses 
  • Dealing at a local level with an internal team is always tedious and time-consuming. Engaging on a regional or a global level increases the ability to solve contract complexity, which enhances buyer skills 
  • Increasing asset complexities and companies buying properties across the globe triggers the need to outsource the property management services 
  • During the requirement for quick-completion requests, suppliers can leverage their contacts to buy or sell the properties immediately


  • On an operational level, the buyer feels that initially it is difficult to freeze the scope of services if operations are on a local level and with a wide property portfolio 
  • Different business unit heads may feel that they have greater bargaining power over a local level supplier, which might lead to resistance in outsourcing the services to a large regional or global supplier 
  • Services providers still lack self-performance capabilities, which is one of the main expectations of the buyers, as it can reduce the margin on sub-contracting

Supply Trends and Insights 

  • The highly competitive real estate/FM market, together with increased focus on security and sustainability, has been pushing service providers towards innovation The introduction of IFM/TFM will result in strong growth, driven by the increasing role of technology, along with the demand for services, such as energy management and real estate management. This is driving the market towards consolidation 
  • The market is gradually shifting from single service to bundled services and further towards IFM, so major service providers are increasing their competency through M&As –For example: CBRE acquired Johnson Controls, Inc.’s (JCI) Global Workplace Solutions (GWS) to achieve greater competency in FM services –Leading global property vendors DTZ and C&W merged in 2015
  • Most adopted model globally: Fixed price and flat fee 
  • Most large companies, typically, look at a regional/global engagement as it addresses any one of the following scenarios: –Large spread of properties internationally –Properties in markets that are opaque 

Cost Structure Analysis 

The fixed/flat cost model is widely used for pricing property management services. The client pays a fixed price/flat fee based on the value of the property, size of the property, location of the property, nature of the property portfolio (for example, leaseholds and long leaseholds), and annual agreed rent.