Commercial Real Estate Services

Global Market Outlook on Commercial Real Estate Services (CRE)

• The global market for CRE investment was valued at $280–300 billion in Q3 2022 , which is a  percent year-over-year higher compared to Q2 2021. This indicates market recovery to pre-COVID levels

• Americas CRE investment volume increased by 47 percent and 25% in EMEA. The US is the major contributor, with around half of the global CRE investments

• After a decline in investment volumes in Q1 2021, the increase in investments in Q1 2022 indicate recovering markets

Global CRE Industry - Drivers and Constraints 

Drivers

• 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

Constraints

• 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 

Supply market outlook

• 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&A

Engagement Model

• 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

What to look for in suppliers before awarding large contracts?

• Suppliers should have the experience to manage the large volume of transactions

• Ability of service providers to provide integrated real estate services
  – Global suppliers have a strong presence with a wide range of service capabilities

• Service providers' capability to serve single buyers with large -size multiple properties in one geographic region
  – High-value accounts have been managed by global service providers

• Software used to manage real estate services

• Supplier focus on resource management
  – Focus is largely on high priority contracts and leveraging economies of scale

Market Overview 

Global players have the capabilities to provide end-to-end services.

The major fee components are management fee. The management fee can be a percentage of the monthly gross rent or a flat fee. It pays for the property manager’s time spent in commercial real estate marketing, administering lease agreements, screening applicants and resolving tenant issues. Administration fee: Services, like managing dispute resolution with tenants, sending out statements and providing reports to the property owner, require an additional fee on top of the management fee. Collection fee: encompasses a collection of all rents, fees, revenue and delinquencies. Maintenance fee: Maintenance fees are special costs tailored specifically to the upkeep of buyers’ properties, and others. Generally, the contract period is between three and five years. The pricing is fixed.

Why You Should Buy This Report

• This real estate market intelligence report gives the global and regional commercial real estate market analysis, global commercial real estate market size, trends and Porter’s five force analysis. 
• It gives supply trends and insights and provides SWOT analysis of major players like CBRE, JLL, Cushman & Wakefield, etc. 
• The report gives the commercial real estate market cost structure breakdown, pricing trends, etc.
• It details the best sourcing, engagement and pricing models and analyzes the commercial real estate market data to list out the SLAs and KPIs.
• It thoroughly analyzes the saving opportunities and the cost structure. It provides a supplier scorecard too.
• The report provides procurement best practices including pricing structure, pricing model, office space management, engagement models, and contract lengths.