Commercial Real Estate Services Trends
Category Intelligence on Commercial Real Estate Services covers the following
- Information relating to market, supply, cost, and pricing analysis
- Hard to find data on cost and TCO models, supplier details, and performance benchmarks
- Macroeconomic and regional trends impacting cost, supply, and other market dynamics
- Category-specific negotiation and sourcing advice
Industry Outlook & Drivers
Global Market Outlook on Commercial Real Estate Services (CRE)
- 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 $1,130 billion in 2017 and is expected to grow 9 percent by 2020
- Total global investment volume –$1,747 billion (2018), expected to grow at an average rate of 6 percent by 2021.
- High commercial real estate market maturity regions: US, UK, Australia, Germany, France, Qatar, Dubai, Singapore.
- According to real estate market intelligence the major cost components are management, administrative, collection, maintenance, and other unspecified fees.
- The commercial real estate market data shows that major KPIs are acquisition and disposals, landlord and tenants, data analysis, and data capture.
- Globally the commercial property market is expected to slow down, attributed by the emergence e-commerce and deconstruction of brick and mortar stores
Global 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
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&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
What to look in suppliers before awarding large contracts?
- Suppliers should have experience to manage the large volume of transactions
– For example: CBRE has the highest volume of transactions managed, followed by C&W and Colliers International on a global level
- 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
– TRAMPS, Yardi Propware, Horizon, MRI & Yardi Voyager
- Supplier focus on resource management
– Focus is largely on high priority contracts and leveraging economies of scale
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 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.
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.