Corporate RE Departments Reorganizing, Downsizing, Outsourcing

By: Tonie Auer, Southwest Correspondent

As companies continue to grapple with the industry-wide downturn, they are increasingly looking to make their corporate real estate departments operate as efficiently as possible, according to a new report by CB Richard Ellis Inc. and CoreNet Global.

The report, entitled The Evolution of CRE: “Upskilling” the Downsized CRE Organization said that for many firms, forming strategic partnerships with outsourcing service providers and increasing skills to meet the needs of an increasingly complex and challenging business environment are becoming more of a necessity than a luxury.

The report is the culmination of an April 2009 survey of real estate executives across 13 industries, representing 475 million square feet. These findings were then compared to additional third-party industry analysis and CBRE client best practices.

Key survey findings indicate that during the past five years corporate real estate departments, as a result of the economic climate and desires for greater efficiency and service delivery, have started to centralize and consider downsizing their organizations.

In addition, in the report, CBRE noted that corporate real estate departments are adopting staffing ratios for optimal service levels as compared to functional requirements. Concurrently, CRE departments have turned to service providers for assistance in delivering strategic, specialized service capabilities to augment core competencies. This has enabled CRE departments to focus on increasing skills to respond to internal customers’ business demands and opportunities.

CBRE and CoreNet Global expect these trends to continue over the next three years as further rightsizing occurs during the period of economic recovery, the report stated.

Earlier this month, a CBRE spokesman told CPE that “there seems to be momentum in the market for companies looking for expertise to help them with their real estate management across the spectrum. Our global platform is producing significant assignments as a result of that.”

As a chief example of the study’s findings, CBRE had been growing its outsourcing abilities this year, CPE reported. RREEF selected CBRE and Transwestern to take over direct property management of the office and industrial property portfolio currently managed by RREEF for its clients. CBRE has been assigned an office and industrial portfolio totaling approximately 70 million square feet. The properties are primarily located in northern California, the Pacific Northwest, the Northeast, the Midwest and Southeast. West Penn Allegheny Health System signed on with CBRE for facilities, project and transaction management, lease administration and strategic planning for approximately 6 million square feet.

Additionally, Automatic Data Processing, Inc. (ADP) contracted with CBRE to provide facilities management services for ADP’s 6.7 million square foot portfolio. CBRE’s Global Corporate Services business also added or expanded relationships with clients including Cox Enterprises, Nokia, Nissan and Ontario Realty Corporation this year, the CBRE spokesman said.