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s companies focus on their core competencies to remain in the black, there is greater incentive to turn to commercial real estate service providers to handle the real estate and facilities management functions.
Companies outsource projects to reduce costs while simultaneously gaining special niche skills and services such as lease negotiation and administration, market optimization, facilities management and information technology. In turn, this enables the company to focus all of its energies on primary business.
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“For many companies, outsourcing is crucial first because of the workload issue. If a company tries to do it all in-house, they would have to staff up for the highest workload and then not have people busy all the time,” notes Bill Goade, founding chairman of CRESA Partners LLC, an international corporate real estate advisory firm exclusively serving corporate space users. “The other reason for outsourcing is the core competency issue. How many things can an in-house staff accomplish well with the proficiency of a hired expert who is in the field all the time?”
CRESA Partners LLC — which specializes in tenant representation, portfolio/ lease administration, project management and capital markets expertise — is co-headquartered in New York City and Boston, providing service in 35 countries and more than 125 cities. In 2002, CRESA Partners North American assignments totaled 37 million sq. ft. (3.44 million sq. m.) valued in excess of US$4 billion.
Stream International, a Boston-based third-party outsourcer of technical support and customer support services to technology companies, has worked with CRESA Partners since 1997. Stream employs about 10,000 in 19 locations throughout North and South America, Asia and Europe.
CRESA Partners has helped Stream create an integrated, centralized process for handling real estate by focusing on four core services — site selection, incentives, transaction service and project management. These services are centered on Stream’s specific needs in the area of contact centers. In the fall of 2002, CRESA supplemented Stream’s in-house real estate negotiation and construction management staff to open a contact center in Watertown, N.Y.
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“The Watertown project was particularly successful because CRESA worked closely with the New York Department of Economic Development to locate a community where contact center skills and state-of-the-art connectivity were readily available,” explains Craig Weinstein, vice president of corporate real estate for Stream International.
The added value with CRESA on the Watertown call center project, Weinstein notes, came from expert negotiation skills with regard to lease costs, and procuring incentives from the state. Weinstein adds that throughout the negotiation process, CRESA takes clear direction from Stream.
“At every turn, we send CRESA out with precise direction from us. They participate in each step as we evaluate wages, information technology, and infrastructure. They work with everyone from our in-house council on lease negotiation to our architects on building improvements,” Weinstein notes.
“I’ve worked with many brokerage, project management and site selection firms and CRESA’s people are the most consistent and well-trained,” concludes Weinstein. “They have top-notch industry experience so from a corporate real estate perspective they allow me to extend my reach. CRESA also helps me manage my head count through business peaks and valleys and fluctuations in the economy.”
Ted Parcell, senior vice president of the corporate services group for NAI — a global real estate services company covering 300 markets worldwide with offices in 32 countries — relays how NAI provided more added value to a primary metal manufacturer client in Lafayette, Ind.:
In the 1960s, the manufacturer built its plant and purchased the extra land around it, hoping to one day expand. Thirty years later, the neighborhood had encroached and retail property surrounded the plant. The land purchased 40 years ago, however, was still zoned as industrial.
The client came to NAI, asking NAI to sell the land. After NAI performed an opinion of value, NAI determined that, zoned as industrial, the land was worth $3 million. But, if the land were rezoned as retail, the client’s profits could soar.
NAI investigated the matter with local authorities, did all the leg work and had the land rezoned in just 90 days.
The bottom line? The 30-acre (2.8-hectare) property now zoned as retail is worth more than twice the $3 million industrial value, and major retail firms are interested in purchasing the property because the space is large enough for a shopping center.
“We could have simply listed the property as industrial and sold it for $3 million, but someone else would have purchased it, had it rezoned and resold it for more than twice the industrial asking price,” says Parcell. “The client came to us because they wanted to remain focused on their core functions. They were not familiar with the rezoning process and, understandably so, did not want to get involved in having the land rezoned.”
For more than a decade, Colliers Turley Martin Tucker (CTMT) has worked with Edward Jones, a securities brokerage that serves individual investors and business owners through its network of one-broker offices. CTMT is one of the nation’s largest full-service commercial real estate firms, handling more than $2.5 billion in annual real estate transactions and managing more than 82 million sq. ft. (7.6 million sq. m.) of industrial, office and retail space.
“Edward Jones decided that they wanted to grow to more than 10,000 locations in the United States,” explains Brandon Mann, senior vice president and principal of CTMT. “When faced with that growth goal, they did a self-assessment to find their strengths and weaknesses. Real estate was not a critical success factor for them. They want to be around the corner on every block, so it is our job to make sure they are in those locations.”
Edward Jones uses its proprietary market optimization program to determine the best locale for its next one-broker office. Jones’ in-house market analysis team examines demographics and financial factors to find a viable location. They then come to CTMT with that “theoretical dot on the map,” as Mann says, so CTMT can begin the preliminary site search.
Once a site is selected and the transaction management phase is over, design and construction management kicks in, with the CTMT team physically getting the office open by working with several tenant improvement contractors. CTMT next becomes involved with lease administration, ensuring that Edward Jones is kept up to date with its leases and expenditures. Finally, CTMT oversees facility management, setting up a help desk for facility issues such as leaking roofs or lack of heat or air conditioning.
Johnson Controls Inc., a global market leader in facility management and control and automotive systems, recently signed a renewed contract with Key Bank, a leading financial services organization, totaling more than $60 million for a five-year period.
An expansion of a five-year relationship between Key Bank and Johnson Controls focused on facilities and energy management, this new agreement will allow Johnson Controls to take on a more comprehensive property management role throughout Key Bank’s more than 1,200 North American bank branches, office buildings and data centers.
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“As our relationship with Key Bank has grown, our performance brings us closer to the decision-making table,” says Eric Scaff, vice president of sales, facility management solutions, for Johnson Controls in Milwaukee. “We now are in the strong position of doing joint planning with Key Bank to ensure that what we are doing meets the needs of Key Bank’s long-term business objectives.
“We have 153 people on-site every day at Key Bank locations, aligning our activities with Key Bank’s overall business goals,” continues Scaff. “Each team is completely dedicated to a Key Bank location, pulling knowledge from Johnson Controls to provide expert services directly to the Key Bank portfolio.”
Johnson Controls has been instrumental in helping Key Bank’s Corporate Real Estate Group save more than $40 million annually since 1997.
For example, a successful energy management plan helped reduce Key Bank’s utilities budget by more than $3 million annually through improved operations, updated building controls, energy awareness programs and by capturing recent energy deregulation opportunities.
Scaff adds that the flow of data is vitally important and that reliability is a major issue.
“We are managing Key Bank’s data centers and we have had zero unplanned downtime in the last three-and-a-half years,” he notes. “We are constantly focused on developing efficient ways to remain reliable and to meet all the service requests of Key Bank across their portfolio of 1,200 buildings.”
Herman Miller Global Customer Solutions (GCS) is a research, consulting and management group helping organizations around the world align their workplace strategies with their corporate strategies. A solution provider, GCS helps customers optimize their workplace performance through a variety of areas in Space Performance and Work-Space Management.
The core staff of GCS is comprised of 115 professionals with expertise in project management, facilities management, real estate, finance, consulting, architecture and design, human resources and procurement.
According to Michelle Behrenwald, vice president of GCS, all of those areas of expertise are focused on “creating and sustaining great places for our clients … and a great place for one company may be different for another company.”
To help make and manage “great places,” GCS often utilizes a proprietary Herman Miller technology solution called AIM, an Asset and Inventory Management tool that enables the lifecycle management processes for GCS clients — allowing them to track, utilize and monitor corporate-wide assets.
Behrenwald explains how GCS recently saved a client millions of dollars through proper asset management during a consolidation phase, with some locations shrinking, others growing, and people moving.
“We went to the client locations, identified all of the assets, took photos and put them up on our Web-enabled AIM system. In this way, the client could easily plan and transfer the physical assets from one business unit to another and from one geographic location to another.”
Behrenwald says that the AIM system allows individuals to go on line and view what assets are available throughout the company-wide assets database. The planner can view and reserve assets and equipment for various rooms and individual spaces.
“Through this system, our clients increase the utilization of their assets and avoid additional cost occurrences,” Behrenwald says.
