• APAC

Corporate Real Estate Outsourcing in Asia

by David Jones, International Director

outsourcing Asia

Among many Asian-headquartered companies, the focus is often more on output, and less on working environment or market presence. This focus could be starting to change, however. There are signals that firms headquartered in Asia are addressing corporate real estate operations differently.

First, it’s a good idea to examine how Asia views CRE. Asian global offices are significantly understated, especially in comparison to their Western counterparts. Additionally, the management structures are different. It’s common for country businesses to run their own real estate functions outside of headquarters purview.

A good example is India, where CRE has traditionally been led by ex-armed forces officers operating in military style. Chinese and Japanese corporates historically have large, in-house teams in the home country with limited representation “internationally.” Local businesses typically have an ad hoc local broker relationship, or use the home country team for negotiation, which may not deliver an optimal outcome.

Furthermore, without value measurement or costs benchmarked to market, real estate can be considered a lower priority. Nor do many Asian companies capitalize on value creation in terms of rent cost and more flexible lease terms. The belief is that it’s more important to maintain good relationships with landlords. There is rarely a mechanism to measure performance or value from the CRE function and in many cases, there’s not even a business case to instigate one.

This could be changing, however, due to increased scale of global operations, more governance and risk, competition for talent, and new accounting regulations.

This, in turn, is leading to the staffing of regional CRE roles with local talent. In addition, Asian CRE business leaders are taking on global roles. There is also more of an overlap between client and supplier in Asia, than in EMEA or the Americas. This means the focus is on in-house technical and market expertise, as well as more local self-delivery on strategy or transactions; one such transaction a lease renewal, which occurs often (three years or less) and requires more administrative effort.

Just as important, CRE professionals transferring from global MNCs are bringing a fresh perspective, and creating confidence that global outsourcing benefits are worth pursuing. Additionally, Asian CRE teams within global MNCs are moving toward small panels of advisers, with in-house teams working on routine admin and less-complex transactions.

Meanwhile, service provider platforms in Asia are being set up to work collaboratively and provide integrated service for global MNCs. They can offer the same to Asian companies, but there is no current track record, simply because there hasn’t been a market.

Still, the potential to disrupt the established balance is immense, signaling Asia as a game changer. The new players will challenge the global CRE establishment, and what will emerge is the next wave of outsourcing that is fit for the future. Many Asian companies are now assimilating the benefits of global CRE delivery models and outsourcing opportunities. If the trend picks up, it could become the new global CRE industry phenomenon.

The above is an excerpt from our Fall 2016 edition of the Occupier Edge. To learn more about corporate real estate outsourcing in Asia, download the Occupier Edge here.

1019-davidjonesDavid Jones is an International Director and the Head of Enterprise Solutions in Asia Pacific for Cushman and Wakefield.

 

 

 

 

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