Corporations outsource in wake of staff reductions.

A by-product of the economic downturn that marked the first years of the 90s has been the drive for economy and operating efficiencies by corporations across the region and the country.

Downsizing became the byword. Payrolls were reduced, and with it, a shrinking demand for office space.

With the emphasis on reducing staffs, companies had to look outside the organization to accomplish many of the functions that had long been managed by internal departments. Among these were real estate.

"We pared down the staff, but our department's responsibilities increased," explained an executive at one New York-based corporation. "The real estate function now demanded a greater level of service."

To replace pared-down in-house real estate departments, he and other corporate executives have turned to experienced national real estate firms to provide the needed services, including real estate strategic planning, portfolio and property management, lease management, disposition and acquisition activity, on both a national and regional basis.

These developments are now proving to have a long-lasting impact and are reshaping the real estate industry. The growth of corporate outsourcing has brought with it an increased emphasis on national real estate organizations with broad capabilities in markets throughout the country. The corporate client's demand for more sophisticated service is changing the way property management firms and brokers have traditionally operated.

Greater skills and resources are required to manage the real estate portfolio more efficiently and to formulate real estate strategies that complement the overall strategic plans of the corporation. In addition, there is increased emphasis on planning and market analysis as well as the ability to manage and create innovative solutions to policies that focus on reducing occupancy cost.

Real estate firms are expected to pay closer attention to costs, to have sufficient computer capability, and to be adept at tenant retention.

In many ways, corporations expect the real estate firm they work with to provide the detailed levels of planning, review, reporting and service that were common to internal departments. This means setting up standards and procedures for all real estate transactions, developing and maintaining vast databases to help monitor lease expirations rental rates and escalations, as well as expansion and renewal options.

The real estate industry's response to the corporate world's increasing emphasis on outsourcing has been the development of nationwide networks of affiliated local and regional firms, to put themselves in a position to compete with established, multi-service national real estate firms such as Grubb & Ellis.

Companies have come to realize major advantages in working with a single real estate source, not the least of which is gaining tremendous leverage of executive time.

For example, a company may have properties in 10 cities across the country. This could mean working with 10 different managing agents or brokers at 10 different firms. Just talking to these individual firms would involve an enormous amount of executive time.

With one real estate source, one key contact, the time spent is greatly reduced. The single source knows and understands the requirements and standards set by the company. He or she understands the corporation's business and the kind o budgeting and tenant retention standards desired in any market in the country.

In addition, the company gains a consistency in reporting, a consistency in the approach and management of the project.

Today, companies are realizing that they have achieved real benefits through outsourcing. Companies are utilizing the experience and vast resources available in a national real estate firm to assist them in developing and executing their real estate strategy.

They are realizing significant time and financial benefits from being able to use a single source of information for conditions and opportunities in local markets. And, they gain a knowledgeable and proactive presence across the country with property management that achieves high uniform standards.