The Walls Come Down

Finance, IT, and HR have been outsourced. Now, companies are turning their attention to property.
Eila RanaNovember 5, 2007

What can be left to outsource? Companies have farmed out IT, HR and all manner of business processes. Now, it looks as if management of the bricks and mortar are heading off the books too.

European companies have shied away from property outsourcing — which covers everything from the management of transactions, facilities, data and projects, to helping them shape their entire property management strategy. This is mainly because it is only cost-effective to do such contracts on a global, or at least pan-regional, basis, something that is particularly hard to organise for such an inherently decentralised function, according to property services companies.

A recent spate of “requests for proposals” from European companies, however, suggests some CFOs are coming around to the idea.

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Indeed, Jones Lang LaSalle has won at least four such contracts. One of those, won jointly with Cushman & Wakefield, is to service GlaxoSmithKline’s global property portfolio. The property companies will run 7m square metres of GSK property around the world and services may also include project management and design, including briefs to help it make buildings more energy efficient and eco-friendly. Outsourcing providers, as well as reports in some of London’s business press, claim that Nestle, Siemens and Philips are among those planning to outsource their entire global property portfolios, worth a combined €20 billion. These firms would not confirm this. Indeed, Nestle spokeswoman Nina Backes told CFO Europe, “Nestle is not in discussion with any property firm about outsourcing its global property portfolio.” Philips spokesman, Joon Knapen, left the door open, saying, “This is not the case at Philips right now.”

But even GSK appears reluctant to describe its deal as “property outsourcing.” A GSK spokesman told CFO Europe, “We look at our portfolio mix and where we can rationalise or manage our portfolio actively, we do so. But that’s quite different from so-called outsourcing.”

Why are companies coy? One property outsourcing executive reckons companies will be “hugely nervous” about going public until they can overcome the controversial hurdle of dismissing the thousands of staff involved.