Corporate Real Estate_2020 Service Delivery and Outsourcing Final Report

FINAL REPORT May 2012
The Future of Corporate Real Estate
and the Workplace
Service Delivery
and Outsourcing

Principal Author
Kathy Brister
Contributing Authors
Blake Layda, Jones Lang LaSalle
Kurt Ochalla, MBA, MCR, CEng,
Expense Management Solutions
Contributing Editors
Jessica Beers, MCR, Senior Director, UGL Services
Hunter Fleshood, Capital One
Brandon Forde, Studley
Lisa Huls-Fry, Cassidy Turley
Connie Hughes, CCIM, CPM, Cassidy Turley
Sherri Parman, CPA, MBA, Capstan Advisors
Team Liaison
Melissa Securda, CoreNet Global
Service Delivery and Outsourcing
FINAL REPORT May 2012
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CORPORATE REAL ESTATE 2020 FINAL REPORT: service delivery and outsourcing
3
I. Introduction 4
II. Research Methodology 5-6
III. Executive Summary 7-11
IV. Historical Evolution of Service Delivery 12-18
V. Current State of Service Delivery 19-25
VI. Bold Statements 26-39
A. Bold Statement 1 27-28
Real Estate business objectives and goals will become more integrated
with Procurement and, therefore, more sophisticated and complex.
B. Bold Statement 2 29-31
Vendors will become responsible for data access and usage as it becomes
more widespread as a means of delivering corporate real estate strategy.
C. Bold Statement 3 32-33
Clientele will drive service providers to grow their platforms globally.
D. Bold Statement 4 34-35
Due to economic pressures, there will be continued consolidation of
service providers, and we expect to see a nontraditional service provider
enter the race.
E. Bold Statement 5 36-37
With corporate real estate utilizing their service providers as an
incubator/training ground for noncore business, human resources
and training capabilities will become a heightened requirement.
F. Bold Statement 6 38-39
Pricing and performance management models will become more
value-based (more strategic and proactive), while less focused on purely
financial objectives.
VII. Conclusions 40
VIII. Appendices 41-51
A. Corporate Real Estate 2020 Team Leaders and Sponsors 41
B. Professional Leaders Interviewed by Service Delivery and Outsourcing 42
C. Corporate Real Estate 2020 Service Delivery and Outsourcing Interview Guide 43-47
D. Service Delivery and Outsourcing Summary of Responses to Bold Statements 48
E. Corporate Real Estate 2020 Service Delivery and Outsourcing Participants 49-50
F. Corporate Real Estate 2020 Participating Companies 51
TABLE OF CONTENTS

4
INTRODUCTION
Have you ever tried to imagine what work will be like in 2020? It’s
not easy, but that is exactly what CoreNet Global’s Corporate Real
Estate 2020 initiative is all about – envisioning the future of corporate
real estate (CRE) and the workplace. Corporate Real Estate 2020 is a
research and leadership development program designed and managed
by CoreNet Global members to address the business environment in
the future and to collect and distribute best practices, tools and studies
to meet future business needs effectively. A follow up to Corporate
Real Estate 2000 and CoRE 2010, Corporate Real Estate 2020 has
brought together more than 280 of the industry’s most thought-pro-
voking and leading minds, as well as several other professionals from
areas outside the CRE realm.
Given today’s climate of protracted economic uncertainty, forecasting
has never been more challenging. Predictive modeling is often an in-
exact science, yet considering the outcomes of many of the forecasts
CoreNet Global has made in previous renditions, it can prove to be an
effective tool for setting expectations. Volatility withstanding, compa-
nies, industries, professions and other types of networks need to set
a baseline to gauge and anticipate change as best as current indicators
and history allow.
This report explores the major trends discovered and studied by the
eight research teams to aid corporate real estate executives and pro-
fessionals in becoming the most effective leaders in an increasingly
complex business environment.
Corporate Real Estate
2020 has brought
together more than
of the industry’s most
thought-provoking
and leading minds

5
RESEARCH METHODOLOGY
Corporate Real Estate 2020 began in August
2011 and continued through May 2012. The
program was launched at the AT&T headquarters
in Dallas, where a group of more than 70 senior
thought leaders convened to discuss the business
environment in the year 2020 and create an overall
vision of the future and what the impact on CRE will
be. From this discussion, it was concluded that the
research would be carried out by breaking down the
profession into eight dimensions unique to CRE.
Following the official launch meeting in Dallas,
each of the eight teams was tasked with defining
its goals and predictions. Using the overall vision of
the world in 2020 and its impact on CRE as context,
each team created a set of Bold Statements.
The Bold Statements were developed, evaluated
and finalized throughout the first months of the
project using recent research findings from a variety
of resources and topic-specific group discussions.
The statements, a prediction of where a typical
CoreNet Global member firm would stand in 2020,
were based on what the teams “thought” would
happen, not what they “wanted” to happen,
reflecting varying degrees of forward thinking.
The predictions were also presented at the CoreNet
Global Paris, Atlanta and Singapore Summits, where
members from the across the globe were given a
chance to provide feedback on the Bold Statements.
These predictions served as the research questions
to be validated based on in-depth qualitative
interviews with CRE leaders and topical content
experts plus a quantitative survey of CoreNet
Global’s end-user members across the world.
Throughout the process, leading organizations and
industry experts were identified for interviews and
further research. Telephone and in-person interviews
that followed a structured interview guide (Appendix
C) were documented and analyzed for patterns to help
the teams understand the current views and future
perspectives of these business leaders. In addition,
case-study materials were solicited as part of the
interview process, and some of those real-world
examples have been incorporated into this report. The
research teams also used articles, books and reports
to ground the theories and compare results.
EIGHT RESEARCH AREAS
Enterprise
Leadership
Service
Delivery &
Outsourcing
Sustainability
Location
Strategy & the
Role of Place
Technology
Tools
Partnering
with Key
Support
Functions
Workplace
Portfolio
Optimization
& Asset
Management
Using the overall vision
of the world in 2020
and its impact on CRE
as context, each team
created a set of Bold
Statements.

6
RESEARCH METHODOLOGY
Interview insights, materials and Summit feedback
were synthesized on a number of levels. The research
team met regularly to review the materials collected to
determine emerging viewpoints and implications.
The following diagram illustrates the research
timeline/process. Appendices B and E list the
Service Delivery and Outsourcing team members
and organizations interviewed.
VALIDATED
AND FINALIZED
BY INDUSTRY
LEADERS
VALIDATED
THROUGH GLOBAL
END-USER
MEMBER SURVEY
INTERVIEWS
CONDUCTED WITH
PROFESSIONALS
EVALUATION
OF BOLD
STATEMENTS AT
CORENET GLOBAL
SUMMITS
MATERIALS
ANALYZED AND
CONCLUSIONS
AGREED UPON
BOLD
STATEMENTS
CREATED
SAN DIEGO
SUMMIT RESULTS
PRESENTATION
CREATION OF
EIGHT RESEARCH
TEAMS
REPORTS
DISTRIBUTED
VISIONING
MEETING IN
DALLAS
FIGURE I.I | KEY STEPS IN RESEARCH PROCESS

7
Corporate Real Estate 2020 was established to document the indus-
try’s thinking about the corporate real estate (CRE) environment of the
future; the key characteristics of a successful enterprise; and the im-
plications for the corporate real estate profession, based on the latest
and best ideas from senior CRE and infrastructure leaders.
Looking toward 2020, real estate leaders interviewed and surveyed
identified high-level business drivers they predict will shape the indus-
try’s future. Among these are globalization, technology and data-driven
business intelligence, value- and cost-based metrics, evolving out-
sourcing models, industry consolidation and expansion and access to
well-trained and experienced workers.
Always-on connectivity is changing the perception of the workplace
and redefining “corporate space.” Technology also is changing CRE’s
traditional modes of operation and the expectations CRE executives
place on service providers. The service provider of the future must go
beyond task-oriented accomplishments to become a strategic, collab-
orative partner whose data-driven insights can help end-users make
informed decisions.
This presents a challenge to an industry that traditionally measures
success by the square foot, but it also opens the door to unprecedent-
ed opportunities. To seize upon them, end-users and providers must
rethink the role and function of corporate real estate. The future is less
about space and more about services and strategy.
The Corporate Real Estate 2020 research initiative is focused on how
the many facets of the industry will evolve – technology, the nature
of work, integrated infrastructure resources, leadership and more. As
a key facet of the industry, service delivery must react to and evolve
with the continually changing internal business structures and environ-
ments that are driven by external economic influences.
The research presented in this report indicates new models and roles
will emerge that will allow corporations to better leverage their external
networks to deliver more value and to give them a competitive edge.
For the purpose of this research effort, the service provider includes
EXECUTIVE SUMMARY
FOREWORD
The future is less about
space and more about
services and strategy.

8
EXECUTIVE SUMMARY
everything from the provision of tactical, day-to-day operations support
to the design and delivery of a strategic vision for an organization. This
broad view of the market supports the ever-expanding roles that service
providers are being asked to assume. To some organizations, service
delivery may still only involve the tactical execution of specific tasks, but
at today’s leading-edge businesses, the added value that service provid-
ers can bring to the table goes well beyond that definition.
Through a series of preliminary discussions and industry work ses-
sions, the Service Delivery and Outsourcing team established research
premises based on a perceived expansion of and dependence upon
outsourcing. In the future, CRE executives will look to service provid-
ers not only to deliver more administrative services but also to manage
those services provided by other vendors. A corresponding degree
of risk and responsibility will shift to the service providers: They will
be expected to deliver multi-domain services using highly skilled and
efficient teams. They will be expected to advise on and add to the end
user’s strategic vision. They will be expected to compete on value, as
well as price.
The Service Delivery and Outsourcing team is focused on how the ex-
ternal resource and capabilities network will integrate and organize to
interact most effectively with the evolving internal organizations. As a
part of this research effort, the Service Delivery and Outsourcing team
conducted more than 20 interviews to gain insight into today’s service
delivery models and assess what the future may hold. While many of
the interviewees were CRE or administrative service directors from
major global business entities, other interviewees were representa-
tives from the market’s leading service providers. In addition, the team
also interviewed industry thought leaders.
The findings were used to formulate hypotheses about high-level business
drivers, challenges and opportunities that will shape the future of CRE.
Over the past seven decades, the overall business environment and
the CRE sector have evolved in tandem, with developments in one
driving change in the other. Changing company demands regarding
real estate led first to the creation of centralized internal real estate
Over the past seven
decades, the overall
business environment
and the CRE sector
have evolved in tandem,
with developments in
one driving change in
the other.

9
EXECUTIVE SUMMARY
divisions and to the development of an entirely new external service
delivery industry, which has consolidated and grown in complexity and
sophistication in recent years.
Real estate outsourcing is now modus operandi for most large com-
panies, but one single methodology does not fit all. Desires to meet
the demands of rapid globalization while continuing to manage costs
are universal. But corporations are employing a variety of outsourcing
strategies and structures to achieve these goals – among them best-
in-class, bundled and integrated outsourcing models.
For their part, service providers are striving to meet end users’ demands
for strategic global portfolio optimization, workplace mobility, process
improvement, energy management, sustainability and cost reduction –
all while seeking to shift the value proposition of their services from a
cost-based structure to one that pegs success on broader definitions
of “value.”
CRE executives who want these more diverse and sophisticated
services expect true expertise from their providers. A case in point:
End users who contract data management services from providers
want them to deliver not only data reports but also the kind of in-depth
analysis that provides strategic insights. Such expanded requirements
have opened the door to some non-traditional service providers; firms
that once focused exclusively on food services or business processing,
for example, are beginning to move into facilities management.
Current market trends and conditions will propel the CRE service deliv-
ery sector into a future already being imagined by the industry’s best
and brightest decision makers and thought leaders. To capture their
views, the Service Delivery and Outsourcing team interviews centered
on carefully developed hypotheses about what lies ahead. These hy-
potheses were presented to interviewees as Bold Statements:
End users who contract
data management
services from providers
want them to deliver not
only data reports but
also the kind of in-depth
analysis that provides
strategic insights.

10
EXECUTIVE SUMMARY
Bold Statement 1:
Real Estate business objectives and goals will become more
integrated with Procurement and, therefore, more sophisticated
and complex.
Experts’ Overview: The collaboration between CRE and Procurement
will yield greater discipline and buying power than the CRE department
possesses on its own, but it also will add complexity to decision making.
Bold Statement No. 2:
Vendors will become responsible for data access and usage as
it becomes more widespread as a means of delivering corporate
real estate strategy.
Experts’ Overview: Service providers will own the systems that can
manipulate and analyze data coming from end users, but most companies
will continue to own and house the data, especially if their business is
highly competitive or heavily regulated. Service providers’ ability to glean
insights from shared data will be a core competency and competitive dif-
ferentiator, and this will factor significantly into customer retention.
Clientele will drive service providers to grow their platforms globally.
Experts’ Overview: End users will expect service providers to antici-
pate global business drivers and emerging markets and have estab-
lished service offerings before corporate real estate executives request
them. To enable that nimbleness, service providers increasingly will
partner with local providers in key markets.
Due to economic pressures, there will be continued consolidation
of service providers, and we expect to see a nontraditional ser-
vice provider enter the race.
Due to economic
pressures, there
will be continued
consolidation of
service providers, and
we expect to see a
nontraditional service
provider enter the race.

11
EXECUTIVE SUMMARY
Experts’ Overview: Nontraditional providers will enter the market to
compete outright with mainstream CRE offerings or to erode the value
proposition of specialty services offered as part of service provider
bundles. Mid-size and small service providers will combine to compete
against the largest firms.
With corporate real estate executives utilizing their service providers
as an incubator/training ground for noncore business, human resourc-
es and training capabilities will become a heightened requirement.
Experts’ Overview: End users will require service providers to con-
tractually ensure adequate human resources/training capabilities, and
HR and training capabilities will become competitive differentiators
among service providers.
Pricing and performance management models will become more
value-based (more strategic and proactive), while less focused on
purely financial objectives.
Experts’ Overview: Organizations will recognize the potential detri-
mental impact of cost cutting on productivity, which will change the
conversation from cost containment to value creation. Cost control will
move down the list of metrics, but it will remain one of the key mea-
sures of success.
The real estate leaders’ views on these Bold Statements provided
insights into the industry’s future. To achieve success as we move to-
ward 2020, end users and service providers must rethink the role and
function of CRE, these experts say. The future is more about services
and strategy than square footage.
Pricing and
performance
management
models will become
more value-based
(more strategic and
proactive), while less
focused on purely

12
historical evolution
of service delivery
a look back
Since the end of World War II, the global business
environment has dramatically, irrevocably changed,
and corporate real estate (CRE) has changed right
along with it. Real estate’s organizational models,
roles and responsibilities underwent distinct evo-
lutionary periods. Changes within CRE were both
reactions to and drivers of broader economic trends.
Ultimately, they created an entirely new external
service delivery industry.
Pre-1960s: Setting the Stage
After two decades of economic depression and
war, businesses in the 1950s were readjusting to a
peacetime economy with a sense of optimism in a
perceived new world order. For the most part, busi-
nesses picked up essentially where they had left off
before World War II. While the mature industries
of manufacturing and agriculture still dominated
economic activity, few companies served markets
outside specific domestic regions, and even fewer
served a global client base.
With the exception of capital-intensive industries (such
as steel, automobiles and chemical production), busi-
nesses tended to be small, locally based, entrepre-
neurial in approach and homogenous in nature. Many
organizations only supported one line of business,
producing closely related product types. Industries
were highly fragmented, and businesses typically
served specific, nearby markets because the existing
transportation network limited the efficient flow of
finished goods. For the most part, businesses operated
in a decentralized manner, with production and support
functions distributed throughout the organization to
serve specific business units.
A similar mindset was common for administrative
support functions. It is generally accepted that prior
to the 1960s, most corporations had not yet estab-
lished a CRE function and real estate was managed
in a highly decentralized fashion. Each business
unit typically coordinated its own transactions and
managed its own facilities portfolio. Real estate
assets were strictly considered “agents of produc-
tion,” and real estate decisions were not particularly
strategic in nature.
Corporations kept real estate service providers at
arm’s length and did not consider them as valuable
networks that could be leveraged to improve organi-
zational performance. Most organizations were confi-
dent that functional knowledge and industry best prac-
tices should be developed and managed internally.
This limiting approach prevented the development of
relationships with real estate service providers.
In this pre-1960s period, the real estate service provider
function was mostly limited to support for real estate
transactions. Aside from real estate brokerage and prop-
erty management services for investor/owners, few
other services were offered. Real estate firms tended
to be small and were focused on providing transaction
support for specific property types in defined market
areas. Corporations called on service providers for spe-
cific engagements, as the external parties were only
considered to be “order takers.”

13
of service delivery
a look back
The 1960s to the 1980s:
Conglomerates and Centralization
In 1956, President Eisenhower created the inter-
state highway system as an integral part of the
national defense system. However, the commercial,
economic and social ramifications of this system far
outweighed its military value. As the system devel-
oped in the 1960s, national markets expanded rap-
idly and a new kind of business model was needed
to serve the increasingly larger and more dispersed
markets. In response to this economic market
expansion, industries consolidated and fewer, larger
corporations emerged.
Consolidation provided better access to capital and
greater economies of scale. The new business models
required the kind of centralized control that was pro-
vided by hierarchical organizational structures. Compa-
nies no longer accepted the inevitability of struggling
through business cycles with a single business line or
product. Instead, they added new product lines or pur-
chased companies with products that complemented
their existing efforts. Mergers and acquisitions prolifer-
ated, conglomerates became prevalent, and these large
companies pursued increased market share.
At the same time, administrative support functions,
such as finance, accounting, personnel, legal and real
estate, were being centralized at corporate headquar-
ters. As businesses became more complex, the need
for access to information and efficient communica-
tions was met by the physical proximity of employees
in centralized locations. The new business environ-
ment forced a change in the way administrative func-
tions were managed within corporations.
In the 1960s, as the structure of organizations’ real
estate portfolios became more complex, centralized
CRE groups started to form within large corporate
entities. While certain services and functions, such
as property management and facilities management,
often still were coordinated at the business unit level,
the management and approval of real estate transac-
tions were undergoing consolidation. In addition, cor-
porations began to out-task some activities based on
internal capacity restrictions and the need to expedite
certain engagements. The volume of out-tasking was
rather limited; only local and regional vendors existed
in the marketplace, and they varied by geography.
Both the real estate group and the vendor organiza-
tions were relatively small.
By the 1980s, centralized CRE departments were
well established within corporations. The CRE de-
partments had grown significantly and increased the
scope of services provided by internal staff, which
now included a cadre of specialists. By the 1980s,
the CRE department was often responsible for site
selection, lease-versus-buy analysis, real estate
Mergers and acquisitions proliferated,
conglomerates became prevalent,
and these large companies pursued
increased market share.

14
of service delivery
a look back
transactions, space planning, design and project man-
agement for construction. Compared to the 1960s,
when real estate groups only handled real estate
transactions, a significant amount of complexity and
responsibility had been allocated to CRE departments
by the 1980s. However, the CRE department’s role
was still that of an “order taker,” which carried out the
requests of the business units to build and maintain
physical facilities. The CRE department supported the
organization’s business strategy but had no role in its
strategic-planning efforts.
In the service provider industry, the volume of out-
tasking (when a service provider executes a discrete
piece of work under specific direction from and con-
trol by the corporate end user) was still rather limited,
and only a few vendors had established extensive
positions in the marketplace. Since large corporations
had in-house expertise, they were less likely to pay
the unit-cost premium charged by external service
providers unless significant benefits could be derived
from outsourcing (when a service provider takes over
complete, or near complete, responsibility of desig-
nated operations). It was generally accepted that no
greater efficiency or effectiveness could be gained
by shifting workload to external service providers. In
addition, the service providers’ profit was seen as an
additional cost that would not be incurred if activities
were maintained in-house. As such, the workload
completed by service providers remained task-fo-
cused and was driven by internal capacity restrictions
and the need to expedite delivery.
Toward the end of the 1980s, a few innovative compa-
nies like Baxter Healthcare and Ameritech started
to rethink the CRE function and planted the seeds for
the streamlining of these large and sometimes cum-
bersome internal structures. At the same time, new
concepts were emerging to shift workload efficiently
and effectively from internal resources to external
resources, through large real estate services delivery
contracts with select, top-tier providers.
It was generally accepted that no
greater efficiency or effectiveness
could be gained by shifting workload
to external service providers.

15
of service delivery
a look back
The 1990s:
Cost Reduction and Outsourcing
With the fall of the Berlin Wall and the removal of sev-
eral trade barriers, U.S. corporations were suddenly
exposed to global competition and were at a distinct
cost disadvantage. During the 1990s, Japanese busi-
nesses were ahead of most of the world in terms
of cost efficiency, and U.S. companies scrambled to
restructure and become more cost-competitive. The
efforts to lower costs were supported by a global eco-
nomic downturn of considerable severity and duration.
In this environment, Wall Street began to question the
monolithic structure of corporate America and started
to reward those companies that focused on their core
business activities. Corporations were now focused on
maximizing return on invested capital by establishing
distinct, competitive advantages and by selling off large
portions of their businesses that were considered to be
non-core. Enabled by advances in information technol-
ogy, corporations began to outsource many of the func-
tions that were formerly handled in-house, in an effort
to further reduce costs and enhance focus.
These technological advances significantly reduced
the costs associated with information sharing and
enabled corporations to rapidly coordinate and roll up
financial and operational data across very complex
global organizations using enterprise-wide data man-
agement systems. Highly centralized organizations
were no longer justified or necessary, and technol-
ogy facilitated global expansion.
By the 1990s, out-tasking was more common with
corporations more effectively leveraging external
service providers for many administrative support
functions. New technologies had reduced the trans-
action costs of doing business with external provid-
ers, and the proliferation of personal computers,
data management systems and the Internet made it
easier to manage and communicate across internal
and external networks.
In response to a big out-tasking push on the part of
CRE, internal departments began to downsize, and the
real estate service provider industry grew significantly.
However, while there was a substantial increase in
the number of vendors, the organizational maturity
profile of these vendors had not changed much. As
was true in the 1980s, real estate service providers
were offering multiple service or product lines to their
customers, but the services were not being delivered
in an integrated fashion. At best, services were being
“bundled” or “packaged” in an effort to sell multiple
services to the same customer and increase profits
through overhead efficiency gains.
As was true in the 1980s, real estate
service providers were offering
multiple service or product lines to
their customers, but the services
were not being delivered in an
integrated fashion.

16
of service delivery
a look back
The continued downsizing of internal administrative
support functions – often coupled with the adoption
of an administrative service organization structure that
integrated and aligned functions like human resources,
information technology and CRE – led to an increased
reliance on external providers. As a result, the service
provider industry engaged in major expansion ef-
forts throughout the 1990s. Mergers and acquisitions
between the larger American and European providers
fueled consolidation. Examples include the merger/ac-
quisition activity between CB Commercial and Richard
Ellis, Jones Lang Wootton and LaSalle Partners,
and Cushman & Wakefield.
These new, larger service provider firms also began
adding higher-value services to their core capabilities,
including financial re-engineering for portfolio cost
structures, balance sheet impact analysis and platform
alignment to better address issues that were most
relevant to senior corporate executives. The corporate
services approach was well on its way to acceptance
by the mid-1990s, and the relationships between CRE
departments and external providers transitioned from
a vendor focus to a partnership focus.
Service providers began to offer greater efficiency,
cost effectiveness and flexibility. United Systems
Integrators was a prime example. Established in 1991,
real estate service firm USI was founded on the belief
that corporations would increasingly improve return
on invested capital and obtain higher valuations by
outsourcing non-core functions. Jones Lang Woot-
ton’s merger with LaSalle Partners in 1997 was largely
driven by the corporate client need for creative and of-
ten integrated approaches to manage their real estate
portfolios and meet their complex occupancy needs.
In the early 1990s, outsourcing of corporate real estate
at Baxter Healthcare demonstrated to the industry that
the corporate real estate function could be managed in
new and different ways. Baxter was the first company
to outsource many services, and thereby reduce the
size of its internal CRE department. It was the first time
that management of many of these functions was taken
outside a large company. Ameritech soon took a similar
course. Then other corporations, including Microsoft
and Sun Microsystems, followed the example in
an effort to realize similar benefits. These companies
began to see that all-encompassing, large internal CRE
departments made them less nimble and too rigid, and
burdened them with unnecessary exposure. Change
was cumbersome and difficult to implement.
It was the culmination of a trend that had been devel-
oping for some time, as the out-tasking or outsourcing
of commodity activities such as transaction implemen-
tation, project management and facility management
gave corporate real estate groups more flexibility to
respond to business unit requirements and to maxi-
mize return on invested capital. The larger real estate
service providers expanded their service portfolios to
include the complete life cycle of real estate services,
adding valuation analysis, mortgage banking, project
management, and real estate consulting and property
development services. These “bundled” services
were sold as packages to corporate clients.

17
of service delivery
a look back
In addition, corporations established single-source
contracts or preferred vendor arrangements with
large real estate service providers to achieve volume
discounts. This “one-stop shopping” concept allowed
corporate real estate departments to reduce the
number of vendors required to provide services. In the
new model, the role of the remaining CRE department
staff was to manage the outside vendors, negotiate
pricing and ensure accountability.
The 2000s:
Globalization and Strategic Alignment
In the 2000s, four major business drivers – glo-
balization, information technology, administrative
organizational structure and labor – combined with a
high degree of economic fluctuation to reshape and
redefine internal and external real estate service de-
livery. Enabled by technology and trade liberalization
agreements and driven by an intense drive to cut
costs, organizations outsourced back-office admin-
istrative and support functions to third parties, not
only to more cost-effective domestic markets but
also to third parties in other countries – so called
“off-shoring.” This trend, combined with develop-
ing markets’ phenomenal growth – which increased
even during a deep recession that hobbled many
developed economies – led to increased globaliza-
tion of major corporations.
During this time, several organizations, including Nortel
Networks, American Express, United Technologies
Corp. and Bank of America, emerged as best-practice
operations in integrating and leveraging external provid-
ers for strategic CRE service delivery. As opposed to
allocating limited internal staff resources to the hands-
on implementation of non-core activities, the CRE
departments at these organizations focused on devel-
oping and managing long-term outsourcing strategies
to deliver these non-core activities. This reflected an
evolution of corporate real estate’s role from taskmas-
ter to business strategist.
This “one-stop shopping” concept
allowed corporate real estate
departments to reduce the
number of vendors required to
provide services.

18
of service delivery
a look back
Meanwhile, U.S. companies increasingly off-shored
work to countries like India and China. And, as these
developing economies grew, major corporations be-
gan to view them not only as suppliers of cost-effec-
tive goods and labor but as markets in their own right.
Corporations began to seek real estate solutions that
would allow them to set up manufacturing and cus-
tomer contact operations to serve customers in North
America and Europe and also would enable them to
sell goods and services to ever-richer businesses and
consumers in these emerging markets.
As end users’ needs changed – often rapidly – service
providers honed their relationship management skills,
working to align service and delivery structures to the
needs of customers. Providers realized understand-
ing their customers’ needs and monitoring how well
they delivered against those needs while being able
to measure performance and deliver sophisticated
reporting was a competitive differentiator.
Between the first major implementation at Baxter
Healthcare in 1990 and the close of the 2000s, CRE
and facilities outsourcing became commonplace at
major corporations. Large, established companies
such as General Motors and Bank of America were
now out-tasking multiple real estate functions and
wholesale outsourcing of the entire real estate func-
tion was an option on the table. Many endeavors
started small, by outsourcing the most tactical func-
tions, such as food service. As CRE departments real-
ized benefits and became more confident that quality
of service would not be compromised, other functions
were outsourced.
As outsourcing evolved it also changed the responsi-
bilities of in-house CRE. Internal staff that had once
spent their time completing transactions and man-
aging projects and facilities instead were managing
the work of external service providers who assumed
day-to-day responsibilities. However, most of these
outsourcing relationships still focused on tactical
services. The development of strategic plans for the
real estate portfolio and the CRE organization were
still typically internal activities.
The development of strategic plans
for the real estate portfolio and
the CRE organization were still
typically internal activities.

19
the current state
of service delivery
a picture of the present
In today’s Corporate Real Estate (CRE) market
outsourcing is a given, but one single outsourcing
methodology does not fit all. Trends toward cost-
containment are universal, as exemplified by
the increasing collaboration between CRE and
Procurement. But corporations are employing a
variety of outsourcing strategies and structures to
achieve such efficiencies.
For their part, providers are striving to meet end-
users’ demands for strategic portfolio optimization,
workplace mobility, process improvement and
optimization, energy management and sustainability
and cost reduction. Key service providers have met
these end-to-end CRE demands by consolidating
with former rivals in an effort to increase
capabilities and reach.
Among end users, CRE leaders are concerned
with aligning assets to meet local market needs
amid increasing globalization. Globalization is one
of the key trends causing some CRE executives to
move away from single-source “bundled” services
toward “best-in-class” (also called “best-of-breed”)
options for multiple markets. A few CRE executives
are outsourcing the management of these various
vendors to “integrators.” Corporations whose
business is well suited to the “bundled” model say
they continue to benefit from volume buying and
the efficiency of coordinating and collaborating with
a limited number of vendors. Other firms find the
administrative burden of managing several different
suppliers to be risk laden and cost prohibitive.
End users are requiring increasingly diverse and
complex capabilities from service providers – turning
to them for everything from food service to data
management. That diversity of requirements has
opened the door to some nontraditional providers;
firms that once focused exclusively on cafeteria
management or business processing, for example, are
beginning to move into facilities management.
CRE professionals who want more of these diverse
and sophisticated services expect true expertise. For
example, end users who contract data management
services from providers want them to deliver not only
data reports, but also the kind of in-depth analysis
that provides strategic insights. End users increasingly
understand that these offerings require a level of
training and experience that cannot necessarily be
delivered by the lowest bidder, and their RFPs are
evolving to become value and outcome oriented
rather than strictly focused on cost.
“The transactional model is not
the future of where outsourcing is
going. It needs to be a partnership.”
– Donna Inch, Ford Motor Land Corp.

20
the current state
of service delivery
The Integrator Model: A
Hybrid Sourcing Strategy
Over the past decade, CRE decision mak-
ers had two main outsourcing choices:
Achieve consistency and simplicity but
reduce granular flexibility with a “bundled”
model linked to one primary service
provider. Or opt for a “best-in-class/best-
of-breed” model that enables high-quality,
local-level services but requires juggling
multiple vendors in multiple markets.
Today, however, a single company is testing
a new model – the integrator – that com-
bines some aspects of bundling and best-
in-class. The integrator is, in essence, an
outsourcing hybrid, and a major corporation
views it as offering the best of both worlds.
What makes this model different is that a
CRE executive gives a single partner – the
integrator – responsibility to oversee and
measure the performance and consistency
of multiple vendors. The integrator shares
accountability for the performance of these
service providers.
The integrator is responsible for:
• Driving consistency of process and service
delivery across multiple vendors to create
a uniform experience for the end user
• Sourcing, managing and tracking
vendor work allocation and the quality
of service delivery
• Developing and managing a formal
control structure for mitigating risk
• Establishing a data system capable of
managing and reporting on vendor work
performed across the portfolio
• Developing continuous improvement
plans at strategic and tactical levels
• Managing a budget that supports capital
and operating expense plans
The integrator model can be adapted to
match the degree of responsibility and control
the integrator exerts over other service part-
ners. For example, the integrator may man-
age with a light touch and simply oversee and
report on work completed. Or the integrator
may take a hands-on approach, acting more
as a prime contractor who dictates exactly
how work should be completed and has
100-percent accountability for the quality of
the work and outcomes.
As a still-emerging model, the integrator
is a question mark for many end users
and service providers. While it conceptu-
ally solves for many weaknesses of the
bundled and the best-of breed sourcing
models, the integrator model does create
unique issues of its own, including the
potential for management duplication
and the necessity to have a robust and
transparent governance structure in place
to foster success.
Clearly it is up to each CRE organization to
determine whether the integrator fits with its
desired roles and responsibilities, needs, risk
tolerance and corporate culture.
Differences Among Outsourcing Models
Source: CoreNet Global’s The Leader, March/April 2011

21
the current state
of service delivery
Deliberate Approach to
Outsourcing: State Street
Bank Case Study Background
State Street Corporation (SSC), a
financial holding company, is one of
the world’s leading investment service
providers, focused solely on serving
institutional investors worldwide. State
Street has operations in 29 countries,
serving clients in more than 100 markets,
with more than 29,600 employees
worldwide. State Street serves some
of the most sophisticated institutions
through a flexible suite of services that
spans the investment spectrum, including
investment management, research and
trading and investment servicing.
This sector of the financial services
industry is highly competitive and the
real estate services group is expected
to provide a high level of service in an
efficient and cost effective manner.
Back in 2005, State Street had a global
footprint of approximately six million
square feet (557,418 square meters),
with 93 percent of the integrated
facilities management (IFM) functions
being self-delivered through an in house
staff. The challenge was to take an IFM
service delivery model that was self-
performed, with extensive out-tasking,
and consolidate all of the services under
one IFM service agreement.
The Approach
State Street took a very structured
approach to its first-generation
outsourcing initiative, implementing
segments of the portfolio in a
methodical manner. Since the
organization had a heavy presence in
the Boston area, in 2005 they decided
to consolidate the IFM services being
provided in Eastern Massachusetts
first with a single provider. The portfolio
under consideration in the first phase
included approximately four million
square feet (371,612 square meters),
excluding their one-million-sq.-ft.
(92,903 sq. m.) corporate headquarters.
State Street also realized that for
the first outsourcing initiative to be
successful, it needed to allocate
sufficient resources to the project,
so it engaged Expense Management
Solutions (EMS) to manage the
sourcing process. EMS helped State
Street develop a best-practices master
services agreement, a comprehensive
set of IFM service level agreements and
an enhanced pricing structure.
Based on the quality of proposals,
State Street selected a single provider,
CBRE, to deliver the IFM services
across the Eastern Massachusetts
portfolio. A comprehensive performance
management program was developed
and implemented to continually rate the
supplier’s performance and determine
the amount of “at-risk” fees to award
on a quarterly and annual basis. The
final negotiated pricing also represented
a significant savings over the company’s
current costs.
Upon realizing the success of its first
outsourcing initiative, in early 2006
State Street decided to competitively
bid their one-million-sq.-ft. corporate
headquarters in Boston. This second
phase was also won by CBRE. Not
resting on their laurels, in late 2006
State Street initiated the third phase
of its outsourcing plan by adding 1.3
million square feet (120,774 square
meters) that included the balance of its
North American portfolio. In this round,
State Street chose to pursue negotiated
pricing with the existing provider,
utilizing EMS to develop an abbreviated
RFP and pricing model, rather than a
full market bid. At the conclusion of
this phase, State Street had effectively
centralized the management of its
entire North American portfolio under a
single provider.
Going Global
Following the success of the sourcing
consolidation in North America, State
Street looked to pursue opportunities
in the global portfolio. In late 2006, the
Global Realty Services team put the
EMEA portfolio out to a full market bid,
and Serco was awarded the contract for
approximately 94,000 square meters
(one million square feet) in 35 sites. The
CASE STUDY: State Street Bank

22
the current state
of service delivery
Asia Pacific region went to bid next in
2008, consisting of a dozen assets and
over 360K SF. CBRE once again won
the assignment, and over the years
State Street has continued to expand its
relationship with CBRE as indicated in
the table above.
By mid-2011, the State Street global
footprint had grown to 7.4 million square
feet (687,482 square meters), and its
outsourced relationships had grown as
well, with 65 percent of the IFM services
managed by outsourced providers. The
key responsibilities that SSC maintained
in house included asset management,
project management, engineering
strategy, lease administration,
transaction management and space
strategy and metrics. EMS was brought
back in 2011 to take the existing North
American IFM relationship with CBRE
and negotiate an expanded scope
of work to include the entire APAC
portfolio. The negotiated pricing resulted
in further reductions in supplier costs
under a consolidated contract.
Looking Back
Reflecting back on the approach taken
over the seven-year period, State Street
has realized that despite its success,
there were some things the company
might have done differently. First, it
would have been more aggressive
on initial outsourcing scope and not
taken as many interim steps with the
portfolio. This phased approach was
partly because of the fact that the
team over-estimated its customer’s
transitional concerns. State Street also
would have redefined the roles and
responsibilities between internal GRS
employees and the service provider in a
more direct manner to avoid ambiguity.
Other lessons learned include being
less restrictive on CBRE’s ability to
change the model more quickly. Finally,
it is important to understand there is
dual responsibility for success in the
outsourcing process, with both the
internal CRE team and the service
provider sharing equal responsibility to
ensure that the transition is smooth.
Going forward, State Street will
continue to evaluate additional
outsourcing opportunities that make
sense in the overall business model.
They will also pursue global consistency
in the delivery of services and roles and
responsibilities. Given State Street’s
track record and deliberate approach,
there is no doubt it will be successful in
achieving the desired results.
CASE STUDY: State Street Bank (continued)

23
the current state
of service delivery
Faced with significant changes to its
business following a 2009 merger with
Schering-Plough, Merck & Co. engaged
Jones Lang LaSalle, one of their three
regional service delivery partners to help
its Global Real Estate Services (GRES)
team increase customer focus while
reducing costs. The need to find financial
and operational efficiencies—even in
the high-stakes R&D function—was a
high priority. Significant location overlap
created a milestone opportunity for the
corporate real estate function to play a
leadership role in realizing the $3.5-billion
overall merger synergy targets.
Working under a bundled outsourcing
model for facility and real estate
management functions enabled close
collaboration and support of an extremely
complex global initiative with an equally
complex goal: achieve $200 million in
occupancy cost savings within three
years, while creating a highly effective
workplace for the combined organization.
Several objectives were established
at the outset:
1. Rationalize the portfolio. Following
the merger, Merck establish a primary
goal, “… to create a real estate footprint
that enables a high-performance
workplace in as efficient a manner
as possible,” and a commitment to
consolidating the portfolios by reducing
operational costs rather than other
factors such as write-offs or geographic
preference. Determining which locations
to expand, consolidate or close was a
complex decision involving many factors
and required detailed analysis.
2. Maintain core facility operations
and evaluate third-party suppliers.
With significant ongoing change
and corporate mandates to reduce
expenses, Merck was seeking to
engage a third-party supplier manager to
evaluate and manage suppliers and to
protect and enhance Merck’s facilities.
The net result has been an increase in
the level of service and improved overall
appearance of the facilities, as well
as cost savings and an increase in the
amount spent with diverse suppliers.
3. Ensure people care. Merck places high
value on its people, so the team wanted
its employees to land with a service
provider that could absorb them and offer
long-term opportunity. More than 250
staff were interviewed and hired by Jones
Lang LaSalle, and all but one leadership
position was filled with existing long-term
Merck employees. Today, management
leaders remain in place and overall
employee retention exceeds 95 percent.
Making it work
Having a seat at the table was critical
to the team’s success. During the
most intense period of operational
planning, sometimes site selection
and consolidation strategies were
confirmed in less than a week – a
process that would typically require
months. What made such rapid
movement on consolidations and other
value-creation strategies possible was
GRES’ confidence in those decisions,
despite real estate portfolio data gaps.
M&A regulations block the free flow of
portfolio information before a merger
deal is closed. To fill in some of those
gaps, the external alliance relationship
proved its value, as local market teams
were able to provide real-time market
intelligence that was not available
through internal channels. This on-the-
ground information was used to inform
critical consolidation, move management
and real estate portfolio strategic moves,
establishing a strong, if never all-
encompassing, foundation. Confidence
in the data they did have, in the in-house
and outsourced team, as well as in GRES
processes, made it possible to avoid
getting mired in red tape.
Informed partners, informed
real estate strategies
External and internal teams must share
an understanding of an organization’s
corporate culture and business
objectives to work together effectively
under ambitious timeframes. The
fact that a centralized integrated
facilities management and real estate
relationship was already in place kept
the focus on the merger goals, not on
team ramp-up. Also, the leadership role
the corporate real estate and facilities
function played on the integration team
meant senior management backing for
the tough decisions.
CASE STUDY: Merck

24
the current state
of service delivery
The Integrator Model in
Action at Microsoft
Microsoft was an early adopter of
outsourcing and has been an innovator in
adapting outsourcing to the company’s
changing needs. The technology
powerhouse has begun a next-
generation plan that combines the best-
in-class and bundled approaches into a
hybrid outsourcing model: the integrator.
The Outsourcing Challenge
Microsoft Corp. operates in 107
countries around the globe, which makes
outsourcing both the right solution for
the software giant and one of its top
corporate real estate challenges.
“For many years, we had global
service providers for things like
project management or transaction
management,” explains Bob Kaplan,
Director of Global Resources for
Microsoft Real Estate and Facilities.
“What we found is while those global
service providers were great in lots of
places; there was no service provider
out there who was great everywhere
we operate.”
Microsoft considered various options,
and then decision-makers settled on
an outsourcing model that combines
bundled and best-in-class approaches to
aim for a higher level of service quality
in every market and for every task. This
hybrid model is managed by a single
provider, called “the integrator.”
The Integrator Solution
The next step was to figure out who
that integrator would be. “We needed
someone – and it could have been
either us internally or an outside
vendor – to manage across all those
different service providers and drive
consistent processes, best practices,
CASE STUDY: Microsoft
Microsoft’s Integrated Governance Plan
Snapshot
Headquarters: Whitehouse Station, NJ
Industry: Pharmaceuticals
Geography: Global
Portfolio type: Corporate and sales
offices, research and development
centers
CRE Portfolio: 100 million SF/600 sites
globally (global RE services and 32
million SF/30 sites (U.S. and Canada)
under IFM with Jones Lang LaSalle)
Dedicated CRE employees: 250
Outsourced CRE services:
• Integrated facilities management
• Occupancy planning
• Move management
• Project management
• Strategic consulting
• Transaction management
CASE STUDY: Merck (continued)

25
the current state
of service delivery
reporting and data management,”
Kaplan explained.
After looking at various service providers
– including business services companies
like Tata and Accenture – as well as
mainstream providers such as Jones
Lang LaSalle and Cushman & Wakefield
– Microsoft chose real estate firm
CBRE as its integrator. “The conclusion
we came to was to really manage
brokers, or project managers or facilities
companies well, you need people with
deep knowledge of real estate. So
that’s why we went to market to CRE
providers, and ended up with CBRE.”
“They build the strategy. They do the
procurement around it. They do the
contracting around it. They manage the
service providers. They do the reporting
around it. They do the onboarding and
training around it,” Kaplan said. This
integrated approach gives Microsoft the
benefits of a single-source “bundled”
provider and the benefits of best-in-class
service in all of its key markets, he said.
The Role of Governance
Getting ready for the integrated model
required significant internal preparation,
Kaplan noted. Microsoft had to carefully
define governance policies and
procedures for supplier contracts that
fit under the integrator’s purview. For
example, because CBRE is the integrator,
the governance structure prohibits the
integrator firm from competing for any
projects that fall under the integrator’s
scope. “None of the other project-
management vendors would be willing to
work in the model if they knew they were
competing against the people who were
managing it,” said Kaplan.
“We had to build a governance
structure that allows that to work
and that allows our people to have
interaction with those project-
management vendors, as well as with
the CBRE people who are responsible
for procuring them and managing
them and paying them,” he said. A
governing organization now sits at
the center of Microsoft’s integrated
outsourcing structure.
Initial Results of The
Integrator Model
Kaplan said it is too early to assess the
overall integrator model’s success –
such as any significant upticks in local
market service quality or any potential
savings – but the approach already has
had an effect on seeing competition
for service, quality of staff and choice
of providers; all things they wanted to
accomplish, as well as change how
CRE operates within Microsoft. “It
has shifted the importance [of CRE
functions] to relationship management
with our business units – to
understanding their needs on a much
higher level,” he added.
Snapshot
Founded in 1975, Microsoft is a worldwide
leader in software, services and solutions
for businesses and consumers.
Headquarters: Redmond, Wash.
Employees: 92,303 worldwide
Fiscal 2011 Revenue: $69.94 billion
CRE Portfolio:
• Owns approximately 16 million
square feet (1.5 million square
meters) at 105 sites
• Leases approximately 17.6 million
square feet (1.6 million square meters)
at 532 sites
Outsourcing Model: The Integrator
and stables of tier 1 providers for
real estate, project management and
facilities management.
CRE Hierarchy: CRE sits within the
finance organization. The head of real
estate and facilities reports to the chief
administrative officer, who reports to
the chief financial officer.
CRE Operational Structure: Four
regional divisions (Headquarters
campus; Americas; Europe, Middle
East and Africa; and Asia-Pacific)
and two center of excellence teams
(Global Workplace Strategies –
responsible for workplace design,
research and productivity and Global
Resources – responsible for best
practices in real estate, design and
construction, facilities, employee
services, sustainability, technology,
communications, supplier relationship
management, reporting and customer
satisfaction measurement).
Organizational Domains: CRE is closely
aligned with Procurement, which also
sits under the same organization in
finance. HR and IT are in separate areas.
IT, in particular, has a unique design at
Microsoft as it is considered a product
testing ground for Microsoft software and
technology and is tightly linked to product
development and delivery.
Key CRE Skill Sets: Ideal CRE employees
not only have real estate and facilities
knowledge, but also strong customer
relationship and integration skills.
CASE STUDY: Microsoft (continued)

26
BOLD STATEMENT
RESEARCH HYPOTHESES
The future of corporate real estate (CRE) will be
shaped by today’s visionary leaders. To capture and
present what they see on the horizon, the Service
Delivery and Outsourcing team conducted more than
20 interviews centered on service delivery industry
issues of today and tomorrow. These issues were
presented to interviewees as six Bold Statements,
essentially hypotheses about what lies ahead.
Real Estate business objectives and
goals will become more integrated
with Procurement and, therefore, more
sophisticated and complex.
Vendors will become responsible for
data access and usage as it becomes
more widespread as a means of
delivering corporate real estate strategy.
Clientele will drive service providers to
grow their platforms globally.
Due to economic pressures, there will
be continued consolidation of service
providers, and we expect to see a
nontraditional service provider enter
the race.
With corporate real estate utilizing their
service providers as an incubator/training
ground for noncore business, human
resources and training capabilities will
become a heightened requirement.
Pricing and performance management
models will become more value-based
(more strategic and proactive), while less
focused on purely financial objectives.
Many of the interviewees were CRE or
administrative service directors from major global
business entities. Other interviewees were
representatives from the market’s leading service
providers. In addition, the team also interviewed
industry thought leaders and conducted a survey of
CoreNet Global’s end-user members worldwide.

27
BOLD STATEMENT 1
Source: CoreNet Global End User Survey December 2011
FIGURE .I | BOLD STATEMENT 1 SURVEY RESULTS
2%
6%
19%
Strongly
Disagree
Neutral Strongly
Agree
50%
22%
Disagree Agree
End Users Foresee More Real Estate and Procurement Integration by 2020
Procurement plays an ever-larger role in CRE
transactions, an outsourcing-related trend that can
be attributed to a continuing push for lower costs,
increasingly sophisticated client demands for bundled
offerings that combine space with services and a
desire for more discipline around real estate contracts
and related spending.
The latter is what Richard Chalker, Managing Director
at financial services firm Morgan Stanley, sees as
a primary driver. “An effective procurement system
gives a check and balance to the process, especially
in project management and property operations,” he
said. “Procurement gives best practices around vendor
management and managing the relationship between
the service provider and the functional owner.”
At production-oriented companies like Ford Motor
Co. and MillerCoors, the partnership between
CRE and Procurement is not a trend but a tradition.
“Procurement support is integrated into the CRE
group; there has been this tight linkage historically,”
said Donna Inch, Chairman and Chief Executive
Officer of Ford Land, which provides real estate,
construction and facility services to many tenants,
including automobile manufacturer Ford Motor Co.
The business advantages of the CRE-Procurement
structure are increasingly apparent as Ford Land aims
for rapid but efficient and economical growth in the
post-recession environment, said Inch.
At MillerCoors, Director of Real Estate Pat Crumley,
MCR, also sees Procurement’s traditional role in CRE
gaining importance for the beer maker. “Real estate
goals and objectives are more sophisticated and
complex because they have to be woven into the
business objectives and goals of the corporation,”
she said. “That sophistication is being driven by
markets that are much more competitive.”
Real Estate business
objectives and goals will
become more integrated
with procurement and,
therefore, more sophisticated
and complex.

28
BOLD STATEMENT 1
Wayne Taub, Vice President of Real Estate for media
and entertainment company Time Warner, agrees but
cautions that a Procurement approach will not work for
every aspect of CRE. “There’s a strategic piece around
real estate decisions that probably will not be part of
any Procurement efforts, which are more financially
driven than strategic in nature. Procurement has an
opportunity to play the biggest role in tactical areas
of real estate,” he said, “such as supplies, facilities
management services, engineering and energy.”
Procurement brings rigor and fairness to the process,
but as subject matter experts, CRE owns the
decision. A recent CoreNet Global survey of CRE
end users around the world showed that nearly
three-quarters of respondents believe that real estate
objectives and goals will become more integrated
with Procurement by 2020, driving a higher degree
of sophistication in how outsourcing is done.
A View of the Future
Looking ahead, several real estate experts
interviewed by CoreNet Global see evolutionary
trends for real estate-related procurement:
• Procurement’s focus will move from a
commodities-driven, cost-centric approach
to focus on multiple criteria that can drive
total value.
• To that end, real estate-related RFPs will broaden
to concentrate on wider goals and objectives
rather than on a laundry list of cost-based
deliverables. How the service providers will get to
the end game – the goals and objectives – will be
what distinguish them during the bidding process.
• Procurement professionals will specialize in CRE-
related spend, becoming part of a dedicated team
that understands the ins and outs of real estate
transactions.
• The combination of CRE and Procurement
will yield greater buying power than the CRE
department possesses on its own, but it also will
add complexity to decision-making.
• Rigor will increase around CRE-related vendor
selection. Decision-makers will have to justify
choices.
Chalker said Morgan Stanley already has discovered
that the key to successfully combining real estate
and Procurement efforts lies in creating harmony
rather than discord. “If you have an adversarial
relationship with Procurement,” he said, “then it’s a
constant battle.”

29
BOLD STATEMENT 2
Data-backed insights and business intelligence are an
increasingly important component of business plan-
ning and strategy in every sector, including CRE. But
CRE’s legacy and structure creates challenges for
fully leveraging data, real estate experts say.
“Today, data is the big gaping hole for most real
estate functions,” said Christopher Staal, MCR,
Vice President, Global Head of Real Estate and
Facilities Management for financial information and
media company Thomson Reuters. The problem is
two-fold: The CRE department traditionally has not
been at the forefront of technology innovation, and
the industry’s structure of service providers and us-
ers can add complexity to the already tricky task of
determining who owns data.
Nonetheless, most experts interviewed by CoreNet
Global say that by 2020, data access and usage
will be essential to both making real estate-related
decisions and to the services that end users expect
service providers to offer.
The December 2011 CoreNet Global survey of CRE
end users indicated 80 percent of respondents fore-
see a future in which:
• Data streams from different parts of an organization
are integrated into cross-functional dashboards to
better support real-time decision making.
• Service providers not only collect and report on data
but also analyze it properly to guide CRE strategy.
• CRE providers and end users easily share non-
proprietary information.
• Standardized portfolio metrics enable side-by-side,
value-based comparisons across global operations.
All this means that the critical importance of data is
not in dispute. What is in question is whether the
tug-of-war over data ownership will hamper the CRE
department’s ability to get the most out of the avail-
able information.
“Some larger, risk-averse and heavily regulated compa-
nies have data and systems highly insourced, secured
and protected from service providers,” noted Thomas
McCarty, Managing Director of Strategic Consulting
for commercial real estate firm Jones Lang LaSalle.
Pharmaceutical, health care and financial services firms
are among the most cautious about their data.
Morgan Stanley’s Chalker said competitive advan-
tages and confidentiality and regulatory concerns
Vendors will become
responsible for data access
and usage as it becomes
more widespread as a means
of delivering corporate real
estate strategy.

30
BOLD STATEMENT 2
will ensure that end users like banks maintain tight
control over data. “I do agree that companies will get
more sophisticated about the data they share with
service providers to drive better partnerships,” he
said. But he added, “The company will ultimately
maintain full control of the data.”
Nonetheless, technological innovations like cloud
computing already are changing companies’ posi-
tions on the exclusivity of and protection around
their data, said an interviewee responsible for leas-
ing and construction projects in North America.
“You would expect that by 2020 service providers
will take a more active role in both systems and
data management [for clients], assuming they can
meet all the security and expertise requirements,”
continued the interviewee. “I think between now
and 2020, the biggest investment for many service
providers is going to be their technology platforms
because many of their clients are going to demand
it, expect it and call them to task on it.”
Data management requirements already are becom-
ing an increasingly important requirement on RFPs,
and end users want more than reports. They want
analytical, insightful analysis of what the data shows.
Data usage will become more widespread as a
means of setting corporate real estate strategy and
vendors will take a more active role in the manage-
ment of the data stream.
All of the real estate experts interviewed by CoreNet
Global say data will be an integral part of the service
provider/end-user relationship going forward. By
2020, they envision:
• A tiered structure for determining which pieces of
data get shared and how the data is controlled.
The less critical the information is to a company’s
competitive advantage, the more likely it is that
the end user will hand it off to a service provider
for management and/or analysis.
• Vendors will have access to some data, but most
companies will continue to own and house the
data, especially if their business is highly competitive
or heavily regulated.
FIGURE .2 | BOLD STATEMENT 2 SURVEY RESULTS
2%
6%
19%
Strongly
Disagree
Neutral Strongly
Agree
50%
22%
Disagree Agree
Data Will Play an Essential Role in Corporate Real Estate Operations by 2020

31
BOLD STATEMENT 2
• Service providers will own the systems that can
manipulate and analyze data coming from end-
users. The systems will need to be easy to use and
flexible – for example, “dashboard” portals that
plug into enterprise resource planning systems like
SAP and Oracle.
• Service providers’ ability to glean insights from
shared data will be a core competency; end users
will expect service providers to be able to deliver
this kind of business intelligence.
• Providing these technology solutions will become a
competitive advantage for service providers, whose
data-rich bundle of services will tether them to
clients – making end users less likely to move
business elsewhere.
McCarty of Jones Lang LaSalle predicts companies
will increasingly desire the efficiencies to be gained
from using service providers’ data management and
analytics capabilities. End users will look to service
providers to “manage processes and make decisions
for them or in conjunction with them.”

32
BOLD STATEMENT 3
The industry catchphrase of 2012 may be “global,”
but saying it and achieving it are two different
things, real estate experts contend. The pressure on
service providers to increase the geographic scope
of offerings will intensify as we march toward 2020.
But even in 2020, a truly “seamless” global CRE
environment will not be a reality, warn some of the
industry players interviewed by CoreNet Global.
End users want providers to offer global real estate
services that will allow them to scale quickly over-
seas to meet growing demand and seize emerging-
market opportunities. But end users need to realize
that the challenges they face in growing their own
global operations also create obstacles for their real
estate service providers, said Crumley of MillerCo-
ors, who formerly worked on the service provider
side in positions at Cushman & Wakefield and
Jones Lang LaSalle.
“The local laws and the local practices are really going
to dictate how things happen,” she said. “I think it’s a
big responsibility of corporate real estate executives
to truly understand how the business works. … There
needs to be recognition of the realities of what it takes
to do these things internationally and a willingness to
figure out how to work through that.”
For service providers to grow their platforms globally,
they must employ what Crumley calls “workarounds,”
partnerships with local real estate vendors that allow
a service provider to offer space and services in many
markets but that may not ensure adequate control
over all operations.
“Standards vary from country to country,” agreed
Koo Stengle, Strategic Planning Manager for bank-
ing firm BB&T. “To be a true international platform,
service providers will need to integrate locally.” That
integration takes place through partnering with,
merging with or buying local providers. That already
is happening, and the trend will gain momentum –
and sophistication – in the future, experts say.
Inch of Ford Land foresees service providers doing all
of the above to create the global platform that end-
users will expect. “Global reach will continue to be a
part of the selection criteria for the CRE department
because it is easier from a global account standpoint
to be operating with one vendor,” she said.
Tom LaDue, Senior Director of Real Estate Relation-
ship Management at health care technology and prod-
ucts supplier McKesson, agreed and added that the
end-user also has high expectations. “We want the
same level of service in Ireland or Belgium that we
get here [in the U.S.].” The demand will only increase
for this consistency and standardization, he says.
Taub of Time Warner said the push for global real
estate offerings from existing service providers is
Clientele will drive service
providers to grow their
platforms globally.

33
BOLD STATEMENT 3
a matter of necessity, but also convenience. “It is
easier for corporations to have two or three one-
stop shops versus six or seven,” he noted. “It’s
great to be able to rely on the same service provid-
ers … domestically and globally.”
The move toward increased global offerings will be
constant, but the realities of cobbling together of-
ferings from diverse local markets will mean steady,
rather than speedy, progress, say the experts inter-
viewed by CoreNet Global. They predict:
• Clients will expect service providers to show
capabilities in markets around the world before an
agreement is signed. That means service providers
must anticipate the business and set up offerings
before end users request them.
• Partnerships between large service providers and
local providers in key markets will increase in
number and sophistication.
• Companies will want single-source vendor
relationships for global markets.
• Globalization will increase standardization of facilities,
especially those used for world-wide collaboration.
The bottom line, says Staal of Thomson Reuters, is
service providers will be expected to lead the way
in enabling global operations. “They should be do-
ing some heavy investing,” he said.
0%
6%
18%
Strongly
Disagree
Neutral Strongly
Agree
46%
30%
Disagree Agree
Service Providers Will Expand Globally to Meet Increased CRE Demand

34
BOLD STATEMENT 4
The advent of nontraditional providers entering the
market already is upon us, real estate experts say,
and it’s not only driven by economics but also by new
opportunities. They cite a few recent examples of non-
traditional firms carving out space in the CRE space:
• Food service vendors Compass and Sodexo are
offering facilities management services.
• Regus, which built its business around supplying
as needed meeting space and services for small
operations, has entered the corporate space.
• Business processing firms like Xchanging and
Wipro are competing against the value proposition
of CRE providers’ full-service offerings.
Additional niche-based nontraditional providers
could alter the landscape, experts said, with end-
users choosing providers who offer specialties that
are of critical importance to their operations. What’s
more, traditional technology or consulting firms
could enter the space with new, broader solutions.
Experts list several possibilities: Cisco, SAP, IBM,
Hewlett-Packard, Accenture, PricewaterhouseCoo-
pers and Ernst & Young.
Staal of Thomson Reuters predicts such new en-
trants would create significantly disruptive change:
“The brokerage side of the business may be im-
pacted uniquely.”
There will be continued consolidation of the service
provider industry with the appearance of stronger,
more viable regional partners and nontraditional
service providers emerging in this space.
Consolidation among traditional service providers
already has transformed the market, and several
experts question how much bigger the largest players
can get. But they do foresee a number of smaller ser-
vice providers consolidating to form an operation large
enough to compete with the service provider giants.
Another possibility, they say, is that smaller providers
will join together to create deal-specific consortiums –
perhaps rich in regional expertise – that put them on a
level playing field in highly complex bids.
John Jordan, who heads the Global Workspace
Association and is President of BusinesSuites, said
consolidation itself may create competitive oppor-
tunities: “Perhaps a smaller boutique firm will find
Due to economic pressures,
there will be continued
consolidation of service
providers, and we expect to
see a nontraditional service
provider enter the race.

35
BOLD STATEMENT 4
creative ways to address the gaps in the market-
place created by consolidation.”
• Nontraditional providers will enter the market to
compete outright with mainstream CRE offerings
or to erode the value proposition of specialty
services offered as part of service provider bundles.
• Mid-size and small service providers will combine
to compete against the largest firms.
• Consolidation may open new doors for smaller
providers who can fill resulting gaps in service.
“Consolidation is a natural evolution,” said Chalker of
Morgan Stanley. “It’s the survival-of-the-fittest model.”
FIGURE . | BOLD STATEMENT 4 SURVEY RESULTS
1%
5%
20%
Strongly
Disagree
Neutral Strongly
Agree
58%
16%
Disagree Agree
Consolidation and New Entrants Will Reshape the Corporate Real Estate
Marketplace. There will be continued consolidation of the service provider industry
with the appearance of stronger, more viable regional partners and nontraditional
service providers emerging in this space.

36
BOLD STATEMENT 5
End users are asking service providers to deliver increas-
ingly complex and operationally essential offerings, and
that has increased awareness of how well the service
providers’ employees are prepared to do their jobs.
This is an area of extreme focus, said Maxine Hewer,
Global Category and Supplier Manager for technology
equipment maker Cisco, and it presents challenges
today and tomorrow. Do service providers have the
skilled employees that end users expect? Are they
hiring and training strategically to ensure they will have
the manpower to meet end users’ future needs?
The reality, noted Crumley of MillerCoors, is that real
estate services have melded into domain-oriented
corporate services, and that changes the needs and
expectations. “Yes, [service providers] are doing the real
estate, but they’re also managing the mail room or the
fleet or running the cafeteria,” she said. “There needs to
be some serious employee training and development to
help people expand into these broader responsibilities.”
McCarty of Jones Lang LaSalle says the heightened
needs and expectations have changed the nature of
CRE outsourcing. “It is no longer a default practice
to simply ‘re-badge’ the outsourced team,” he said.
“Service delivery capabilities are now much more
sophisticated – integrated with and dependent on
technology, and that requires more advanced skills
and training.”
Corporations want to know service providers’ human
resources divisions are up to the task, said Stengle of
BB&T. “We want to see what the training looks like,
and we want to make sure that if a service provider
has a particular core function that they are doing it well.
They need to be trained.”
At McKesson, LaDue said he wants to know details
about service providers’ preparedness. “We’re very
interested in understanding how they train and man-
age staff because, essentially, these teams end up
being dedicated to us full time as though they are
our employees,” he said. “We’re definitely interest-
ed in what kind of support they get and how they’re
being continually educated and trained. We want
them growing and not becoming stagnant.”
The experts interviewed by CoreNet Global see train-
ing as an essential component of any future success-
ful supplier/client partnership. They forecast that:
With corporate real estate
executives utilizing their
service providers as an
incubator/training ground
for noncore business, human
resources and training
capabilities will become a
heightened requirement.

37
BOLD STATEMENT 5
• End users will require service providers to
contractually ensure adequate human resources/
training capabilities.
• HR and training capabilities will become competitive
differentiators among service providers.
• Recruiting, training and retaining top talent will
become increasingly important for service providers,
heightening the pressures on and requirements for
HR divisions.
• Successful managers and employees frequently
will move back and forth between service providers
and end users and be tasked with training others
for success.
• Service providers’ succession plans will get more
attention internally and externally.
• A talent gap looms unless the industry does more
to recruit young workers and make training both
relevant and required.
Jay Bechtel, Project Executive for Google, said
service providers’ human resources capabilities
will become increasingly critical to end users as
2020 approaches. “As we outsource more to ser-
vice providers, the quality of their people is more
important, and thus, HR and training plays a critical
role,” he added. “Absolutely, the service providers
are an extension of us as they interface directly
with our users.”
“We will see more fluidity of people
working for corporations and
service providers, and a greater
acceptance of the movement
between the two. … In the future,
the focus will be more about being
a professional in the industry.”
– Christopher Staal, MCR, Thomson Reuters
4%
11%
30%
Strongly
Disagree
Neutral Strongly
Agree
41%
14%
Disagree Agree
Human Resources and Training Will Gain Importance
Service providers’ HR and training capabilities will become more essential to clients.

38
BOLD STATEMENT 6
During the recession of the late 2000s, cost cutting
was everyone’s mantra. Now that a slow but steady
economic recovery has taken hold, companies are
beginning to move away from a reactionary focus on
costs and move toward requirements and assess-
ments that are based on quality-oriented metrics,
say most of the real estate experts interviewed by
CoreNet Global.
“[Key performance indicator] contracts are more
prevalent,” said McCarty of Jones Lang LaSalle. In a
related trend, he noted, end users are shifting to the
service providers the responsibility for ensuring that
quality. “The service providers now must manage
performance requirements down through the supply
chain to their suppliers and subcontractors.”
It’s a risk-and-reward structure, he explained, in which
providers get penalized for poor performance by the
companies they hire and rewarded for performance
that exceeds time, cost or performance expectations.
LaDue of McKesson predicts that trend will continue.
“We’re already envisioning something different in the
future that’s much more outcome-based. What was
the value brought at the end of the day? We’re moving
toward less emphasis on how a service provider gets
it done, as long as we get a good outcome,” he said.
“Are they being proactive in how they attack issues,
with different alternatives and creative solutions?
That’s what we should be measuring and reward-
ing them for,” LaDue said. The process an end user
requires the provider to follow is important, he said,
but it is the means to the end, not the measure of
success. The outcome is the end. “If they’re not fol-
lowing the process, they they’re probably not going to
have good outcomes. So you’ll still be able to reward
and penalize around process, but you’re not spending
a lot of time watching and measuring it,” he added.
An interviewee based in Asia-Pacific agreed that a
value-based standard is gaining momentum among cor-
porate real estate executives. But, the interviewee said
that the challenge is how to measure “value.”
“We’re struggling ourselves to measure even what
we deliver internally,” the interviewee noted, despite
access to technology tools and databases theoreti-
cally designed to gauge performance on real estate-
related objectives. “If we can’t get that right, how
are we going to track providers helping us deliver.”
This interviewee would like to see an accurate,
relevant value-tracking system developed for the
industry by 2020 but is not optimistic. “People have
been trying to sell that for 10 years,” continued the
interviewee. “I haven’t seen real success.”
Barry Varcoe, Global Head of Corporate Real Estate
and Facilities Management for Zurich Insurance
Group agrees that it’s a worthy goal, but also fore-
sees problems with tracking something amorphous
like “value” compared to tracking something easily
quantifiable, like cost. “Attempts to measure value
that I have seen included productivity … and reten-
tion,” he said. “Those are tough to prove.”
Real estate executives from financial services firms say
quantitative measures will continue to be an important
Pricing and performance
management models will
become more value-based
(more strategic and proactive),
while less focused on purely

39
BOLD STATEMENT 6
criterion when compared to qualitative ones in their
industry. “Price is always an issue,” says Chalker of
Morgan Stanley, “but one must take into consideration
the quality of the service as well.”
Kendall Bateman, Senior Vice President of Bank
of America’s West Region, said, “Heavily regulated
industries like banking and financial services have a
tougher time” moving away from quantitative metrics.
Many real estate experts interviewed by CoreNet
Global say a focus on value is gaining momentum but
warn that challenges with tracking and measuring
value-based metrics hamper change. They predict:
• Organizations will recognize the potential detrimental
impact of cost cutting on productivity, which will
change the conversation from cost containment to
value creation.
• End users will expect service providers to take on
responsibility for ensuring quality measures are met.
• Cost control will move down the list of metrics for
many CRE executives, but it will remain one of the
key measures of success.
• Some business, such as financial services, will stick
to straightforward, quantifiable metrics, even if the
broader real estate industry focuses more on value-
based measures.
Staal of Thomson Reuters proposes that one way to
measure value is to gauge how much service pro-
viders enhance strategic decision-making and the
outcomes of executing that strategy. “If the service
providers play a part in the strategy,” he said, “then
you’re paying for value.”
“CRE and service provider
relationships are still adversarial and
will need to be more collaborative. …
There needs to be better alignment
between the goals of the corporation
and the goals of the service provider
for the industry to move forward.”
– Kendall Bateman, Bank of America
3%
5%
26%
Strongly
Disagree
Neutral Strongly
Agree
44%
23%
Disagree Agree
Pricing Models Will Become More Value Based

40
CONCLUSIONS
The Corporate Real Estate 2020 Service Delivery and
Outsourcing team documents the industry’s thinking
about its past, present and future.
Interviews with more than 20 corporate real
estate (CRE) and service provider executives and
results from a survey of global end users indicate
globalization; technology and data-driven business
intelligence; value- and cost-based metrics;
evolving outsourcing models; industry consolidation
and expansion; and access to well-trained and
experienced workers will shape corporate real estate
as we head toward 2020.
To meet evolving business demands, corporations
are employing a variety of outsourcing strategies
and structures – among them best-in-class, bundled
and integrated outsourcing models. For their part,
service providers are striving to meet end users’
increasingly sophisticated and varied demands
while shifting the value proposition from a cost-
based metric to one that measures success using a
broader definition of “value.”
Based on the Service Delivery and Outsourcing
team’s hypotheses about what lies ahead, industry
leaders offered these insights:
• A combination of CRE and procurement will
yield greater discipline and buying power than CRE
possesses on its own, but it also will add
complexity to decision-making.
• Service providers will own the systems that
can manipulate and analyze data coming from
end-users, but most companies will continue to
own and house the data. Service providers’ ability
to offer data-rich business intelligence will be a
competitive differentiator.
• End users will expect service providers to
anticipate global business drivers and emerging
markets, and to set up service offerings before
CRE requests them.
• The CRE sector will be reshaped by continued
consolidation and by nontraditional service
providers entering the market.
• End users will require service providers to put in
place skilled workers who benefit from the
providers’ high-quality human resources and
training capabilities.
• Organizations will begin to shift from cost containment
toward value creation as a contractual metric, but
pricing will remain a key measure of success.
As we move toward 2020, experts say, end users and
service providers must re-envision CRE, putting the
emphasis on services and strategy, rather than space.
Service providers will own the
systems that can manipulate and
analyze data coming from end
users, but most companies will
continue to own and house the
data. Service providers’ ability to
offer data-rich business intelligence
will be a competitive differentiator.

41
CORPORATE REAL ESTATE 2020 | PARTICIPATING COMPANIES
APPENDIX A:
CORPORATE REAL ESTATE 2020
TEAM LEADERS AND SPONSORS
Enterprise Leadership
Mark Schleyer, AT&T
Michael Creamer, Cushman & Wakefield
Location Strategy and the Role of Place
Mary Jane Olhasso, MCR, County of San Bernardino
Partnering with Key Support Functions
Craig Robinson, Cassidy Turley
Portfolio Optimization & Asset Management
Jack Burns, Cresa
Keith Keppler, Cresa
Russ Howell, MBA, Jones Lang LaSalle
Service Delivery & Outsourcing
Blake Layda, Jones Lang LaSalle
Scott Bumpas, Cresa
Lisa Huls-Fry, Cassidy Turley
Sustainability
Leigh Stringer, HOK
Technology Tools
Larry Sweeney, AT&T
Robin Ellerthorpe, HOK
Workplace
Anne Nathe, Johnson Controls, Inc.
Chris Mach, MCR, AT&T
Cindy Beavers, Steelcase Inc.
Margaret Gilchrist Serrato, PhD, MBA, AIA, ASID, LEED AP, Herman Miller
Michael Leone, Regus
Patricia Roberts, Jones Lang LaSalle
Rob Wright, Johnson Controls, Inc.
Russ McFadden, AT&T
Steve Hargis, MCR, LEED AP, HOK

42
APPENDIX B:
Professional Leaders Interviewed by the
Service Delivery and Outsourcing Team
Corporate real estate and workplace leaders who were
interviewed as part of the study Service Delivery and
Outsourcing included:
Bank of America
Kendall Bateman, MCR, Senior Vice President, West
Region
BusinesSuites and Global Workspace Association
John Jordan, President
BB&T
Koo Stengle, Strategic Planning Manager
Cisco Systems, Inc.
Maxine Hewer, MCR, Global Category and Supplier
Manager
Google
Jay Bechtel, Real Estate and Construction Project
Manager
Ford Motor Land Corp.
Donna Inch, Chairman and Chief Executive Officer
Ericsson
Ed Buckley, Director, Facilities Management
Infrastructure Ontario
Toni Rossi, Executive Vice President of Real Estate
Management
Henry Chow, SVP Asset Management
Jones Lang LaSalle
Thomas McCarty, Managing Director of Strategic
Consulting
Lam Research
Randall Knox, Senior Director, Worldwide Facilities and
Real Estate, formerly with Adobe Systems
McKesson
Tom LaDue, Senior Director of Real Estate Relationship
Management
Morgan Stanley
Richard Chalker, Managing Director
Microsoft
Bob Kaplan, Director of Global Resources for Microsoft’s
Real Estate and Facilities
MillerCoors
Pat Crumley, MCR, Director of Real Estate
Standard Chartered Bank
Simon Wise, Head of Regional Project Management,
Southeast Asia
State Street Bank
Banc Winsor, SVP and Director of Realty Services, State
Street Bank
Thomson Reuters
Christopher Staal, MCR, Global Head of Real Estate and
Facilities Management
The Travelers Companies, Inc.
Jim Scannell, SVP Administrative Services
Time Warner
Wayne Taub, Vice President of Real Estate
Zurich Insurance Group
Barry Varcoe, Global Head of Corporate Real Estate &
Facilities Management

43
APPENDIX C:
SERvICE Delivery and outsourcing
INTERVIEW GUIDE
The purpose of this document is to assist the
research teams in setting up the interview
by providing consistent information on the
background of the project, research areas,
purpose of the interview, timeline, deliverables
and expectations. Some of the people being
interviewed may be very familiar with the
project, while others may not. Reviewing this
information prior to the formal interview can
help to insure that all interviews are conducted
in a consistent manner and the people being
interviewed have a clear understanding of the
overall project and their role in the process.
Background
CoreNet Global is the world’s leading association
for corporate real estate (CRE) and workplace
professionals, service providers and economic
developers. Nearly 7,000 members, who include
70% of the Fortune 100 and nearly half of the
Forbes Global 2000, meet locally, globally and
virtually to develop networks, share knowledge,
learn and thrive professionally.
Program Description
• Corporate Real Estate 2020 is a research and
leadership development program designed
and managed by CoreNet Global to address
the business environment in the future and to
collect, package and distribute state-of-the-art
best practices, tools, models and case studies
to help our members prepare to meet future
business needs.
• To achieve this objective, we are interviewing a
number of senior industry leaders to validate a
new vision for the industry and develop a series
of transition strategies to assist corporate real
estate organizations in transforming themselves
to meet the challenges ahead as the economy
changes and new business models evolve.

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