As family dynasties have ceded some of their real estate ground to new owners and operators
, the real estate scene has diversified in terms of ownership. The main industry players are still REITs, with the larger ones setting the stage. Yet, there is ample room for other players, such as smaller owners and operators, family-run and operated ventures, joint-ventures fee managers, or private equity firms making an investment in real estate.
New owners and operators are more eager to explore available technological advances. The current challenge that the industry faces is to decide whether to invest in new technologies, or accept the fact that real estate companies can achieve better ROI by looking for third-party resources that can help them leverage future opportunities for growth.
The answer really depends on what makes for efficiency. Here are a few steps to help you determine how to get started.
1. Why think about third-party provider opportunities now?
Looking forward towards the future from the current vantage point, there are providers and data capabilities that did not used to exist. For instance, your ERP system is on the cloud, so you cannot have any more expectations of having all your operations taken care of on site.
A couple of years ago, the largest question for real estate referred to updating legacy IT systems. Today, these systems still constitute a challenge, but the solution needs to be driven by the best possible strategy that moves the company forward.
Real estate companies need to ask questions such as:
- Do I need to refocus my core business?
- Or how to I optimize to stay true to my core business?
Some good answers to these questions point to opportunities to use third-party providers.
Setting up an internal shared service center depends on:
- People and their skill sets
- Capabilities 2. What triggers opportunities for real estate companies to use third-party providers?
Growth or business changes can create opportunities for your company to leverage a third-party provider. Then, strategy, efficiency, productivity and profitability, all come up for reexamination. Changes — such as expanding to a different market segment or making an acquisition — raise larger questions related to the efficiency of internal processes, people, technology and infrastructure.
In some cases, companies can create efficiency by optimizing internally — for instance, by creating an internal shared services center that can handle back office, such as operations recovery billing.
Sometimes it is more efficient to outsource to third-party providers who are set up for optimal handling of these processes and have already the technologies necessary to set up automation for time-consuming, often paper-driven work flows.
3. How do you prioritize what stays in-house and what is handed over to a third-party provider?
Walking the middle line is a reality for most real estate companies. Profit margins are tight in real estate, and most real estate companies do not have the resources to be trend setters, unlike large REITs and other big players. Yet, this does not mean that all companies should not continually look to evolve and be more efficient.
While ideally, all companies should have an internal department focused on continually assessing possibilities for improvement, even those who do not have such a department can plan for regular assessments that can foster growth. Hence, they can move to being proactive, rather than reacting to unforeseen challenges that will inevitably show up.
Steps to take to be proactive about the future
1. Identify top challenges for your organization
2. Rank them in terms of the resources needed, implementation time, and ROI
3. Prioritize in terms of urgency and according to budget
4. Based on the steps above, decide what to solve in-house and where to leverage
a third-party provider
National Managing Partner
Construction, Real Estate, Hospitality and Restaurants
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