Commercial Real Estate Services – Procurement Best Practices & Sourcing Strategies

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Commercial Real Estate Market Global Size Research Report:

ELINT Market Research’s latest commercial real estate services procurement market research report projects a total global investment volume of $280–300 billion in the fourth quarter of the year 2022.

Market Definition:

Commercial real estate service providers assist in multiple services such as managing properties, leasing, advising on investments, property selling, construction, etc. Further, multiple stakeholders operate in this sector like real estate businesses, support service managers, property owners, renters, and investors. Moreover, the real estate service industry comprises different types of properties such as office zones, retail marts, industrial factories, repositories, colleges, and more.

Major Commercial Real Estate Market Drivers:

1. Expansion in Urbanization –

One of the major growth drivers for the global commercial real estate services market is expansion in urbanization, which leads to the manufacturing of housing societies, offices, retail stores, and much more. Hence, real estate market players are receiving vast amounts of construction projects in urban areas.

2. Technological Progress –

Another key driver for the commercial real estate services worldwide market is the increasing integration of technologies in multiple operations, like online transitions, property listing websites, and virtual property tours. Also, technology facilitates obtaining real-time insights, market evaluation, customer support, etc.

3. Rising Infrastructure Projects –

Real estate service providers are experiencing high demands for infrastructure projects like residents, bridges, power plants, hospitals, etc., due to the increasing population. Hence, this reason is another primary reason for the development of the international real estate market.

Commercial Real Estate Market Challenges:

1. Vulnerable Nature of Real Estate Market –

The global real estate service market is vulnerable to varying market dynamics, economic matters, interest rate fluctuations, construction material price shifts, and more. Hence, this is a major challenge for market players in their business expansions.

2. Regulatory Compliances –

Real estate service providers experience difficulty in adhering to various regional and international regulatory regulations related to construction methods, zoning areas, land utilization, and more. Thus, real estate companies are required to get permits to execute such operations.

3. Expanding Remote Work Model –

Multiple regional and global businesses adopted the remote work model and flexible office places in the last few years, which contributed to reducing the requirement for traditional workspaces. Hence, real estate companies face difficulty in receiving construction projects.

Commercial Real Estate Market Opportunities:

1. Sustainable Construction Initiatives –

The commercial real estate market encounters a compelling opportunity due to increasing environmental concerns. Hence, multiple builders are focusing on investing in sustainable property development to attract clients.

2. Customized Home and Office Space Requirements –

Nowadays, people are looking forward to obtaining customized infrastructure either for their homes or offices. Thus, real estate service suppliers are providing adaptable property designs, attractive interior works, coworking spaces, and much more.

3. Urban Regeneration Activities –

Several commercial real estate service organizations are receiving transformation projects for urban areas. This regeneration approach helps in renewing aging infrastructure depending on consumers’ choices.

Commercial Real Estate Market Segmentation:

1. Type of Property –

One of the key segmenting factors for the real estate service market is the type of properties including, office areas, retail stores, industrial plants, warehouses, educational institutes, and more.

2. Type of Services –

Commercial real estate companies provide different types of services, which include property handling, renting out, investment-related consulting, building, etc. This segmentation helps service providers to work according to consumer demands.

Emerging Engagement Strategies in the Commercial Real Estate Market:

The prominent emerging engagement strategy of the commercial real estate services market includes the bundling of CRE and FM services in a single contract. This method allows real estate service providers to merge real estate and facility management services, and provide this huge package to consumers.

Further, with this approach, companies can facilitate their business operations, and also consumers can obtain a blended system for handling their commercial properties.

Moreover, bundling services with facility management demonstrates distinct factors such as medium affordability, high-quality achievement, medium execution risk, and rapidly increasing adoption rates.

KPIs in the Commercial Real Estate Market:

The foremost KPI is acquisition and disposals, which allows consumers to evaluate the track record of successful property transactions of real estate firms. The next KPI is landlord and tenant, which helps in measuring market performance and fulfillment of both property landlords and tenants. Lastly, data analysis and data capture KPI assist in assessing the information administration and utilization power of real estate service providers.

Cost Components in the Commercial Real Estate Market:

In the commercial real estate services market, significant cost components include management costs, administrative expenses, collection costs, maintenance fees, and other anonymous payments. Thus, these are the major cost elements, and any type of fluctuation in their expenses can interfere with the overall pricing structure of real estate services.

Negotiation Factors in the Commercial Real Estate Market:

Negotiation factors help real estate service suppliers and customers to mutually come to the same ground regarding pricing and other factors. The share of savings negotiation factor helps both partakers decide, how they will divide up any savings in expenses. The next, factor is a fee at risk, which exhibits part of the service provider’s payment, which gets unexpected upon reaching predetermined performance criteria, and connects incentives with results.

Further, the scope additions aspect helps in bargaining about getting additional services from service providers, which might go beyond the initially decided measure of work. The last aspect is contract tenure, which comprises details about the service provider and the customers’ contractual agreement.

Pricing Models in the Commercial Real Estate Market:

The fixed price model helps real estate companies and consumers decide on a preset price for the services, which provides predictability and stability to both parties. Contrarily, the flat fee model requires a predetermined cost of specific services, regardless of the real amount of time or money spent.

Contract Period in the Commercial Real Estate Market:

In the global commercial real estate services market, the average contract period lasts 3 to 5 years between real estate companies and consumers. This long duration of agreement helps both parties foster strong relations, and also customers get surety of receiving constant real estate services.

Maturity Regions in the Commercial Real Estate Market:

The global commercial real estate services market’s high-maturity regions include the US, UK, Australia, Germany, France, Qatar, Dubai, and Singapore, which implies that these nations conducting strong and advanced level commercial real estate activities.

On the other hand, the medium market maturity regions include the UAE, Eastern Europe, China, and India, which means these territories are working hard and are currently in the development phase in the commercial real estate sector.

Leading Suppliers in the Commercial Real Estate Market:

Multiple popular industry players are operating in the vast landscape of the commercial real estate services market including Shell​, Amazon​, Maple Tree Investments​, and Ascena Retail Group.