Outsourcing Lease Administration and Auditing, A Growing Trend
Outsourcing is generally defined as having a third party involved in doing back office services and other non-core activities, primarily so clients can focus more on their competitive advantage instead of the day-to-day minutiae.
Outsourcing has significantly grown in the past few years. Not only are companies in the U.S. outsourcing their phone services, but outsourcing has also progressed in the real estate industry. Most businesses around the world have seen it as an opportunity to grow their business while cutting the costs that growth entails, while still maintaining the control of team management and product quality.
The Growth of Outsourcing
Based on surveys published by KPMG and Deloitte, 60% of tenant respondents outsourced at least some lease administration duties, while another 10% have plans to outsource in the future. Lease administration was also among the top five of all real estate and facility management service lines to be outsourced. Lease administration service providers confirm this trend, with an overwhelming 96% responding that demand for their services was either holding steady (39%) or increasing (57%).
Within the lease administration domain, lease auditing was the function most commonly outsourced (by 77% of the tenant respondents in the Deloitte survey), followed by lease abstracting (64%), cost controls (53%), and accounting (33%).
The Benefits of Outsourcing
While outsourcing remains strong and continues to grow, based on the KPMG survey, outsourcing is expected to increase in the short to medium term. Many worldwide businesses see outsourcing as a way to reduce operating costs, improve process performance, increase financial flexibility and create a more variable cost model that supports global business growth and expansion agendas. A lease administration program that utilizes highly trained experts from third party service providers will reduce your operating costs while elevating functional performance and efficiency, primarily because third party providers understand that the life of their business depends on their accuracy and timely response to the client’s needs.
KPMG 2011 Real Estate & Facilities Management Outsourcing Pulse Survey
Deloitte 2010 Lease administration Benchmarking Survey
The Surveys Say: Trends for Outsourcing Lease Administration and Auditing