Top 5 Reasons to Outsource Lease Administration
Although outsourcing back office services has become a fast growing trend, there are still companies who would prefer having this non-core activity done in-house. If you’re one of the top players in the real estate industry, most probably, you would take outsourcing into consideration.
Based on a survey done by KPMG in April 2012, here are the top 5 reasons why you should outsource lease administration:
Most top players in the real estate industry see lease administration as a non-core activity in their firm and they don’t see the need to spend hours staffing their lease administration department. They also see that their employees would still need to be trained as they lack commercial real estate experience. In response to the need for lease administration services, they prefer to outsource, since it takes less time to staff and train these new abstractors and gives them subject matter experts with proven track records better than their in-house employees.
Third party service providers ensure better processes and controls as compared to them doing it internally. Third party processes are designed solely for lease administration and their software is specially built for the service. Big real estate companies believe that issues will be more effectively communicated to landlords and that landlords will be more responsive to their needs when dealing with a professional lease administration firm.
Accuracy is what third party providers guarantee. The reason for this is simple: their revenue and reputation are built on it. Third party providers make sure that the necessary controls are in place to avoid business risks while meeting their contractual obligations.
One of the most important reasons for outsourcing is to cut down the costs that you will be spending for lease administration. Although there is more than one country offering outsourced services at a very low cost, price is not the only consideration when choosing the right one: culture and language should be at the top of your list. Further, outsourcing provides a flexible/scalable staffing model as providers can easily flex up or down as the size of the real estate portfolio changes. Additionally, outside providers have systems and technology specifically designed for lease administration, and continue to invest in them to remain competitive, thus eliminating buyer firms’ need to allocate funds to purchase and maintain their own systems.
Third party service providers are more likely to produce leading practices since their services are focused on lease administration. They do continuous studies and surveys on how to further improve their services thus keeping up with the outsourcing trends to ensure that they can always accommodate changes in the industry.
Source: Companies’ drivers for, and against, outsourcing lease administration; Steve Silen, Director, KPMG Advisory Services