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A New Kind of CRE Executive
Many corporations are tapping people with financial backgrounds to head their real estate departments

By Jennifer McCandless

CLIFF VAN HANDEL WAS PART OF THE corporate real estate team with Great Western Bank when the financial institution decided to
outsource many of its real estate functions and reduce its staff. "There was an initial hesitation to outsource any part of the real estate
function because you always feel that you can do a better job yourself," he relates. Ultimately, Great Western tapped Jones Lang
LaSalle to handle its space needs and Van Handel and several other members of the real estate team went over to JLL as part of the
integration. Now, some 10 years later, Van Handel, a senior vice president and global customer relationship manager with the firm,
works with corporations and helps former corporate professionals make the same transition over to the services side.

While downsizing and outsourcing are not new issues in real estate, or any other industry for that matter, these practices, coupled with
a greater emphasis on the bottom line, have led to an increasing number of corporations naming executives with no real estate
background to head their property departments. Instead, companies are seeking out people with a strong business acumen or financial
background. With this is changing the dynamics of the outsourcing relationship, a team of skilled property professionals for hire minding
the as well as the types of services corporate clients are now portfolio, these in-house executives can focus more on overall business
strategies and efficiencies, say observers. All of this is changing the dynamics of the outsourcing relationship, as well as the types of
services corporate clients are now expecting.

"A lot of the people that we deal with on a client's real estate team have no real estate experience," relates Van Handel, who is based
in the firm's Chicago office. "What we're seeing now is more of a focus on financial results. So, the head of the real estate department
has a background in finance, but not one in real estate."

Frank Robinson, vice president of McKesson Real Estate, which oversees the space needs for the San Francisco-based healthcare
services company, agrees that some companies are moving people with no prior real estate knowledge into the top CRE positions,
adding that he sees this as a generally positive move for corporations.

"Obviously, finance skills, plus the knowledge about how the company really works, are keys to success for any CRE executive,
regardless of their background. CRE executives first need to be good general business managers. As I think of it, over the years we've
had many examples of individuals without real estate experience moving into the top slot."

Robinson, who points out that he was in sales and marketing before settling into real estate, says the challenge that most executives
face when assuming the corporate real estate executive role is understanding the key drivers that significantly impact their company's
portfolio and how space influences productivity and financial results. These include knowing how portfolio management concepts impact
a company's finances, understanding the various real estate financial measurement tools and how alternative workplace environments
influence employee performance.

"The internal real estate team is focusing more on the key business goals of the company and making sure the real estate strategy is
consistent with them," the VP says. "Companies now expect their property assets to support business operations, respond to the
overall strategy and continuously I demonstrate improvement in terms of efficiencies and utilization."

In the past, in-house real estate teams were made up of people who had specialized expertise in areas such as project management,
architecture, engineering or handling transactions, relates Richard McBlaine, president of strategic consulting at Jones Lang LaSalle in
Chicago. Today's CRE units tend to be smaller and more involved with functions like scenario planning and strategy and oversight of the
supply chain than actual real estate matters.

Another function of corporate real estate professionals these days that they didn't traditionally do in the past is overseeing the
relationship with the service provider. "Rather than just managing a team within your own company you have to manage the
relationship with another company," says Eric Bowles, director of global research for CoreNet Global in Atlanta. "What you see is that
companies are looking to bring on providers who understand the culture of their organization, what the business needs are and how to
achieve the overall corporate objectives. The real estate role is becoming more strategic in its focus, while the business is supported by
people with a business acumen."

This approach is also changing the way service providers interact with their clients and affects the types of people they look to hire.
McBlaine says that since JLL is more often working with real estate executives who do not have real estate backgrounds, service
providers want employees to have some financial education to be able to better communicate with corporate clients. They want
professionals, he says, who can discuss real estate's impact on corporate financial performance and key business objectives.

"If you're facing off against the CFO, you want somebody who can process all the stuff that is going on in the portfolio and translate it
in a way that is meaningful to the executive."

Van Handel adds that service providers are now reading client companies' financial reports and listening to earnings calls to understand
how the real estate services they provide impact the corporation financially.

"The common denominator now is cost management," he says. "We have to know what impact our services will have on a company's
earnings, revenues and overall business strategy. We have to understand that because our clients are making decisions based on
those financials."

And as Robinson notes, the success of the CRE executive is greatly dependent on the success of the service provider. "I clearly want to
communicate to them the way things need to be done and delivered," he says. "I want to make sure they are bringing me industry best
practices in terms of the processes they are using, providing knowledge about what other companies are doing and giving me a
breadth and reach that I would not have as an individual, but that they have as a services firm."

Consequently, many service providers are hiring alliance relationship directors to serve as the clients' key point of contact. "For a
service provider who is handling several functions for a company, there needs to be a single point of contact who can make sure all
services are delivered and the process runs smoothly," Robinson says.

While logic would dictate that downsizing and outsourcing is causing a reduction of jobs in the industry, Bowles says that total
employment in the corporate real estate sector is continuing to rise. Just as in Van Handel's case, a growing number of companies are
moving their corporate real estate teams to the outsourcing firms they hire. "Who better to try to spur and start things up with your
new service provider than the employees who have been responsible for that function all along," Bowles asks. "There tends to be a
very smooth transition in that respect, so you try to take advantage of existing skills in employees when you can."

Taking on a client's real estate team is very beneficial to the service provider, says Karen Ellzey, executive managing director of global
corporate services in the Boston office of CB Richard Ellis, because "they bring with them a lot of the history and the knowledge of the
company and the account is preserved through the transition of those individuals." But while a service provider should make use of that
knowledge and experience, she says it is equally important that they bring new practices and approaches to the table.

"By and large, every service provider will say they are always looking for great talent," Ellzey adds. And "outsourcing has opened doors
and created career opportunities. People often reach the height of their careers as a real estate professional in a company and then
they transition over to us and go on to become very senior people here."

Van Handel agrees that many individuals have found the switch over to the service provider side to be a positive one. "The move
allowed me to follow a career path that I would not have been able to follow had I stayed in a corporate environment," he says, adding
that he has heard similar sentiments from many of his colleagues who also joined Jones Lang LaSalle through the integration process.

When it comes to a career in real estate, service providers can offer better mentoring and education as well as greater chances for
advancement, relates Robinson. "Service providers have more than one or two people in various roles where historically a corporation
would only have one. Therefore, there are limited places for them to go within a corporation."

With companies' changing approach to real estate, the types of services that are being outsourced are also changing. The most widely
outsourced functions, say the executives, include facilities, project and construction management, workplace design and planning and
lease negotiation and administration. According to McBlaine, corporations are starting to push the envelope in terms of what types of
offerings they are looking for. Energy management, sustainability consulting and business continuity are just a few of the more
contemporary services that are asked of service providers. Firms are also requesting more integrated and "soft services" such as
document management and network support as part of facilities management, he says.

In addition, there is an increasing demand for strategic services such as location/site selection, portfolio analysis and alternative
workplace solutions, Ellzey relates. "We're also seeing a lot of interest in labor analytics," she says. "Our clients are asking us to help
them find out where the talent is today and what the longevity of that labor pool is in certain locations."

Another new trend is that companies are now issuing multi-regional requests for proposals. Corporations are increasingly making
decisions on a global stage and service providers are meeting the needs of clients in more than one region, McBlaine adds.

"Increasingly, companies are outsourcing more than one service," the executive relates. "Clients are asking for more multiple-service
capabilities today as than 10 years ago when you might see a company bid each service independently."

What all of this boils down to is that today's service provider is being called upon to provide oversight, coordination and integration of a
company's real estate portfolio, a role that once would have been handled by the corporate real estate teams, McBlaine states. "If you
look at the continuum of the development of our industry over the last 20 years, it went from rather large real estate teams who were
buying off of a menu from service providers," he says. "They would select a broker, a construction manager and a facility manager, in
some cases on a building-by-building, project-by-project basis. Today, you're seeing the trend go to the other extreme, where
companies are giving complete regions to one or two service firms to provide virtually all functions that are required for real estate."

At the same time, "as companies deal with their own breaking waves of new themes, whether it be sustainability or talent retention,
they're looking to real estate to play an ever increasing role in the solution to those issues," he says.

Source:
Real Estate Forum
Corporate Perspectives
Pages 51-58
June, 2007