Today, only 18% of Japan companies do not outsource any kind of Corporate Real Estate (CRE) services according to JLL’s Japan CRE Survey 2013. This is compared to 8% globally who do not outsource any kind of CRE services, according to JLL’s Global CRE Survey 2013, showing a tremendous drop compared to the 24% of two years ago.
Among Japanese companies that do outsource part of their CRE delivery, attitudes are very polarised. More than half of respondents (55%) agree that outsourcing represents a strategic relationship. Although this is less than the global average (63%), it is one of the bullish findings of the survey that so many respondents demonstrate a strategic approach to outsourcing and assess partnership value over the long term. At the opposite end of the spectrum, more than one third of respondents in Japan (34%, vs. 15% globally) approach outsourcing as a tactical transaction done with the lowest-cost supplier.
Question: Please rate your current attitudes towards outsourcing on a scale of 1 to 5, where 1 means that outsourcing represents a tactical transaction, mainly with the lowest cost supplier, and 5 means that outsourcing represents a strategic relationship.
Source: Jones Lang LaSalle, Changing Winds Ahead. Japan Corporate Real Estate Trends, 2013
However polarised, survey findings are showing that today, in Japan, CRE outsourcing is maturing at a faster pace than might be expected in a country with such a reluctant outsourcing culture. The drive towards outsourcing can be attributed to a combination of factors such as the towering strategic agendas placed upon CRE teams. These come in addition to existing in-house capacity challenges and skills gaps across the industry.
Companies in Japan do not feel bound to follow traditional paths towards outsourcing. Those with already some CRE outsourcing experience continue to adopt industry best practices, seeking innovative delivery models that harness greater strategic contributions. They are being joined by another generation of companies new to outsourcing. Whilst some of them are starting with tactical out-tasking, others are leapfrogging and advancing at a much faster pace. Early and late adopters alike demonstrate a clear willingness to take different paths towards strategic outsourcing, such as joint ventures created with external partners.
Drilling further into survey responses, we see that the changing balance between in-house and outsourced delivery varies significantly depending on the types of services. The control of specialist and resource-intensive services such as project management is easier to relinquish, while sensitive services such as portfolio strategy are more likely to be retained within the organisation.
Over the next three years, we can expect further development along the outsourcing continuum in Japan. CRE teams will look for more support from the market in order to fulfil their increasing tactical and strategic agendas. Drawing a line in the sand, JLL’s Japan Corporate Real Estate Index 2013 highlights a gap between Japanese and global companies’ CRE maturity that is expected to narrow in the near future.
About the author
Anne Thoraval is a Director in charge of Corporate Research Asia Pacific.