At that time, real estate brokerage was its own value add--eachtransaction was evaluated separately and each broker's performancewas based on customer satisfaction.

As outsourcing grew, the focus for corporate real estatedepartments changed from customer satisfaction to creatingcompetition in the brokerage industry. They did this by aggregatingbrokerage services through outsourcing arrangements with realestate service providers. The larger real estate service providercompanies became adept at creating outsourcing structures thatallowed them to negotiate fee sharing agreements with their ownbrokerage teams. The brokers were paying the price (or justifiablyanteing up, depending on your perspective). Either way, for theaverage corporate-focused commercial real estate broker, thesqueeze was on.

Over time, corporate real estate departments got used to theidea that brokerage would give up some of the commissions; theythen began to focus on the money earned by the outsourcing team andlooked for a way to share in some of it. Outsourcing groups wereforced to get creative in designing fee models and beganstructuring outsourcing engagements differently. They began toinclude profit sharing, rebates, discounts and other fee structuresinto their contracts. For most service providers, it becameapparent that outsourcing would only make sense if there was hightransaction volume in the client account. And even if the volumewas there, outsourcing groups started to put more "B" teams on theclient accounts to improve their margins. Service quality took anotch down as a result. Corporations won the cost battle butstarted to lose the quality war. And for the real estate serviceprovider outsourcing teams, the squeeze was on, again.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.