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Service providers can be an interesting bunch to hang around. They’re likable and friendly, but they’re often full of contradictions. So is their marketing information. One US-based real estate services company website I visited touts the firm’s ability to save its clients between 10-15% in real estate costs. Further down on the same page, the firm’s message is that they focus on fulfilling long-term versus short-term needs. Sooner or later, however, the ability to create cost savings dwindles so isn’t cost savings alone simply a short-term solution?

If you approach real estate clients with a message focused solely on cost savings you’ll soon hear a chorus of “What have you done for me lately?” We’ve all been there and it’s what keeps so many real estate services firms companies in business. Sooner or later, the client is going to send out an RFP and want to switch their service provider.

I envision cost savings like pulling back the power band on a slingshot or enabling you to step on a car’s accelerator. It’s the result of the action that matters. Service providers have to do a better job of communicating the business benefit of cost savings. Wait a minute, you say, cost savings is its own benefit. Well, yes, I’ll agree but only insofar as you’re focused on short term needs. But as I mentioned last month, corporate real estate clients today need real estate solutions that do more for them than just lower costs. I mentioned that real estate outsourcing (properly delivered), is moving into the company’s driver’s seat–for a long-term ride. This month, I’ll try to illustrate exactly what “properly delivered” means with respect to cost savings. In other words, what should cost savings do for the client? Here are two important illustrations.

Cost savings should instill in the client a desire to plan better

Perspective is everything, isn’t it? Tell me you’ve reduced my operating expenses in 2006 and I’ll ask you to do it again in 2007. If you succeed, you’re a hero (and so am I). If not, you’re fired. However, if you tell me how better planning could make me a hero everyday by keeping my real estate portfolio running lean and mean and I’ll hire you for life. Remember, my main desire as a corporate real estate manager is to present a professional image and to earn the respect of my superiors (increasingly the C-Suite). I want to hire a service provider as long as they are efficient and make me look smart. If you save me a lot of money, I may look smart for hiring you but it begs the question of how I let the costs get out of control in the first place. Not a good thing.

Cost savings should accelerate business performance

Service providers should be prepared to discuss cost savings in terms of the freedom it gives clients and their businesses. Clients should feel confident to take business risks knowing that the real estate component of any new business venture is not adding a challenging complexity to the decision if it needs to be retracted or if the client’s business changes. No one understands this concept more than the multitude of small, high-growth companies who, for years, created more real estate capacity than they needed with a “build it and they will come” mentality. The race against time between subleasing this excess space and going broke drove many businesses to the ground earlier in this decade.

Intuitive, you say? If so, then why do so many real estate service providers and their websites fail to make the connection between a company’s real estate and its business performance? And why do so many service providers tout cost savings for their clients? I wonder if it’s because they helped create the cost inflation for their clients in the first place. What’s your take?

Vik Bangia is managing director, strategic services for the corporate solutions group of United Properties in Minneapolis. The views expressed in this article are the author’s own.

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