As large real estate brokerages steamboat forward to sign more leases, they are also expanding their scope of services to include construction, facilities management, investment management, project management, owners rep. etc., etc., in order to grow revenue and market share. Recently the Wall Street Journal shared that CBRE has agreed to buy Johnson Controls because “CBRE and other real-estate-service firms are looking for recurring sources of fee revenue so they aren’t reliant on sales and leasing commissions.” * This may be good for them and their bottom line, but is it good for you and your real estate projects?
The answer is simple: NO. Brokerage firms will provide low-cost—and sometimes free—in house project management services merely to support a lease transaction, but they are not to be confused with the project management services a true third-party real estate project management firm offers. Often we encounter situations in which an organization is wondering which to enlist: an independent project manager, or the one its broker has in house. Unfortunately, the value and benefits of hiring a project manager are blurred if you engage the one your broker has internally.
When you create your project team, it is important to recruit best-in-class experts whose core competencies lie in their particular areas of focus and expertise. If selected and assembled correctly, your team should not only be conflict-free but also possess a natural set of checks and balances that will enable them to complement each other’s strengths so they can seamlessly manage all facets of the project collaboratively, give each other quality control as needed, and make sure they don’t cross-pollinate their skills into areas best handled by those who specialize in those areas.
The following criteria make an independent project manager a better choice than a broker-provided one:
- Conflict-free. Brokerage firms make most of their revenue from lease transactions, and a third-party project manager earns 100% of theirs from project management services. If brokerage compensation depends on a transaction occurring, then will the broker’s project manager advise the client to make the best decision, even if that could delay or even cancel a large compensation for the broker? Not likely, since brokerages depend on these fees to stay in business. This is a perfect example of the fox watching the hen house. At the end of the day, is a broker-provided project manager looking out for the client’s best interests, or the broker’s? Clearly the latter, because the brokerage firm’s project manager is focused on how to get the transaction done, since this is the source of revenue. On the other hand, a third-party project manager, being truly independent and conflict free, can make decisions and help organizations make decisions based upon their best interests.
- Core Competency. A brokerage firm is focused solely on broker/leasing services and project management is only as important as it needs to be to help the broker win commissions and/or support existing brokerage work. However, a third-party project management firm has project management as its core competency, and is therefore 100% focused on how to provide the best project management services possible to its clients, since this is the only service the firm provides and depends on for revenue, and has had specialized training and experience in. That alone should show you how much more efficiently that kind of project manager will manage the nuts and bolts of your project from start to finish than a project manager in a brokerage firm will.
- Level of service. Because brokerage is the primary business focus a project manager in the office will not have the support and resources an independent project management firm has, and will focus primarily on sales and how to land more leases. Conversely, a third-party project management firm will spend all of its resources and training on project management services. Thus, such a firm’s office should be made up of several project managers with various types of expertise who can support each other and lend their respective backgrounds to different projects, whereas a brokerage consists mainly of brokers plus one or two project managers with limited resources.
Consider how valuable the choice of a third-party project management firm can be for your next project. Hiring a firm whose core competency is project management to provide 100% conflict-free counsel and oversight will ensure that your project is completed on time, within budget, and to your satisfaction.