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Retail and Multi-site: New blueprint for large real estate portfolios

Sector perspectives in Facilities Management Procurement

March 29, 2023 5 Minute Read

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With large, geographically dispersed portfolios, retail and multi-site companies manage anywhere from 1,000 to 10,000 or more properties. Portfolios of this magnitude have felt the acute impact of inflation and labor challenges. Cost controls remain a top priority, as most procurement organizations have been balancing global inflationary pressures, supply chain disruption and labor shortages.

In addition, the sheer size of the real estate footprints in this sector has proved a challenge for effective and consistent facilities management (FM), with a gap in strategic and future-proof planning. These changing times have produced an advantage for procurement teams. This function can help drive a company’s productivity rather than draining resources or complicating vendor selection.

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Here are five key trends shaping a new blueprint in retail and multi-site facilities procurement.

1. Ongoing cost pressures

Following a tumultuous period of materials shortages amid the COVID-19 pandemic, supply chain issues are finally starting to stabilize. However, costs remain a challenge—many companies lack the scale and buying power to mitigate the higher prices of raw materials. Pre-ordering and pre-payment can drive significant savings and reduce the risk of supply chain interruptions, but these tactics are contingent on having market knowledge and foresight.

2. Facilities maintenance, an elective service?

More than other sectors, retail enterprises tend to see maintenance as an elective service. Operating on thin margins, retailers often look for ways to minimize maintenance-related spend across their stores. Inflationary pressures have driven many to forgo scheduled maintenance, which costs more in the long run. As deferred maintenance work orders mount, the risk of critical maintenance needs increases as does the cost of repair. Unlike most other industry sectors, retail has less stringent regulations, which allows companies to defer repairs that would otherwise be required in other industries. Seeing FM as an elective service comes with risk. Predictive and proactive maintenance programs offer more control in FM budgeting and planning.

3. FM outsourcing frequency

Retail companies are initiating outsourcing requests for proposals (RFPs) much more frequently than other industries because of pressure from internal due-diligence teams, although some are now realizing that this approach might be counterproductive for achieving competitive pricing. Many retailers are adopting outsourcing models for the first time, which is a major strategy shift for in-house teams. This is partially driven by cost, but also the result of a shrinking pool of skilled labor. However, in some cases, RFPs are imposed on procurement teams—and a supplier partner is selected with little alignment.

4. Fresh focus on total cost of ownership (TCO)

While many companies opted for reactive repairs and quick fixes amid recent cost pressures, we’re now starting to see a shift toward longer-term preventative maintenance strategies and a focus on optimizing the overall FM cost.

Retail FM leaders understand that proper planning can significantly mitigate risks. Opting for scheduled maintenance is one example, but guidance from partners can also produce a better overall capital spending strategy. There’s now more of a willingness to adapt long-standing strategies to meet evolving business needs.

Managing a real estate supply chain on an individualized basis creates higher risk and frequently leads to fluctuating costs or timelines. In-house FM models often rely on single or dual sources with limited leverage. However, global procurement partners can assume certain supply chain risks on a company’s behalf, including third parties' performance accountability, which helps limit exposure for individual businesses. These economies of scale help optimize TCO, driving meaningful savings portfolio-wide.

5. ESG now a priority

Until recently, Environmental, Social and Governance (ESG) concerns were seldom center stage in the retail sector. Now, many organizations are building their strategies with sustainability at the forefront, particularly when it comes to procurement, as they are becoming more aware of what’s within their control and what isn’t. Typically, a company’s emissions from its own direct operations (Scope 1) make up just 40%-50% of the total. So, when committing to slashing emissions or achieving net zero, businesses must also tackle indirect value chain emissions (Scopes 2 & 3) and evaluate their partners and suppliers too.

As many companies begin to publicly commit to net-zero timelines, leading companies are mapping a path to subzero, or regenerative commitments. These targets create an opportunity for procurement teams to reaffirm their position as strategic business partners and provide the subject matter expertise to re-design and optimize services.

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Find out more

CBRE provides streamlined facility management operations and support to big-box retail, convenience, grocery and other dispersed multi-site portfolios. Our technology-led model gives clients access to the largest and most reliable data repository in the industry to revolutionize facility performance, process and expenses.

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Report

Facilities Management Procurement Perspectives

February 6, 2023
Facilities Management procurement leaders share their top 2023 priorities for supply chain inflation, ESG, organization design and more.

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