Outsourcing Property Management? An Evaluation of the Rationales and Motivations

Abstract

This paper investigates the operation of outsourced property management delivery. Drawing upon semi-structured interviews with senior professionals responsible for property management outsourcing in Finland, Netherlands and the UK, it is found that the perceived advantages and disadvantages of outsourcing property management are broadly consistent with existing work on broader business process outsourcing. In particular, the ability to transfer fixed into variable costs and, so, to externalize operational risks were perceived as key advantages. In addition, due to the size of third party providers, it was possible to benefit from their economies of scale and to gain access to expertise in specific real estate sectors and specialisms. Arms-length relationships with third party providers, relatively short contractual periods and service level agreements are perceived to facilitate more formal quality assurance and performance monitoring procedures. Cost savings did not emerge as a key issue in the property management context but a recurring theme was the trade-off between cost and service quality and the need to maintain the latter in the context of pressures to obtain operational efficiencies. Common outsourcing problems such as information leakage and loss of control of the customer relationship also emerged from the research.

Keywords: outsourcing, property management, operating models.

JEL Classification: R30, D21, L22, G20