5 ways real estate procurement is changing
Hybrid work, supply chain and labour risks, and ESG demands are changing the way real estate products and services are sourced and managed.
The purchasing and contracting of real estate services, including anything from waste removal, to trade services, and indoor plant maintenance, is critical to the chain of processes that keep buildings performing optimally and providing the best experience.
But like the broader property industry, this area of real estate management, known as procurement, is demanding creative solutions and new levels of contingency amid turbulent economic conditions and shifting business priorities.
Advancing technology, economic headwinds, supply chain disruptions and climate change, are leading to new procurement trends that, while creating new challenges, are also offering opportunities to optimise procurement processes and mitigate supply chain risks.
“Innovation and environmental, social and governance (ESG) capabilities are now dominating our conversations with property owners and managers who are also increasingly specific about the predicaments they want us to solve,” says Scot Pittaway, head of strategic client management, JLL.
Here are five of the fastest emerging trends in the sourcing and procurement of real estate services.
Rapid advancements in real estate technology, particularly in areas such as artificial intelligence, which can call up data to calculate sustainability risk, for example; the Internet of Things, which refers to physical devices embedded with sensors and software so they can be monitored and controlled by computer; automation, which can report equipment breakdowns before a human notices; and data analytics, which can support budgeting for operational and capital spend, as just one example.
These technologies are providing new opportunities to optimise procurement in real estate, enhance visibility into supply chains, automate processes, and reduce errors.
“As well as helping us make better decisions faster digital procurement tools are enabling us to identify trends and patterns in data and reduce manual work,” Pittaway says.
Advanced analytics tools are helping procurement specialists mine data from various sources for insights into supplier performance (such as their Indigenous, or diverse, supplier engagements), procurement spend, or key financial dates. Analytics are also helping organisations track and manage performance indicators in procurement, and identify areas for improvement and optimisation, especially as high inflation and labour shortages bite.
Environmental, social and governance
ESG criteria is increasingly influencing procurement decisions in the property industry. As workers and consumers become more environmentally and socially conscious, property companies are under greater pressure to demonstrate their commitment to sustainable and responsible business practices.
Additionally, companies are seeking to partner with suppliers that are committed to sustainable business practices, including those that can provide environmentally friendly, ethically sourced products and services.
“Procurement is one area of real estate that can really move the needle on a company’s social and environmental aspirations, including supplier diversity and sustainability,” Pittaway says. “We have been able to support clients by partnering with organisations like Supply Nation, Social Traders and WeConnect so we can be confident our suppliers are endorsed and encouraged to maintain sustainable and ethical business practice,” Pittaway says.
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With increasing awareness of labour and human rights abuses in global supply chains, companies are increasingly seeking to partner with suppliers that are committed to responsible sourcing practices. This includes ensuring suppliers offer fair wages, safe working conditions, and adhere to ethical labour practices. Additionally, companies want suppliers that can help them mitigate the risks associated with unethical sourcing, such as supply chain disruptions caused by labour disputes or reputational damage caused by negative media stories.
JLL has its own global modern slavery program, covering all real estate operations and supply chain, and identifying three major risks that are inherent to the business: Geography (JLL operates in countries that have a higher prevalence of modern slavery), complex supply chains, and high-risk service categories, including construction, cleaning, security, ground maintenance, and hospitality.
“As well as continuing investment in onboarding and screening platforms, JLL has a strict supplier lifecycle management framework, which outlines how we approach supplier due diligence across all steps of the procurement process, and ensures we are addressing modern slavery risk for us and our clients,” Pittaway says.
Building and delivery integration
A large part of the role of procurement specialists is providing asset, data and cost recommendations to property owners and managers.
With evolving hybrid work models, business changes, and constant updates to technology, procurement teams must be as agile as ever to ensure they are ahead of new demands.
This is driving a more collaborative approach to contract delivery.
“By strategically aligning key stakeholders in the early stages of a project everyone is in a much better position to consider the long-term cost and environmental impact of delivering on building operations and ensuring that procurement processes are efficient and cost-effective,” Pittaway says.
Collaboration is also effective in managing supply chain risks and ensuring that procurement processes are optimised for a specific project, while mitigating the risks of project delays.