Creating Resilience
Technology, Media & Telecommunications: Rebalancing realities
Sector perspectives in Facilities Management Procurement
June 12, 2023 5 Minute Read
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With cost replacing talent recruiting and retention as the top issue for technology, media and telecommunications (TMT) companies, many are taking an innovative approach to corporate real estate (CRE)—and giving it a more prominent role in overall business strategy.
Figure 1: Cost has replaced recruiting and retention as the top issue for tech companies
Source: CBRE Agile Practice, 2022.
The economic climate and shifting strategies
“We were all about pulling employees back into the office instead of forcing it. We didn't have the response we had hoped for.”
--A Fortune 500 technology firm that—due to utilization rates and portfolio optimization—has reduced its portfolio’s total square footage by nearly 13%.1
During the pandemic, many TMT firms saw revenue surge and added headcount in anticipation of continued rapid growth. Today, TMT firms are dealing with slower growth, tighter budgets and pressure to drive cost savings. This influences the full spectrum of a company’s operations, including its partners, suppliers and real estate portfolio, which means many organizations are adjusting their procurement strategies to adhere to more rigid financial guardrails.
The post-pandemic revenue slowdown, coupled with return-to-office projections that did not meet expectations, puts added pressure on corporate real estate teams to optimize cost savings in its real estate portfolio.
Figure 2: Adjusting Expectations: Current Posture on Office Policy: TMT Sector
Source: CBRE Research, March 2023.
New ways to use space
Business leaders are paying closer attention to their real estate portfolios because the built environment is increasingly recognized as instrumental for powering supply chains, achieving sustainability goals, driving cost savings and fostering company culture. Facilities management (FM) procurement is critical for achieving these objectives and maintaining operational efficiency amid supply chain challenges and economic headwinds.
A particularly high proportion of employees of TMT companies work remotely. That means it’s up to organizations and their partners to develop creative solutions for more efficient utilization of facilities.
While many procurement teams have been working on return-to-office support for nearly three years, occupancy rates still have not normalized. As companies better understand utilization rates and patterns in the coming years, procurement and real estate leaders will need to reengineer office designs, amenities and FM services to meet new requirements.
Dominating recent headlines, tech industry layoffs (220,000 since the start of 20222) further add to the need for innovative solutions to address future space demand and capital expenses.
Tech firms turn to flex space to minimize CapEx
Many TMT firms are realizing cost savings by using flex space. A recent survey conducted by CBRE’s Agile Practice found that 95% of respondents have used flexible office space in their portfolio, 64% of respondents prefer buildings with flexible space and 36% of survey respondents expect to more than double their use of flex space in 2024.
Figure 3: Purposes of Using Flexible Office Solutions: Tech Sector
Source: CBRE Agile Practice, 2022.
Leveraging innovation
Inflation continues to grip the world’s economy, and procurement teams face tremendous cost challenges. As a result, many TMT companies are brainstorming creative ways to mitigate rising costs, including competitive sourcing, direct negotiations and leveraging innovation.
Sensor technology is a popular innovation. With sensors providing better insights into space utilization, potential maintenance issues, air quality and janitorial needs, FM procurement teams can more accurately anticipate facilities’ needs and drive savings.
Fresh approaches to drive savings
TMT companies are looking to their existing real estate partners, who can work with suppliers to deliver optimized services at a significantly reduced cost and in less time. The impact? Procurement as a service will become more of a focus to drive efficiency. It allows procurement teams to shift the focus of their resources and people away from non-core activities to those that will create greater value for the business. Such shifts allow vital team members to focus on core business functions and avoid distractions of day-to-day operations.
As FM procurement leaders seek to improve their relationships with their corporate real estate stakeholders, procurement teams must provide the subject matter expertise to re-design and optimize services. That approach is most effective for driving cost savings, quality and innovation.
ESG has become a procurement imperative
Environmental, social and governance (ESG) regulations are becoming increasingly stringent, and organizations are under pressure to demonstrate tangible progress toward decarbonization. Indirect emissions (Scope 3) include supply chain components and tend to be the most significant part of a company’s carbon footprint. TMT companies are particularly keen to know what their suppliers are doing to help them benchmark supplier emissions. Despite an emphasis on cost-cutting, there is still a focus on decarbonization. For firms that don’t have the up-front capital to scale efficiency projects rapidly, the answer may be to work with a partner who can fund the projects upfront and can be repaid with the savings generated.
For example, CBRE and Redaptive partnered to fund an accelerated decarbonization project for a technology company that avoided 2.7K metric tons of carbon dioxide annually and gained $1.15 million in utility incentives through a retrofit-and-replacement program for portfolio system chillers.3
This attention to ESG initiatives creates an opportunity for FM procurement leaders to help lead the drive to achieve emissions reductions and meet supplier diversity targets. Scope 3 emissions reporting, greener sourcing and vetted supplier networks that align with ESG criteria are just a few ways FM procurement teams can deliver desired outcomes for their organization.
Some TMT firms plan to hold suppliers responsible for environmental reporting—in fact, one Fortune 100 Tech Firm recently started fining vendors that fail to meet its carbon-reduction targets.
Read Decarbonizing Commercial Real Estate for more information on Scope 3 and using procurement to source sustainably.
Find out more
Across the TMT sector, CBRE has over 21,000 sites under management, with more than 10,000 dedicated facilities management professionals.
For further information on how CBRE assists clients in this sector, please contact us.
1 CBRE Institute Global Forum, TMT Sector Insights, 2023.
2 CBRE Research, Non-Tech Companies Seeing More Opportunity to Hire Tech Talent, April 2023.
3 CBRE, Decarbonizing Commercial Real Estate, November 2022.
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Report
February 6, 2023Facilities Management Procurement Perspectives
Facilities Management procurement leaders share their top 2023 priorities for supply chain inflation, ESG, organization design and more.
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