Corporations whose core business is not real estate—such as Facebook, Samsung and Apple—nevertheless have to make real estate decisions with regard to, among others, corporate locations, workplace design or leasing vs. buying space. They often rely on relationships with external service providers to help manage their corporate real estate assets. These are relationships characterized by intangible services, information asymmetries between client and service provider, bounded rationality, and imperfect contracts. But what role does trust play in these outsourcing relationships? Julia Freybote, assistant professor at Florida International University’s Hollo School of Real Estate, is co-author of “Trust in corporate real estate management outsourcing relationships,” published in the Journal of Property Management (2011). Her research examined two types of trust—self-interested or calculative trust based on the cost of taking advantage of clients and relational trust based on shared loyalty and responsibility—with data collected from U.S. corporate real estate managers. “My interest in the value of trust came from my experience working in corporate real estate advisory,” said Freybote. “As a consultant, I realized that whenever there was a new job to be outsourced, the corporate client would frequently request bids from a number of service providers, rather than continue to send the new work directly to us. From my perspective, it seemed that the corporate client didn’t really ‘trust’ their existing service providers and felt the need to shop around a little.”
While there is growing body of scholarly literature on the concept of trust in business relationships, there is little research in the commercial real estate arena, and Freybote’s research is pioneering. Her research revealed that service provider expertise and efficient monitoring improved the level of calculative trust. Additionally, perceived value, social interaction, communication, service provider dependency and efficient monitoring increase the level of relational trust. The findings suggest that service providers can garner trust from their clients by communicating reliably and confidentially, establishing personal relationships with key personnel at the client organization and facilitating monitoring by the client. Corporate real estate departments, on the other hand, should be aware that trust-based relationships still require efficient monitoring systems. “Perhaps the most surprising finding was that increased monitoring—through such tools as performance measurement and contracts with clear deliverables—actually serves to increase the level of trust between corporate clients and service providers,” said Freybote. “In these relationships, trust and effective monitoring are complements, not substitutes.”
For commercial real estate brokers, managers and other service providers who work with corporate real estate departments, the takeaway is clear: while market knowledge is essential to gain a client’s trust, building interpersonal relationships can lead to more stable, enduring relationships. Corporate clients place especially high value on proper handling of sensitive information and reliable communications.
Understanding trends in the way corporations use space and the challenges they face with regard to real estate is part of the curriculum at Florida International University’s Master of International Real Estate (MSIRE) program. “FIU has one of the few real estate master’s programs in the country that includes a course that focuses on the end-user perspective,” said Freybote. “Gaining insight into corporate trends and issues relating to, among others, the workplace environment, procurement, performance measurement and benchmarking, and sustainability help students understand what drives end-users’ real estate decisions, and in turn, enables them to become better developers, investors and service providers.”
The FIU MSIRE program is available in three formats: face-to-face, hybrid and fully online through FIU Online. Dr. Julia Freybote teaches corporate real estate management in Special Topics in Real Estate, and will also teach a new course, under development, Corporate Real Estate, that will be part of the core MSIRE curriculum. For more information visit fiuonline.com