Key Takeaways
- • Institutional capital is re-entering commercial real estate after a two-year pullback driven by interest rate spikes, with investors now prioritizing operational efficiency to boost returns as cap rates remain elevated.
- • Back-office lift-outs—where entire fund accounting and administration teams transfer from investment managers to third-party providers—are emerging as a strategic alternative to traditional outsourcing, enabling firms to retain established workflows, skillsets, and team continuity.
- • Real estate investment managers are increasingly outsourcing non-core functions including accounting, reporting, and fund administration to specialized third-party providers, allowing internal teams to concentrate on core competencies in capital markets, building operations, and leasing.
- • Lift-outs offer cost-structure advantages by shifting overhead expenses from the management company to investors and third-party administrators, while maintaining operational quality and institutional knowledge.
- • CBRE's research examines lift-out strategy as a mechanism to enhance operational efficiencies and complement successful real estate investment strategies in an environment where sound asset management and optimal ROI are critical differentiators.
Summary
Institutional investors are recalibrating their commercial real estate strategies following a nearly two-year departure from the asset class triggered by elevated interest rates. As these investors return to the market, cap rates have not yet fallen meaningfully, prompting a strategic shift toward operational optimization rather than leveraging price appreciation. This efficiency-focused approach is driving institutional real estate managers to reassess their back-office infrastructure and fund accounting capabilities.
The primary mechanism gaining traction is the back-office lift-out—a distinct model that differs fundamentally from traditional outsourcing. Rather than piecemeal vendor relationships, lift-outs involve transferring entire fund accounting and administration teams directly to third-party specialists. This approach preserves institutional knowledge, established workflows, and team cohesion while centralizing specialized functions with expert providers. Unlike conventional outsourcing, which often fragments operations across multiple vendors, lift-outs create continuity in service delivery and operational control.
Real estate investment managers face a core strategic question: whether to maintain all functions in-house or selectively outsource non-core activities. CBRE's analysis suggests that concentrating internal resources on differentiated capabilities—particularly capital markets acumen, building operations management, and leasing expertise—yields superior outcomes. Delegating accounting, reporting, and fund administration to world-class third-party administrators frees management teams to focus on activities that directly drive asset performance and investor returns. This operational model acknowledges that fund accounting expertise, while essential, is not typically a source of competitive advantage for investment managers.
The lift-out structure also addresses cost dynamics in institutional real estate management. By transferring back-office functions and their associated overhead expenses to third-party providers, investment managers can restructure their cost base while maintaining service quality. This flexibility is particularly valuable in a market environment where operational leverage and cost discipline directly influence net returns to investors.
Spencer Levy, representing CBRE's property accounting and reporting practice, emphasized that the lift-out model is transforming how real estate firms manage sophisticated fund accounting operations. CBRE's report, "Beyond Outsourcing: The Rise of Back-Office Lift-Outs for Institutional Real Estate Investors," builds on prior research examining back-office evolution and provides guidance for institutional investors and managers evaluating this operational restructuring approach. The analysis positions lift-outs as a complementary strategy to enhance real estate investment performance in a competitive capital environment.
The primary mechanism gaining traction is the back-office lift-out—a distinct model that differs fundamentally from traditional outsourcing. Rather than piecemeal vendor relationships, lift-outs involve transferring entire fund accounting and administration teams directly to third-party specialists. This approach preserves institutional knowledge, established workflows, and team cohesion while centralizing specialized functions with expert providers. Unlike conventional outsourcing, which often fragments operations across multiple vendors, lift-outs create continuity in service delivery and operational control.
Real estate investment managers face a core strategic question: whether to maintain all functions in-house or selectively outsource non-core activities. CBRE's analysis suggests that concentrating internal resources on differentiated capabilities—particularly capital markets acumen, building operations management, and leasing expertise—yields superior outcomes. Delegating accounting, reporting, and fund administration to world-class third-party administrators frees management teams to focus on activities that directly drive asset performance and investor returns. This operational model acknowledges that fund accounting expertise, while essential, is not typically a source of competitive advantage for investment managers.
The lift-out structure also addresses cost dynamics in institutional real estate management. By transferring back-office functions and their associated overhead expenses to third-party providers, investment managers can restructure their cost base while maintaining service quality. This flexibility is particularly valuable in a market environment where operational leverage and cost discipline directly influence net returns to investors.
Spencer Levy, representing CBRE's property accounting and reporting practice, emphasized that the lift-out model is transforming how real estate firms manage sophisticated fund accounting operations. CBRE's report, "Beyond Outsourcing: The Rise of Back-Office Lift-Outs for Institutional Real Estate Investors," builds on prior research examining back-office evolution and provides guidance for institutional investors and managers evaluating this operational restructuring approach. The analysis positions lift-outs as a complementary strategy to enhance real estate investment performance in a competitive capital environment.
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