Joining a growing list of corporations that are moving their real estate operations to a third-party provider, financial services firm Principal Financial Group (NYSE: PFG) today outsourced facilities management for its 4.3 million sq. ft. of office space to Jones Lang LaSalle.

The five-year contract includes Principal’s 2.4 million sq. ft. corporate campus in Des Moines and more than 150 owned and leased field offices across the United States and in more than 15 countries throughout Asia, Australia, Europe and Latin America.

The deal is remarkable for the range of services it will bring into play, says Richard McBlaine, international director at Jones Lang LaSalle. “They wanted a company that could bring a complete suite of integrated services, everything from real estate consulting through transactions, project management, facility management, occupancy planning — basically the entire suite of services that we provide to occupiers.”

It’s unusual for a large corporation to seek such a comprehensive service offering. “Sometimes clients select us to provide a particular service like transactions, or they hire us to provide multiple services, but in a specific geography,” says McBlaine. “Principal is hiring Jones Lang LaSalle to bring the entire suite of services for their entire portfolio, and that’s a very cool part of this win.”

Principal executives selected the Chicago-based commercial real estate services company after a competitive bidding process, based in part on Jones Lang LaSalle’s global reach. Principal plans to expand internationally and the partnership made good business sense, explains Ralph Eucher, Principal’s senior vice president of human resources and corporate services.

“The firm’s global presence, combined with its technical capabilities, will help us efficiently manage all of the owned and leased properties occupied by our employees,” says Eucher.

Principal is a retirement and global asset manager with $335.8 billion in assets under management as of June 30. The company serves some 16.5 million customers from offices in Asia, Australia, Europe, Latin America and the United States.

The outsourcing trend

Managing commercial real estate for clients is a huge business. Jones Lang LaSalle alone manages a portfolio of approximately 1.8 billion sq. ft., including 755 million sq. ft. in the Americas.

In the second quarter, CB Richard Ellis Group (NYSE: CBG) inked 47 long-term outsourcing contracts. One of those was to manage all U.S. properties for Walgreens, encompassing more than 7,500 locations. At 115 million sq. ft., the Walgreens deal is believed to be the largest outsourced facilities management deal ever.

Just last month, London-based lender HSBC Holdings hired CB Richard Ellis to manage its global portfolio manager for approximately 72 million sq. ft. At the same time, the lender’s U.S. subsidiary, HSBC North America, renewed its contract with Jones Lang LaSalle for integrated real estate services for its 8 million sq. ft. portfolio in the U.S. and 2 million sq. ft. in Canada.

Outsourcing is a major driver of corporate real estate activity, says Richard Kadzis, vice president of strategic communications at Atlanta-based CoreNet Global, an association for corporate real estate professionals with nearly 7,000 members.

“The global service delivery model is very much an outsource model, and continues to evolve in that direction,” says Kadzis. “Corporate occupiers have all kinds of options when it comes to service delivery — [outsourcing] can be based on geography, functions, products or even processes. Services also can be largely insourced or partially insourced, and conversely they can be totally outsourced.”

The evolving relationship between corporations and commercial real estate service providers is more significant than the degree of outsourcing, explains Kadzis.

“It’s obvious that service providers are not regarded as venders so much as they are strategic partners,” he says. “There is a lot of blurring of lines between client and provider, to the point that [workers] go back and forth from the supply side to the demand side a lot more frequently than before.”

As a commercial real estate company takes on more, or all, of a corporation’s real estate functions, the service provider must assume more of the risks associated with those operations.

Service providers who refuse to take on some of the client’s exposure, such as investment risk or liability for environmental remediation, will fall behind competing firms that do agree to share some of that burden for their clients. Risk sharing is particularly important to multinational companies, says Kadzis.

Principal phase-in

Over the next 90 days, Jones Lang LaSalle will gradually take over Principal’s facilities management from the previous property manager, Des Moines-based Terrus Real Estate Group, says McBlaine. “We have already filled the vast majority of the leadership positions on the new team, but we will be actively interviewing in the Des Moines marketplace, including people who are currently providing services to Principal.”

In addition to managing the existing portfolio, Jones Lang LaSalle will assist Principal in adding and managing new locations, particularly overseas. “Principal expects that over time, international will be a growing and even more important part of its business,” says McBlaine. “It was one of the criteria that influenced their selection of Jones Lang LaSalle.”

McBlaine and his colleague at Jones Lang LaSalle, Blake Layda, designed the outsourcing program for Principal as part of the bidding process. Key support in assembling that plan included Scott Tibbo, David Passaglia and Bill Thummel. Passaglia and Richard Tan will serve as the customer relationship managers on the account.

Jones Lang LaSalle reported global revenue of more than $2.9 billion in 2010, and serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.