5 reasons you need a property strategy
Without a strategy for managing your property, your business is wasting money and the opportunity to leverage soft real estate markets. Real estate and facilities expenditure is, for most businesses, the second biggest operating costs after staffing expenses. Despite this most don’t have clear strategy for how to best manage those costs.
A property strategy will enable you to get the best of your expenditure and leverage the regular ups and downs of market cycles. It will also ensure that your ‘physical assets’ are aligned with your people, IT and other assets to maximise value and enhance business performance.
Here are 5 reasons why you need a property strategy.
1. Manage your costs – real estate (owned and leased), maintenance, workplace services, cleaning, security and fit out costs can all be reduced with right plan of attack
The cost of owning or leasing offices, shops, warehouses, factories and any other form or property is a major operating expenditure. Too often managing these costs is spread across multiple divisions and individuals. Collating your spend and knowing what your true costs are is the first step to getting better value and reducing costs.
The property markets are full of sharks and people with vested interests. Non-property internal staff will not even know when they are getting screwed! First and foremost in any property strategy is identifying the best way of managing costs, testing their value and ensuring each transaction is maximised.
2. Improve asset utilisation – most businesses have ‘lazy assets’ that are not meeting the required return rate. A strategy will identify these poor performers and create ways to lift their return
Property assets in the form of land and buildings, fitouts, plant and equipment are major balance sheet items. Your business needs to ensure that these assets are working as hard as they should.
A property strategy needs to identify all your assets and understand the return they produce to the business. Challenging misconceptions on the value of ownership or how decisions are made on what parts of the business are located where and why is required to ensure assets are fully utilised and plans in place to rationalise where possible.
3. Avoid last minute decisions – property commitments are long term. If you get caught in a time crunch you will lose an enormous opportunity and your business will live with the outcome for years
Commercial property markets can fluctuate rapidly with massive shifts in the supply/demand curve. When you do your major deals is as important as how well you do them. Identifying major transactions across your property and having a plan that ensures you are not simply relying on market conditions at the time of the deal is a part of a good strategy. Major, long term costs savings are available if you time your deals to leverage market conditions.
4. Align property with the business – most property decisions are reactive. Knowing where the business is going and aligning assets to support business objectives is all about having a property strategy
To get the best value from major costs and commitments, a good property strategy is planned over the short, medium and long term. No other part of a business needs to plan in the long (10+ years) time frames so it’s hard to ask business managers what their business will look like in 5, 3 or even 2 years ahead – who knows?
Business alignment is about identifying those long term trends that will shape your business and as such must be part of the long term planning that makes for a good property strategy. This aspect of the property strategy must engage with your IT and HR plans. The property strategy must align with IT and HR to ensure all investments are coordinated and future shifts and changes are anticipated.
5. Reduce time and effort for non-core functions – if your business is not property or facilities management why do your staff spend time organising contractors and supervising work?
A strategy will define the way to reduce internal effort and leverage market capabilities. Poorly coordinated or fragmented management of the property functions costs your business time, money and takes your people away from other responsibilities. A service delivery plan as part of your property strategy will reduce the effort required by staff in accessing day to day functions. It will also streamline services and significantly improve cost control mechanisms.
Finally the risk associated with workplace safety, contractor compliance and essential service maintenance are not generally understood by most staff who don’t have the experience or a property management background. A property strategy will streamline service delivery, leverage market capabilities and manage the occupation and compliance risks associated with occupancy.