The true value of effective property portfolio management
The recent revision of the performance of the UK economy in the first three months of the year served as a sobering reminder that we continue to operate in some of the most challenging trading conditions in modern times.
In this age of austerity and cost management, there has never been a more important time to manage property portfolios properly. But against a backdrop of reduced budgets and high efficiency targets, many organisations with large estates are continuing to struggle to combat the ever-widening gap between property maintenance and other business costs.
A waste of space?
Since 2000 the cost of managing property has grown by twice as much as the consumer price index. The situation has not been helped by UK businesses which, according to the Royal Institution of Chartered Surveyors (RICS), are throwing away as much as £18 billion a year through inefficiencies in their use of property; RICS calculated that eliminating this wastage could increase gross trading profits by up to 13 per cent .
And ineffective property management is seemingly not the preserve of private firms. Poor management of fixed assets is regularly highlighted in the audit reports of large public sector organisations: in 2010, a report revealed how a staggering 12.5 per cent of the space officially occupied by the NHS across the UK was being underutilised.
In the same year, the National Audit Office revealed that the Ministry of Defence had insufficient data centrally to demonstrate it was striking the right balance between meeting operational requirements and minimising the cost of the estate.
To combat this lack of efficiency, the Government has moved to improve the robustness and reliability of the information required to manage its office property. It restated the requirement for all departments to record property data on its central e-PIMS database and introduced a system which annually benchmarked the efficiency and sustainability of administrative properties over 500m2. While this is undoubtedly a step in the right direction, issues surrounding the absence and inaccuracy of data, as well as the counter-intuitive nature of the system, has led to persistent problems in the collection – and therefore interpretation – of the data.
The importance of reliable data
But while the challenges of managing diverse estates are considerable, are finance directors helping themselves? The absence of high-level metrics to assess how efficiently an estate is being used increases the likelihood of inaccuracies and errors. Robust data is essential to those users looking to rationalise their estate portfolios, save money and increase the efficiency of property management.
Finance directors and estate managers need data which enables them to determine their estate’s operational importance and potential sales value, provides an accurate insight into running costs, calculates whether the estate is being fully utilised and assesses the overall condition of its assets.
Many organisations currently use spreadsheets for property investment planning. The use of such an antiquated model of estate management, which is susceptible to human error, does little to improve the likelihood of a property portfolio being managed properly. In the cut-throat business world of today, it could be the difference between an organisation succeeding and failing.
A growing number of finance directors and estate managers are coming round to the notion that efficiencies are best realised when property is viewed holistically. A broader, more comprehensive approach enables them to balance factors such as carbon reduction, space utilisation, running costs, condition and health and safety risks.
In a bid to rationalise their estate portfolios, manage fixed assets more efficiently and save money, many finance directors are by-passing these so-called traditional models in favour of more technological solutions. And the market has responded to this demand. In an age where capital needs to be protected, finance directors are now turning to systems which provide forecasting, modelling and performance tracking tools. They also recognise the benefits of implementing models which help them create scenarios and allow them to work through the potential consequences in terms of cost and property performance. Our recently-launched ATRIUMvision software tool is already enabling users to save up to five per cent of their property spend every year through more efficient management. An organisation with an annual property spend of £10m stands to save up to £500,000 annually, a more-than-substantial sum.
Finance directors and their estates managers are under greater pressure than ever to make sure their property portfolio is working as efficiently as possible. Systems which report accurately and offer insight capabilities are far more likely to create those all-important efficiencies which are essential in today’s challenging economic climate.
By Anita Barrett.