11 August 2021, by
TwentyTwo’s Rob Campbell shares his three key tips to getting commercial property management right…
For businesses with a single site or handful of sites, managing the lease or ownership responsibilities largely in-house can make sense – as long as there’s some specific property experience within the business or available from an external provider.
For businesses with larger portfolios (10+ sites), the volume of activity and often complexity increases exponentially requiring either a dedicated in-house property team or more structured, external support.
In either case, you need to consider how effective your current arrangement is. Do you have the right level of skills and resourcing in the business? What systems and processes do you have in place to ensure you are planning and executing property-related decisions well? What opportunities are you missing? What risks are you exposing your business to? What additional costs are you paying for?
While you may be successful running your business (organisation/trust/not-for-profit venture), managing a portfolio of commercial property comes with specific challenges. And while you can make some of it up as you go, nothing beats experience.
I’ve been managing a diverse range of portfolios (either in-house or externally) for the best part of 25 years. This includes large businesses like HP, Bridgestone and Fletcher Building (with a wide range of property types and geographical spread) to smaller outsourced clients who only need support from time to time. This experience shows there are some key pointers to keep in mind if you want to ensure the property decisions you make truly support your business and don’t become a barrier for growth and change, or worst still, create unplanned risks and liabilities.
Most businesses generally lease their properties as having money tied up in bricks and mortar is often not the best use of capital that could be deployed into core business. If you’re in this category, there are some key things to focus on. I think of them as the key ingredients for success.
Context: Lease tenure (ie. plenty of remaining lease term and ideally multiple rights of renewal) provide businesses with certainty and flexibility. In many cases, the physical location/presence is critical in the success of the business, especially retail or specialist manufacturing sites, for example.
Questions: Do you have any lease expiry dates approaching? Do you have renewal options or are you at risk of needing to relocate?
Risks: What are the risks and consequences of having to find alternative premises/property? How difficult will it be to find a suitable alternative? How much lead time is needed? Will the rental costs be similar or unaffordable? How will you fund the one-off capital costs to relocate and establish the new site (fitout, ITC etc)? What level of business disruption can you tolerate?
Solutions:
Context: Getting the best commercial outcome requires a carefully-developed plan well in advance of sitting down at the “negotiation table”. Creating commercial tension relies on having time, being clear on your minimum requirements, having multiple options in play and judiciously sharing information with the “market” to maintain control of the process.
Questions: Are you about to embark on finding new premises? Are you underway with a search process? Are you in the middle of negotiations with your current landlord or a new party?
Risks: How do you know you’re getting the best commercial outcome? How do you measure the commercial outcome – understanding that it is more than the rent paid per square metre (rent, opex, incentive, landlord works contribution, fitout/capex costs)? How are you sure you are not unwittingly committing to inherent lease risks and contingent liabilities? Who do you trust in the process that has your interests at heart?
Solutions:
Context: Spending time on getting the brief right before engaging with the market is often considered an unnecessary step. How hard can it be? In many cases, clients want to rely on some high-level assumptions (location, space, timing etc) and then decide on the finer points at a later stage when they have real options to consider. In our experience, it is much better to spend more time planning.
Questions: Do you fully understand what your business needs in the future? How will the business change and, as a result, how will the premises/property you occupy need to change? Equally, have you considered how your business could use the property decisions/choices it makes to better support your business outcomes, be it brand awareness, revenue growth or staff retention?
Risks: Are you starting a market search process to find new or alternative premises/property (to own or to lease)? Are you clear on what you are looking for? Are you clear on how this decision will support your business? Are you clear on how you will make an informed and objective investment decision? Are you at risk of making a decision on “gut feel” alone? What opportunities are you missing?
Solutions:
PORTFOLIO22 is TwentyTwo’s solution for tackling lease administration/property management for organisations with multiple commercial property sites, albeit retail, office, factory
We take a more “business-centric” approach. It's not just about the lease and lease end dates. While they’re still critical, it's about what the portfolio is designed to achieve and how it can help your business succeed.
There are obviously always events that you have to react to (we’re expert trouble shooters and independent negotiators). But the way we bring expertise to the table is in building a partnership.
We're not just selling widgets. Our aim is to help clients understand how each individual property and network of properties can benefit the business over time. To help you understand if they’re maximising on the opportunities. Are the properties doing all they can do to serve your business?
Then, as we're trying to help you grow your business or increase the velocity of your expansion or roll out – or perhaps scale back – then the more we understand about what drives your business, the better we can deliver a service tailored to what you need.
We’re not just another property management provider. Our service can be a much deeper experience and one that will actually help your business to thrive.