When managing a commercial real estate property, it is important to take time out to look past the immediate day-to-day fire drills and think long-term. Anticipating vacancies, renovations and other problems well in advance gives building managers the ability to develop plans to overcome these kinds of situations.
Unfortunately, a recent survey by Jones Lang LaSalle found that companies often take a more short-term approach when dealing with real estate decisions. This could potentially expose firms to risk and result in missed opportunities. Within the last few years, more organizations have been focused on reducing costs. However, cutting back on preventative maintenance could cause larger, more expensive problems down the road.
One key factor in the tendency to avoid long-term planning was a lack of sufficient data or analytical tools. The study states that 34 percent of businesses lacked information that would add strategic value to their decision-making processes. Capturing and sharing data has been made easier with the use of cloud-based servers and mobile technology, but companies have avoided applying these resources to their real estate investments.
Napa Valley Register states that metrics like the capitalization rate of a property can help investors determine if it is a good investment. Factors like income, sales price and depreciation play a role in the long-term success of a property. Without knowing and understanding which elements deliver the best return, firms may make bad spending decisions. When reviewing the information, companies need to use a mix of metrics to gain insight into the real costs of a facility.
Developing a long-term strategy
Building managers also need to use data analysis to provide better services for their tenants. Fast-growing companies that anticipate needing more office space in coming years find it more cost-effective to sign short-term leases rather than getting locked into any lengthy contracts. Property managers who understand this can deliver increased value for their tenants and owners by thinking long term. A business development plan would guide the transition of a company from a small startup to a market leader. By planning for eventual moves, building managers can retain occupants, helping them to expand their office space as needed. This keeps units rented and maximizes revenue by avoiding vacancies.
Every business should have long-term objectives to help guide its decisions. Rather than focusing on simply cutting costs or raising rents, outlining basic operating principles helps maximize value. The Jones Lang LaSalle survey notes that corporations expect their offices to drive workplace productivity. Optimizing workstations, assembly lines and technology infrastructure is easier if everyone understands the long-term goals. Preparing for large renovations ensures a minimal amount of disruption to services and keeps everyone satisfied.