Challenging market conditions mean that asset managers must be much more proactive in order to get the maximum value from commercial property, according to experts at national commercial property consultancy Lambert Smith Hampton (LSH).
Asset managers can no longer rely on the market to increase the value of their property, and they must look for other income generating opportunities, and must also be prepared to help occupiers who might be finding life difficult.
Associate Director in LSH’s Commercial Property Management team, John Bird said that while the occupier will remain the largest single asset stream for the property, there are other income generating opportunities.
He said, “These opportunities might include revenue from advertising companies to erect hoardings or digital display, revenue from telecoms companies for site masts, of Government subsidies for generating renewable energy through the Renewable Heat Incentive or feed-in tariffs. All have to be explored if a property is to maximise its income.”
He added, “Retaining and enhancing income is at the heart of good asset management and implicit in this is is knowing the occupier’s needs and working with them. This might involve flexibility to protect income. Already in 2012 we have seen occupiers fall into administration or experience poor trading conditions. Those landlords who work closely with occupiers to help them through difficulties will benefit in the long run
“This may take the form of agreeing monthly repayment terms, rescheduling debts or stepped rent uplifts on review. The flip side of the same coin is that the close relationship with the occupier will flag opportunities to enhance the income or extend its duration through lease re-gearing or buying out tenant break options.”
John Bird said, “Long term planning may include improving the environmental performance of a building to give it a higher Energy Performance Certificate rating. This will enhance the building’s value in the future
“Finally, as the dynamics of a property change make sure to review the planning position of the asset and seek to obtain change of use permission consistent with the demand profile of occupiers. In the current market conditions, returns on property don’t come overnight. Property returns and income performance will be delivered through hard work and proactive asset management. “