Company directors need to employ professionals that offer a structured management approach to unlocking the true value of their property portfolios, says Grenville Barr
It comes as no surprise to find that British business is wasting nearly £18bn each year because it does not take property seriously (4 May, p30).
Such a shocking waste of money should be seen as an opportunity to solve the problem and raise profits. Specialist companies can offer advice that will turn property into an asset – making it work for the enterprise, not against it.
The RICS, in its report entitled A waste of space, by economist Roger Bootle, is campaigning for property to be a boardroom issue, but it looks as if the finance directors of UK plc will collectively suffer a loss of at least £9.5bn before they learn the lesson.
Property owners take their buildings for granted, even to the extent of forgetting them – dark properties being an extreme example. Owners forget that tenants are obliged to be more efficient with the space they occupy. If they do not use the space effectively, they will not maximise their investment and will lose money. If UK plc’s finance director understood this, he might recoup their £9.5bn loss.
Preventative measures
But one company didn’t need to learn such a harsh lesson – it saw the problem coming and took the appropriate action.
Covista managed a structured sale-and-leaseback on behalf of Abbey National. With advice from the Covista team, Abbey embarked upon a programme to restructure its entire property management thinking. As a result, the company may soon save as much as £3m pa in operating costs over the next two years.
Apart from the savings, the sale and leaseback has provided Abbey National with flexibility and cost certainty. And it has aligned the company’s property/FM strategy and business strategy.
It is this kind of radical thinking that will lead to UK businesses avoiding the huge losses predicted by Roger Bootle’s RICS report. Reorganising the infrastructure of your business, rethinking the supply chain and then making buildings work for you is the only way many companies may be able to boost their profits.
Other strategies
A structured sale-and-leaseback is one of a number of actions that companies can take. There are also tremendous opportunities to use space more efficiently, new challenges for staff and other ways to release capital for investment in what firms do best – managing and improving their core businesses.
In short, we must be prepared to take some radical decisions and adopt a wider concept of property assets, one that provides a total solution, instead of a concept that is limited by islands of consultancy.
Right now, property is too conservative. We need to push back the boundaries by challenging the traditional approach. We should work together to devise a holistic strategy and break down some of the obstacles that prevent company boards from having a true understanding of the overheads that real estate is adding to books.
The RICS’s chief executive, Louis Armstrong, recommends that corporate managers ask questions of property professionals.
BT, Sainsbury’s, Boots and M&S are moving in the right direction, but I believe that no one has gone as far as Abbey National.
