Commercial property asset management revolves around maximizing the value of a property. It involves the process of buying, selling, and holding one or more commercial properties with the focus on improving the return on investment. Unlike property management which focuses on day to day operations, asset management has a strategic long term outlook centered around increasing the return on investment for clients.
An asset management plan is the strategic roadmap designed to get a property to reach investment goals. Its focus is to improve the value of a commercial property, grow returns, and minimize risks. The asset management plan is an indispensable tool driving growth for owners and business objectives for asset managers.
Why Is An Asset Management Plan Important?
A good commercial property asset management plan improves market value of assets for property owners. Carefully cultivating a client’s portfolio drives measurable growth and in doing so builds client trust. Property managers can go above and beyond by developing an asset management plan for the property owner.
One part of managing assets on behalf of someone else is to help clients make better investment decisions. Property managers are in a good position to effectively manage client assets as they have a good feel for the market and the supply and demand of properties in the area. They are involved in communities and have insider knowledge.
An asset management plan focuses on growth of the investment but it can’t ignore risk mitigation. It is very important to do what is possible to ensure that the investment doesn’t depreciate. A solid understanding of the market is imperative as well as a focus on trends and forecasts.
Goals Of Commercial Property Asset Management
The goals of commercial property asset management include increasing the value of the property, maximizing the income that it generates, and managing risk for investors. Reducing expenses and driving consistent revenue improves value and the return on investment. Analyzing potential risks and alerting owners to possible issues can prevent losses.
A large part of asset management involves forecasting and risk assessment. The managers that make the best decisions which grow financial capital tend to get more clients and are trusted with larger portfolios. Reaching asset management goals pays off for investors and property managers.
Maximize the value of a property
When it comes time to sell, property owners will want to cash in on any increase in the value of a property. An asset management plan should include strategies to make the property more attractive to potential buyers. Reducing expenses and getting the commercial property up to date on maintenance are proven methods of increasing property value but demonstrating the profitability of the building as an income property can help it sell high too.
In order to maximize the returns on a commercial property, we need to calculate the internal rate of return. This measures returns while factoring in the time value of money. It takes into account how long an investor owns a property alongside the property’s ability to generate income and how well the property earns back the investment of its purchase.
It’s important to be diligent about balancing vacancy rates and rent prices in order to maximize the return on a commercial property. Keeping a close eye on the construction and maintenance budgets is also an important aspect of the asset management plan. Finally, regularly conducting a hold or sell analysis to determine the best time to sell will help improve returns at closing.
A comprehensive asset management plan must attempt to minimize risks for the investor. It’s important to be strategic when selecting tenants and to have proper screening in place. The management of commercial properties as assets requires the constant monitoring of market conditions and a proactive approach.
How Asset Management Can Help Throughout The Lifecycle of a Commercial Property
Commercial property asset management starts before the property is acquired. The asset manager can help support the acquisition team with strategic decision making. Once a property is acquired the manager should use their expertise to develop, implement, and manage a plan for the property.
Asset management can help when it’s time to sell. The manager works to streamline the process and implements the strategy for getting a high valuation. An asset management plan should be involved throughout the entire lifecycle of the property while it is in the investor’s portfolio.
The Acquisition Phase
The commercial property asset management plan should come into effect before the property is purchased. It can support acquisition teams by analyzing market dynamics, trends, taxes, rents, and other factors that can affect the performance of a commercial property investment. The asset manager should be able to help determine which properties are most likely to grow the most in value, have the highest returns, and the lowest risks.
Upon acquisition the asset manager can help develop a business plan for the new property. The manager should assess market demand, recommend property improvements which yield the best returns, and include strategies to lower expenses. The business plan needs to enhance revenue, manage expenses, and generate a stable cash flow.
The Ownership Phase
While the commercial property is part of an investor’s portfolio, an asset manager can collect and organize building data. This information should always be reassessed to pinpoint areas of improvement. Even small changes in operational costs and efficiencies can result in big financial returns over time.
The Disposition Phase
Commercial property asset management can help make investors aware of market conditions which are favorable to the sale of assets. The best time to sell a property is at the time that it is likely to yield the highest return. The asset management plan must include criteria for determining the ideal time to dispose of the asset.
When it is time to sell, a high valuation is critical to ensure good results. Typically prospective buyers want to look at operating statements for one year and base their predictions on this information. It is critical to demonstrate that a property is operating efficiently and has a strong potential for growth.
A commercial property asset management plan is an important tool which is used to ensure that a client’s returns are maximized and cash flow is managed. Keeping the financial health of an investor’s assets at the forefront demonstrates quality of service and adds value to your business. No property can be managed successfully without an asset management plan.