The economic optimization of established buildings is gaining increasing importance. But optimization is both a challenge and an opportunity as without a target-oriented strategy and an exact plan, failure is almost inevitable. On the other hand, optimization offers a unique opportunity to tackle and shape the future potential that lies dormant in a building.
Portfolio owners face many problems today. Above all, excessive costs, falling rental incomes and the generally low functionality of older properties cause headaches. The cause is often the condition of the building itself, but also a work environment that is undergoing rapid change and constantly makes new demands.
When looking at the necessary measures, market participants naturally favor balanced approaches. Solutions must not only be profitable but also fit the balance sheet and the profit & loss statement. The approach is to be holistic, but projects should be lean: Both the outcome and the path towards it should be economical, ecological and functional.
This requires strategies based on sound expertise and tailored to the individual requirements of each portfolio owner. Strategic real estate management forms the basis for the planning of cost-effective realization.
The property clock – in which phase is my building?
The value of the building depends on its age and condition. Knowing where a property is in its life cycle is the key for economic optimization. The property clock is based on the face of a clock, with the pointer running clockwise towards twelve. This is the countdown for the building.
Comfort Phase – lean back and relax
Assuming professional project execution and elimination of defects, the first years of a building are characterized by minimal maintenance costs and good leasability.
Cash Phase – observe carefully
After several years, buildings are well-established in the marketplace and are profitable cash cows. At the same time, inflation reduces the interest load and higher rental income eases loan repayment. But even at this stage it is important to observe the market environment and the development of building operation costs.
Properties have now passed their peak earning power, but are still profitable. Rents are beginning to fall and the first tenants are moving out. Often, owners are faced with new regulations requiring costly upgrades, for example for fire prevention.
Critical Phase – rescue resolutely
Buildings in the last phase of their life cycle are out of date in terms of energy consumption. They become an economic burden to their owners. Tenants move out and reletting is difficult or impossible.
Practice shows that the developments described here are reversible: Optimization means turning back the property clock.
Activating and consolidating the client's property knowledge is essential for achieving the right optimization strategy. This is done through intense exchange between the external consultants and all the owner's departments involved in property issues, such as in-house asset & property management or the construction department. Only these departments have access to the data that will allow target-oriented refurbishment.
For this reason, consultants must above all moderate between the various perspectives. In collaboration with the client's departments they secure organizational planning, commercial and technical feasibility, and finally the implementation of the entire project. During this early consultation phase, information flows in both directions – but when it comes to decision-making, the owner's ideas and goals prevail.
We will be happy to provide further information on specific analysis methods, approaches to optimization and implementation possibilities in a personal meeting.