When it comes to corporate real estate (CRES) and property management, there is one all-important question that the property manager needs to answer – how much does it cost to run each building?
This seemingly simple question is often difficult to answer, for a number of reasons, many of which boil down to data. Having the right information available, and ensuring the quality of this information, is critical in effective property management, and in realising any potential savings that could be made as a result.
The goal of property management is to maximise returns by ensuring that property costs are contained. The information required for effective management includes the fixed costs such as the lease or bond, as well as the variable expenses, such as water and electricity and general facilities management.
However, particularly in large corporates or industries such as financial services, retail and hospitality where the property portfolio is large and complex, finding and making sense of this information can prove challenging.
Poor data quality makes this single question of cost difficult to answer. The data required is typically held in multiple applications and systems, which are not only difficult to link, but prove challenging to track and keep up to date. For example, a lease agreement may or may not include variable costs such as water, rates and the lights bill.
These may be sent by three separate providers, which means that various invoices are received that need to be linked in order to obtain a clear picture of the total cost of ownership of the facility.
This disconnect between the fixed and variable costs can make it a complex exercise to understand how much a building is actually costing. When this is multiplied by tens or even hundreds of sites, the problem is significant.
When multiple properties form part of a portfolio, it is difficult for the property manager to get a clear picture across the board. This means that it is almost impossible to measure key building management metrics such as whether the cost per square meter is comparable to similar buildings in the area or whether the building is energy efficient and in-line with the company’s carbon footprint goals. This could help the property manager decide whether to renew the lease or move to new premises.
The reality is that if the property manager has no idea how much properties are costing on a monthly basis, they cannot be managed effectively. If expenses are cut across the property portfolio, the savings can be significant and go straight to the bottom line.
In order to do this, it is necessary to manage granularly, at the level of individual buildings. Property management savings cannot be realised without available, quality data across both fixed and variable expenses.
A related challenge for many property managers is keeping track of when each and every lease expires. For example, if a lease has expired or if a lease is not renewed timeously, the lease may need to be renegotiated on less favourable terms to the tenant, as the landlord can leverage the cost and inconvenience of a move in his calculations.
Addressing this challenge is not as complex as it seems. A data quality audit will identify issues in the data that prevent you from answering the question: how much does this building cost to run.
Once this is done, processes and procedures can be put into place to ensure that data is always available and of the necessary quality, enabling property managers to gain a more comprehensive and accurate view of their portfolios.
Identifying data quality issues across the value chain, and linking disparate sources of information around the various costs of running the properties, can help to optimise the entire property management process. This in turn is crucial in leveraging any possible savings, ensuring expenses are kept to a minimum and leases are adequately managed for better cost-effectiveness and possibly improved profits.