Any organisation, be it commercial or not-for-profit, should have a property strategy — a formal outline of the approach a company takes towards the management of its real estate — whether it owns or leases its assets.
That is because owned assets will undoubtedly represent a significant proportion of the company’s balance sheet, and leased assets typically come with significant liabilities, including annual obligations to pay rent, insurance and service charges and multi-year accumulating liability to pay dilapidations or instate the premises at the end of the property lease. And when not managed correctly, balance sheets and liabilities can spiral out of control and wreak havoc on an organisation.
However, many organisations do not have a property strategy. All too often, these plans are deemed too difficult to draw up or not important enough to make the effort, with directors or trustees lacking the knowledge and experience to decide which approach to take — impeding on companies’ business plans.
But those who do not have a property strategy are making a critical mistake that can define and restrict a business plan — especially in the age of increasingly strict environmental, social and governance (ESG) guidelines.
So, what can go wrong if organisations do not have these crucial plans in place — and how can Rynda help?
The dangers of lacking real estate management
History informs us that any organisation with no property strategy can get caught out, which can lead to the demise of the whole organisation.
For example, the incorrect allocation of funds meant that the Woolworth retail estate became very tired and outdated, which added to the company’s trading and ultimately contribued to its collapse. With appropriate and effective investments guided by an effective property strategy, on the other hand, Woolworths’ shop formats could have been presented in a more welcoming and attractive manner — supporting, rather than hindering, the business strategy.
Similarly, organisations without property strategies often struggle to take the correct steps for business expansion — not understanding balance sheets and the profit and loss (P&L) implications of poorly planned decisions. For instance, organisations with new, unproven business formats might take out long leases when it could be more sensible for them to own business-critical assets due to the debt financing options available.
On the other side of the coin, fast-changing business lines that require frequent accommodation remodelling might struggle to fulfil their business plans when operating under the surveillance of a landlord from whom consent for alterations must be obtained. Imagine if an amusement park like Alton Towers had a landlord — there would be a constant and burdensome stream of licenses for alternations as the tenant changed rides and remodelled the site, each of which would delay the implementation of the business plan.
In all the above scenarios, these organisations could avoid costly mistakes and support their business plans with professional property advisors.
Rynda has grown its property advisory business over the years — helping organisations develop and implement formal plans to support their owned or leased real estate. We have recently taken on mandates in the care sector for both commercial organisations and charities, having witnessed the Charity Commission and independent directors take an interest in the role that a property strategy can play in facilitating strong business performance.
Each project we approach follows a similar process: we first understand each organisation’s business plan and then develop a property strategy that best supports and enhances the company based on this. Whilst the assignments we undertake would be very relevant to schools and universities and a wide range of businesses, we look forward to providing property strategy services across a range of industries and institutions.
Rynda is a property management house with the expertise to help organisations develop and implement property strategies that align with their business plans. To learn more, call +44 (0) 20 3709 9875.