Partner Article

Take dynamic & focussed approach to manage Investments

IT IS interesting to see that some commercial and residential property investors are continuing to manage their own affairs in this challenging market.

Over the last five years demand for property has fallen along with rents and prices. It is now very much apparent – except for the “hot spots” of the West End in London and major cities for retail, student accommodation, quality hotels and high value residential properties – that we are likely to see more organic growth in values.

In some locations and sectors of the economy we need to see values grow to exceed the cost of development before anything can happen.

Many investors still seem to have the view that they should merely sit on their hands and wait for the market to catch up. As any successful entrepreneur knows this is not the way to actively manage an investment. A much more dynamic and focussed approach is needed.

The Royal Institution of Chartered Surveyors (RICS) has published two guidance notes. The first, Commercial Property Investment: a guide for the small investor, provides advice on how to invest in commercial property.

The second is a global publication: Real Estate Management Guidance, but it is still very relevant to the UK.

The small investor guide is a useful synopsis of the types of investment available in the market and looks at commercial and residential property as well as other types of investment through unit-linked and pension funds, trusts, property companies (onshore as well as offshore) etc.

The message however is that if commercial, or residential property, is the base of investment then active management is required. While there are some enlightened investors, few have the knowledge of the market or sector to achieve growth in a slow market.

There is no doubt that many are astute investors, but how many stop to consider that the cost of advice significantly outweighs the growth of revenue and capital?

The investors’ strength is often the ability to make business decisions that improve the bottom line, while advice on how to get there and deliver is often needed from the specialists.

Matters such as renegotiating lease terms, buying a tenant out of an existing lease to refurbish or expand a property and achieve higher rents, putting in a different use, or persuading the tenant to keep the property in good repair can be simple, but have dynamic impact.

All can improve the bottom line, improve the value of the investment and revenue stream. Where the property was bought at the peak of the market and has suffered falls in value, it may be the difference between having a mortgage at a higher amount than the worth of the property and getting over the gain line by active management of the asset to improve its performance.

A chartered surveyor can do all of this by taking an ethical and focussed approach for the client which they must demonstrate while providing a high standard of service

This was posted in Bdaily's Members' News section by Kevan Carrick .