Property: Data is Everything

How do you keep track of your outgoings? Do you wait for the landlord's quarterly rent demand? What processes do you have in place for checking if the demand is correct? Do you know which rent reviews and lease renewals are due over the next 12 months? And do you know what the likely increases will be? Are there opportunities within leases for early determination and upon what terms?

Too few businesses have a sufficiently informed view of their property holdings and liabilities to be able to manage the way that property is incorporated into the company's strategy. A clearly defined property strategy will enable an organisation to plan for events and make its property assets work for the business.

The first stage in creating such a strategy is to put property to one side and to define your objectives as a business or organisation.

DECIDE WHAT YOU WANT TO ACHIEVE

To formulate a property strategy you must decide where you want the business to go. The business should lead the strategy and not vice versa.

Do you plan to grow, consolidate or move into new business areas? Perhaps you don't know with any degree of certainty, in which case, how much flexibility do you need?

A service-led company that is heavily contract based will need short-term leases to match its various contracts. A manufacturing company will probably know it wants to stay in one place for the foreseeable future, but might be considering expansion or possibly outsourcing part of its production.

ASSEMBLE A SINGLE DATABASE

Many organisations find that different parts of their business hold their own property information. Finance, legal and insurance divisions often hold what they believe to be a definitive list, but as these inevitably diversify over time, the task of identifying the correct data often becomes increasingly difficult.

The initial stage in the process is to consolidate various lists that have evolved with other information in order to form a central database. Sources of information will include legal documentation, plans, financial records and correspondence files – anything that helps to determine what the correct data might be.

So what information should a database hold? Information can be divided into three categories:

Basic: includes essential tenure detail; rent paid, timing for forthcoming rent reviews and lease expiries as well as the address, size plan and photograph of each property.

Functional: ensuring the database includes all the information used and required by various departments and individuals within the organisation. If individuals believe that the database is relevant to them, they will invest time and effort in maintaining it.

Business specific: different businesses need to know different things. A pub operator will want to keep a note of licensing details, a retailer will need to record shopping centre opening hours and a logistics company will need to know how many vehicles – and of what size – can be parked at a given facility.

Part of the process of establishing the single database is to decide who is responsible for owning the data and keeping it up to date. Also, who will access the data and how often? Is password protection or limited access required? The guiding principle in making these decisions is to keep it simple. If it is not simple to use and maintain in theory, then it won't be in practice.

BUILD AN ACTION PLAN

Only once you have set out your business objectives and established accurately the nature and size of your property portfolio can you start to put the two together and build a property strategy. Which properties fit the business plan and which do not? Where is the organisation exposed? What action is required?

You cannot do everything all at once. Prioritise the actions required, set timetables, assign responsibilities and keep the process under review. A typical categorisation of priorities might look like this:

• A: fit for purpose – no immediate action required
• B: generally fit for purpose but some action required to (a) save money, (b) improve efficiency or (c) create value
• C: not fit for purpose – action required in the short term
• D: at risk – immediate action required

Don't forget that freeholds are not 'free' property. Look at the return on capital from your business. Would you be better off selling your freeholds, taking a lease back and investing the proceeds in the business?

MANAGE THE PORTFOLIO

A property strategy is not just about 'the big picture'; it's also about managing the day-to-day process. Once an organisation has an accurate and properly maintained database in place, it can be used as an effective day-to-day management tool:

Forecast: the production of forecasts for rental and other property outgoings over the next one, three, five or even ten years. The further one looks into the future, the greater the potential inaccuracy. However, by at least knowing when rent reviews occur and making assumptions as to uplift, it is possible to make reasonable predictions and review these on a regular basis.

Audit: when quarterly rent and service charge demands are received from landlords, audit them against the database. In this way, inconsistencies can be identified and challenged.

Renegotiate: lease expiries and break clauses can be used to a tenant's advantage if he knows he will remain in occupation. A secure income stream is what is important to a landlord and there are often concessions that he is prepared to grant to achieve this provided negotiations are instigated at the appropriate time.

Plan: ensure that you are not caught out by unexpected lease expiries or break clauses.

MAKE THE MOST OF YOUR PROPERTY CONSULTANT

You may say, well that's all very well but how do I get started? Where do I find the time to do all this and run my business?

The answer is twofold:

1. Property and business is one and the same thing, in fact property will often be a company's largest overhead after staffing costs – if your profit margin is 10%, then every £1,000 saved on property expenditure has the same effect as an increase in turnover of £10,000
2. Let a property consultant do the work

The role of the individual within an organisation responsible for property is to set the brief and the vision for establishing a property strategy. It is then up to others to design and undertake the process in accordance with that brief.

If you view your property consultant as a partner in the process and educate him or her as to your business needs and values, you will find that they have more to offer than just dealing with that nasty rent review notice that has arrived out of the blue.