Less is more - how consolidating a property portfolio can pay big dividends

After one of the deepest recessions in living memory, growth is returning to economies across this world and businesses are now looking forward to developing their operations and delivering increasing returns. That said, the economic recovery is still very fragile and there is no room for complacency. The financial crisis may have encouraged organisations to decrease risk but surplus property in a business’ portfolio is something that is often overlooked.

Holding surplus property represents an unnecessary and significant risk, the consequences of which can be a huge financial drain. It is expensive to hold, brings increased liabilities and locks up capital that could be released for investment. In fact, our most recent survey shows that the average liability associated with each site is between $750K and $1.25m. Evidently, this is no small sum, especially for businesses that still have a lot of ground to make up on their balance sheet.

With this in mind, organisations should be looking at their portfolios and making a comprehensive assessment as to what they want their property assets to look like and how to make best use of these assets. However, while on the face of it, unlocking liquidity and reducing risk by disposing of buildings and land should be as simple as putting it up for sale, it is rarely quite this straight-forward; there is often a complex web of issues at play. Barriers ranging from the cleaning up potentially contaminated sites to resolving internal political issues, such as who has responsibility for managing the process, can all get in the way. Possibly one of the biggest issues, however, is the laborious process of ascertaining the full extent of a group’s property portfolio. Put simply, it is hard to tell who owns what and, consequentially, what can be sold off and what cannot. 

In spite of this, the time has never been better for businesses to dispose of their unwanted floor space and land. With confidence in the global economy returning, the call from shareholders for organisations to release value from their balance sheets is growing. A new breed of ‘activist shareholders’ is putting pressure on organisations to leverage stock-piled cash by finding new ventures to invest in and to implement transformative internal programmes. In recent times, $3 trillion of outward investment has come from China alone. Clearly, there is a growing sense of urgency around this important issue. 

To help businesses succeed in this complex and time-consuming venture, we have produced a report, Surplus Property: Asset or Liability? The paper addresses the multitude issues associated with holding surplus property and spells out how organisations can set a proper strategy for identifying the most appropriate avenues to generating the greatest value.
Growth is returning and the demand for property is growing, but there is still no room for complacency. Working hard to release equity and reduce risk can have a serious impact on the bottom line, and businesses should be taking a proper look at their assets sooner rather than later.

Mark Fenner

Global Sector Director & North America Chief Sales Officer +31 (0)20 2011 011 Ask me a question
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