Active management?

Had a lager/ale fuelled (three and a half pints makes me far too talkative – it’s the half that causes most of the problems) discussion with Howard Cooke the other night.  Howard is a hugely experienced and thoughtful real estate analyst who tends to focus on the occupier perspective.  He is co-author with Simon Woodhead of ‘Corporate Occupiers’ Handbook’ and is the Editor of The Journal of Corporate Real Estate. Whilst long involved in real estate education, his recent professional work has been in providing a range of services to corporate occupiers arising from surplus properties with a focus on mitigating lease liabilities.  Our discussion was quite wide-ranging.  We were particularly stumped by the challenges of how to measure, in the context of a wide range of functions being performed in offices and evolving approaches to hot-desking, co-working etc. the relationship between cost, quality and configuration of office space and business productivity.  We agree that it’s a critical question for businesses, that there’s surprisingly little hard evidence (that we’re aware of) and, given all the other variables that affect productivity, that it’s really difficult to isolate.  Btw  DTZ have put some new work out on changing patterns in office occupation.

Then, we got onto (one of) Howard’s bugbears – the difficulties of getting landlords and/or their managers to respond to tenant initiatives that should provide a chance to improve the investment performance of the asset.  I alluded to this issue in an earlier blog mentioning that I’ve heard quite a few anecdotes.  We thought that part of it might come down to the fact that many fund management organisations are under pressure to keep a low headcount – particularly in organisations where they’re being compared to equity and bond fund managers.  As a result, asset managers tended to prioritise the ‘big stuff’ – acquisitions, disposals, major refurbishments etc.  Small stuff such as negotiating surrender premiums for small units, lease assignments, sublets etc. may not be considered worth their time.  Whilst an outsourced property manager might be able to do the small stuff, they don’t because it’s not part of the asset management agreement.  But – we don’t really know enough about how pervasive this problem might be.

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