Predictions about how the Australian commercial property sector might fare in 2023 continue to proliferate, with Credit Suisse and Barrenjoey the latest to air their views. Both envisage the clouds hovering over REITs will darken this summer, and say landlords should brace for portfolio write-downs averaging 10 per cent. Shopping centres and other major assets will cop a soaking, with office towers hit worst of all: Barrenjoey predicts prime office holdings will lose 17.5 per cent of their value, while B-grade towers could shed as much as 33 per cent.
And there are additional, sector-specific challenges for commercial property. Office jobs and consumer shopping habits continue to evolve post-pandemic, raising existential questions for tenants and landlords alike. Scentre Group says sales at its Westfield Living Centres are finally up on 2019 levels1, but is uncertain about whether the growth can be sustained. And CBDs as a whole remain subdued: Melbourne’s CBD was 33% less busy from mid-September to mid-November this year compared with the same period in 2019.2
There’s a case to be made for adopting a defensive stance until these conditions pass. But that’s hardly ideal: businesses thrive by being proactive, not reactive. And, if the volatility we are currently experiencing becomes ‘the new normal’, there’s the risk of getting locked into defensive mode permanently.
For REITs, the question then becomes: how can we better manage each of our assets today to create a more resilient portfolio over the long-term?
We believe the answer is to expand your information capability so you can react swiftly to change, while making more informed strategic decisions. In fact, we’d argue that data-driven decision making is the only way for landlords to successfully navigate whatever may come.
It’s also time to place greater faith in the Facilities Managers and others who work at the commercial property coalface. Providing them with the latest tools and workflow support, while creating a more intuitive digital environment will empower them to work more productively, collaboratively and efficiently.
“We believe true resilience at the organisational level can only be achieved by cultivating resilient infrastructure and resilient people.” explains David Wright, CIM Chairman.
There are some simple changes that property owners and managers should consider that have the effect of doing both. Here are our top five.
- Embrace the sustainability challenge. While initiatives that drive progress towards Net Zero might seem like they offer an upfront drain on resources, it is widely accepted that a more sustainable building will become more valuable over time. The energy crisis, the rising cost of carbon offsets and tightening regulatory pressures are but a few of the reasons why investment in sustainable technology is the right decision for a future-proofed portfolio.
- Seek out tools that foster seamless collaboration. All platforms used by site teams should make assigning tasks to team members simple and put data at their fingertips, so jobs get done quickly. Platforms must enable real-time communication within teams to reduce the need for meetings and unnecessary back-and-forth on emails; while providing full mobile functionality to give staff greater freedom of movement. Freedom and flexibility keeps your team nimble and adaptable, both of which are critical to support organisational resilience.
- Go above and beyond to engage your FMs. Whether it’s embracing technology that incorporates the latest gaming technology into workflow modules or maintaining leaderboards and in-built rewards systems for positive reinforcement, keeping your teams engaged and curious can neutralise feelings of fatigue and frustration in challenging times, so the resilience of your portfolio doesn’t falter. The same applies for contractors; keeping them accountable is important, but they will do their best work in a supportive environment over one that is compliance-heavy.
- Invest in superior data-driven monitoring of plant and equipment. Your people can’t maintain resilience and remain adaptable if their days are dominated by manual checks or grappling with a decentralised software environment. Superior monitoring means using a single platform that collects data continuously and effortlessly, alerting FMs to anomalies or issues that require urgent attention. Using this type of setup, many operational activities can be automated and FMs can focus on what matters most – the tenant experience, fixing critical issues and sustainability performance.
- Collect your operations data and analysis in a single view. In an ever-changing economic climate, being able to maintain holistic visibility over the operational performance of your entire portfolio whenever you like is critical. Be sure to use uniform data-gathering protocols across your portfolio so you can apply learnings from one asset to another and more readily spot well-performing properties and performance anomalies.
There are, no doubt, insights to be gleaned from the forecasts of Credit Suisse, Barrenjoey and others. But fixating on speculative reports can become counterproductive and a drain on energy. According to the American Psychological Society, the same holds true for individuals. Its latest Stress In America survey found that uncertainty was a major source of stress for 81% of Americans, and that fixating on uncertainty sapped surveyed workers of energy and drive.3
The study’s authors explain that the human brain instinctively perceives ambiguity as danger. In order to function well as workers in the post-pandemic era, we must learn to accept uncertainty and carry on regardless. The key to doing so? Prepare yourself today, so unexpected events feel less uncertain.
It's an approach that makes sense for property organisations, too. Environmental conditions may be largely out of your control, but with the right information capability, culture and digital toolkit, gaining a profound understanding of your portfolio and how best to protect it is not.