Sustainability, technology, working from home, and the ever-changing economy have all shaped the future of asset management in development businesses.
Traditionally a more ‘hands-off role’, Asset Managers often relied on the value of a building naturally increasing in value over its lifetime.
However, capital growth in real estate is no longer a given as the needs of the occupier are much greater than they were pre pandemic. Therefore, it’s the responsibility of the Asset Manager to not only ‘manage’ the buildings they own, but to proactively think of new ways to make sure it’s generating value.
From leveraging data and technology to better understand tenant needs, to incorporating ESG practices and government policies to appeal to the increasingly eco-conscious occupier, the Asset Manager’s role is central in the ongoing success and profitability of the asset.
Consequently, employers must reconsider how their existing teams address evolving requirements, particularly in assessing the readiness of their Asset Managers to navigate these changing dynamics.
Although the familiarity of sticking to what you know can be tempting, the challenges faced in 2020 brought about a need for change. By adopting a forward-thinking mindset and integrating innovation, strategic thinking, and adaptability into their organisations, Asset Managers have the potential to thrive in organisations in 2024 and beyond.
The Future of Asset Management for Developers
The traditional role of an Asset Manager in development businesses was previously centered around entering the process once a building was completed and managing it.
However, this role has evolved into a more diverse landscape. As highlighted earlier, the assumption of automatic capital growth in real estate is no longer valid. In the past, buildings were expected to appreciate over time due to demand from various occupiers, whether that was for offices, shops, or restaurants.
However, the pandemic altered this dynamic significantly, prompting a widespread shift to remote work, online shopping, and food ordering. Practically every part of our lives migrated home, where we have the most control and customisation. This shift has a knock-on effect for the role of Asset Managers, as they must provide a similar level of comfort and customisation within the properties they oversee.
For instance, the inconvenience of commuting, arranging childcare, and the impact on personal commitments such as going to the gym makes the concept of going into an office less attractive.
However, by leveraging this insight, Asset Managers can strategically plan spaces that cater to these changing needs. Collaborating with a nursery and incorporating childcare facilities on-site is an example of how they can improve the attractiveness of their assets.
Moreover, it’s crucial to create flexible and adaptable spaces that can easily accommodate evolving work trends. Designing communal areas, incorporating technology to support remote collaboration, and providing amenities that promote a healthy work-life balance are all ways Asset Managers can ensure their properties remain valuable and desirable.
The key is to optimise spaces, providing incentives for people to return, or else these areas remain dormant, losing value over time.
“Asset Managers must evaluate office spaces and consider what they can do or add to that space to make people want to go in. If they don’t, they’re at risk of that building losing money, so everything they do is under a microscope. 10 years or so ago, their role was more straight forward, but now, it’s a much riskier game and Asset Managers require versatile skillset to keep up.”
– Nicholas Carman, Director at Macdonald & Company.
The Rise of Proactive Commercial Understanding
There is a growing importance for Asset Managers to not just manage investments effectively, but also to have a deep and forward-thinking understanding of the commercial environment in which they operate.
This involves keeping up to date with market trends, economic indicators, and the broader financial ecosystem to make informed decisions that maximise investment returns.
To do this, Asset Managers can:
- Continue their learning: Stay updated with the latest market trends, economic news, and financial reports. This could involve subscribing to industry publications, attending webinars, and participating in relevant forums.
- Leverage technology: Use advanced analytics and data to learn more about their clients so that they can provide relevant, customised experiences.
- Attend networking events: Engage with other professionals in the field, including market analysts and other Asset Managers. Networking can provide insights into industry best practices and trends.
- Manage risks: Develop strategies for risk assessment and management. A proactive approach involves not only identifying potential risks but also having pre-emptive measures in place.
- Be financially savvy: Have the ability to analyse market trends, evaluate the performance of assets, and strategically allocate resources to maximise profitability while mitigating potential financial risks.
There is also a greater demand for Asset Managers with skills across different asset classes and the sub-categories within each which we’re exploring below.
Employing a Multi-Asset Strategy
Gone are the days when an Asset Manager could specialise in either commercial, residential or retail.
Now each of these categories are branching out, introducing sub-categories and unique demands by their owners and managers, with each necessitating a bespoke management approach to serve its users.
As the market for living spaces diversifies into increasingly specific usage categories, the expertise required for managing these spaces must also evolve.
This results in talent gaps and supply and demand challenges within the sector. Consequently, for Asset Managers to thrive, they must expand their knowledge to cover a variety of asset classes rather than focussing on one.
This need is further heightened by the adaptability of spaces, as offices can transition into residential areas and vice versa, supporting our earlier point regarding the improvement of workspaces with additional amenities such as gyms and childcare facilities.
Moreover, the theme of ‘hotel-isation’ is gaining traction. This concept, applicable to both residential and office buildings, sets an expectation for a certain level of service including concierge, who are capable of fulfilling a wide range of personal tasks, from laundry to pet care.
This gives people an even greater incentive to go into the office, reinforcing the need for Asset Managers to adopt a broad and inclusive approach to asset management.
