How to Review Your Commercial Property Portfolio
Volatile markets on the back of a global pandemic have created uncertainty for commercial property owners, and you may be wondering how your financial goals are being impacted, whether you’re on or off track and what to do next.
That’s why now is the best time to conduct a review of your commercial property portfolio.
A review will help you to take a step back, objectively look at your situation and have a clearer understanding on whether you’re heading the right direction.
By focusing on the data, market figures and future opportunities, you can decide if you should hold onto your assets or let go and reinvest somewhere else.
So, how do you conduct a commercial property portfolio review? Here’s some key considerations.
The bigger picture review
What's my broader financial state of play?
Understand your broader business and personal needs. Consider if your short-term and long-term financial goals are still the same or if they’ve now changed. Also take into account your finances and cashflow.
What's happening in the market?
Research latest market figures – focus on data from independent sources. The best performance indicators to look at within your region include the investment sale yields, market rents, recent trends of land and building rates and capital growth over the past one to three years.
You should also assess the forecasts for different commercial property asset classes over the next one to five years. Question whether these predictions are lining up with your financial goals and current assets, or if they’ve revealed that changes need to be made to your approach.
What's my strategy?
By reviewing your goals early on, you’ll have a clear idea on not just what you need to achieve in the short, medium and long term, but also how you will achieve it. You may find your strategy now needs to change to accommodate the big shifts in the market or your adjusted goals.
Are my contracts and agreements in order?
Have a look at where all your lease agreements are at with your tenants, business partners, contractors and suppliers. Are there any contracts that are expiring or need updating? Where are the savings opportunities?
What is the tax impact?
Sit down with your accountant, review your assets and position and understand your full tax picture – considering how different strategies will impact your tax, and how you can make moves that will put you in the best possible tax position.
Am I happy with my team?
Evaluate the performance and return on investment from everyone in your property team – your adviser/advocate, accountant, lawyer, mortgage broker, tradespeople, property manager or anyone else who helps execute on the needs of your portfolio.
Along with performance, gather feedback, evaluate communication and other factors against the costs and fees. Are you getting bang for your buck?
Do you have strong relationships within your team or is there someone you’re not working well with? Are you working with property experts with a track record of success? Or do you believe you could achieve better results with someone else? It may be time to let go of those who are detrimental to your commercial property strategy.
How to review each property in your portfolio
Do I need to increase my rent?
Evaluation of your rent and rental income is key right now. Firstly, look at the status of any rent relief negotiations and determine what the short and long-term future looks like for your tenant.
When it comes to reviewing your rent, don’t be afraid to increase, as long as it’s reasonable and considering of all the circumstances. To make an informed decision on whether you should increase your rent, you need to research your region and make sure it is in line with the rest of the property market. It’s often smart to seek independent and professional advice from a property valuer or leasing expert in this field.
What does the growth of my properties look like?
Determine what the current value of your properties are, and how they have performed in the previous 12 months. Also look at how valuations have been impacted recently.
Based on the data, what do your growth prospects look like? Remember that typically property investment is a long term play, so you’ll need to get past any immediate bumps and look further to the future.
Are my finances in check?
Have a look at every aspect of your finances, such as your mortgage balance and interest rate.
Consider whether it’s time to refinance, borrow more and/or tap into equity. If you have a fixed loan on this property, review the terms.
Do I need to update my insurance?
Are your insurances still current and relevant to your commercial property? If you’re happy with the level of insurance and the type of insurance you possess, investigate whether you’re due for any renewals.
Is maintenance up to date?
Assess the state of your property and any equipment in the premises. Determine whether your property is compliant (such as smoke alarms) and if there are any repairs or updates needed, and when they will need to occur.
What’s working … and what’s not?
Have a serious and honest look at what is working for you and what isn’t in your commercial property portfolio.
Perhaps you have poor relationships or a continuous stream of bad tenants? If this is the case, then maybe it’s time to improve your screening process. Or if you’re experiencing maintenance issues or undergoing frequent repairs, then your issues could lie with your suppliers or source of repairs.
What ever your issues are, double down on what is working for you and put plans in place to remove the headaches – it will save you money and a lot of stress.
Action plan and advice
Following an in-depth review of the bigger picture and your individual properties, it’s time to develop an action plan and establish your next steps.
While these tips are a great place to start, it is absolutely crucial to work with a property expert who can independently review your portfolio, utilise the latest data and recommend the best way forward.
Thinking about undertaking a commercial property portfolio review? We're here to help you.
Contact us to discuss your needs. No obligations.
Managing Director, Broadway Property
Director, Broadway Property