Our Property Insight series invites our agents to share what’s happening in the Midlands commercial property and land markets. For this Q3 edition, our Director, Jason Hercock discusses why portfolio management should be a top priority for investors, especially as the Bank of England has warned interest rate rises may be needed…
“For investors and landlords with multiple assets, particularly those with finance raised against a portfolio, one of the most valuable tools is an independent, strategic review. This has always been good practice but as the landscape looks likely for interest rate rises, now is the time to act.
“A portfolio review will highlight upcoming lease events, including any pinch points such as rent reviews, break dates and renewals. If tenants have been signed at the same time on the same terms, this could mean all leases break or expire simultaneously. And if this coincides with a downturn in the market or a weakening economy, it increases the risk of multiple units being unoccupied with debt that still needs servicing. Which is never where a landlord wants to be!
“Instructing an agent to review your portfolio and vary these lease events is therefore a smart strategy. Good property managers stay visible. Through regular conversation they are switched on to where tenants are in their business cycle and how needs might evolve. This prompts opportunities to renegotiate at different times, potentially delivering better outcomes for both landlords and tenants.
“It’s also worth giving tenants a mention here. Those who openly engage with a managing agent are often in a stronger position. That two-way conversation provides structure and helps tenants understand the wider picture which can be crucial in the decision-making process. For those not comfortable having these conversations, or don’t understand the options, don’t forget you can instruct an independent agent! There is rarely one way to achieve the right outcome, and experienced advice can help identify the best solution.
“The same level of engagement is strongly advised for developers too, both those contemplating development or approaching disposal. Appoint an experienced agent who not only understands service charge provisions but can also alert you to factors that can significantly impact asset value. For example, how common areas are arranged and managed, what landscaping is in place, what provisions are in the title for maintenance, and realistic budgeting for service charges and sinking funds. Understanding how the business venue/park is, or will be, managed is fundamental in maintaining asset value and can make the process of selling or letting final units more straightforward.
“Without a model management framework in place upfront, it can take years to move back to a well-run portfolio, so get the paperwork right from the outset. When the market is strong, the consequences might be negligible, but in a weaker economic climate or recession, it will bite hard, leading to potential costs, longer void periods and low tenant confidence. As the saying goes, ‘fix the roof while the sun is shining’. By investing time in getting the fundamentals right, you put your portfolio in the strongest position to protect value.”
For advice on your property portfolio, contact Jason on 01455 559030.
