Old habits die hard
Out of habit I am an ARICS. Now I am an MRICS? What does it matter? If
we are confused then so are our clients. Until they better understand
the new RICS Faculties, maybe it would be best to focus on the service
we deliver to them as the most useful reference point. After all,
everybody, RICS or not, is judged by the effectiveness of our advice.
Habit binds us all and may be at the root of my unease on occasions
with the nature of initial instructions from clients. That unease is
greater when evidence is that some property users have only limited
experience of the range of skills available from property
professionals to meet perceived problems. As long as their building is
sound, well insured, cared for, and no risk to its users what more do
they need?
No point in trying to complete a list in a short piece like this, but
it is clear that despite the familiarity with that all too brief
summary, it highlights the depth to which advice is often sought.
A few years ago the RICS and CBI in conjunction with the University of
Reading sponsored Grimley to look at strategic and operational
property requirements of the manufacturing sector. Many of our clients
are in this sector. A few sample facts from that research:
- Estimated UK property stock then worth £1500 billion with £210
billion in manufacturing
- Between 10 and 30% of value of UK companies tangible assets were
property that's between £21 and £62 billion of value in
manufacturing alone
- Nearly 50% of manufacturing property built before 1970 - 20%
before 1920
- Only 10% Property values reassessed annually
- 30% reassessed every three years
- 38% - to 43% less frequently
- 17% never.
Just looking at this sample, these are challenging numbers. Even if
you choose to ignore the scale of these statistics the last word in
that list was "never". Call me old-fashioned, but I fail to understand
how anybody can prepare a Balance Sheet that includes property assets
without having had an appropriate valuation of assets done at some
stage. Food for thought.
OK, so this was a view of one sector. But, its findings should have
dramatically shaken up awareness of the place of the property asset in
business planning and caused many to do a stock check at least.
Habitually owners may only think about asset value when considering
securing loan finance or relocation. With interest rates low, as now,
the cost of borrowing is a less urgent issue - but all of us remember
tougher times. Have the clients forgotten?
When involved in location strategy we should steer thinking to a
broader awareness. In the same way as it is common to aim to work
other capital assets 24 hours a day, why aren't property assets
treated equally?
Looking wider, does the location meet present supply and market needs?
Does it represent value for money? Is the image right? Is there a more
profitable use for the site?
Equally, ageing buildings generally cost more to maintain and run than
modern buildings, but short-term thinking may mask the full picture.
How can relevant and meaningful business decisions be made if the role
of all assets is not regularly assessed and weighed? The erosion of
profit caused by incomplete decisions should worry us all on behalf of
our clients. But have we been asked?
Enlightened self-interest alone suggests we challenge our clients to
break some old habits and give the wider picture a look.
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