In our experience as urban economists, we have often been asked to undertake a “feasibility study” on a design-driven solution, when the client has not thought sufficiently strategically about whether “bricks and mortar” are the best outcome for their business.
A “bricks and mortar” solution may very well satisfy a client’s strategic needs, but there needs to be a proper and logical process to reach this outcome. In other words, the needs must be identified before the solution is determined.
In considering any accommodation need, the client must first understand completely the nature of their business, their strategic “edge” over competitors, the things they really want to be known for and the parts of their business that they can and cannot do without.
In addition, any accommodation needs analysis must fully consider the risks associated with each aspect of a solution, and the relative ability of the client to manage that risk better than anyone else. They must also, of course, balance that risk against the relative net cost of each possible solution.
In most cases, if this process is undertaken first, and the client is open to both asset and non-asset solutions, the client will not only achieve an accommodation solution that represents the most effective and efficient option, but will also establish strong foundations and principles upon which their business can grow.
When it is not the core business of an organisation, asset management can be an unnecessary distraction and an expensive hobby. In most cases, the ownership and management of real estate assets can represent up to 50 percent of the assets and use up 25 percent of the resources of a business. These resources are scarce and would be better focused on the core business.
With the development of specialised providers of support services, and an abundance of individuals and owners who are prepared to take on the risk of property development and ownership, most companies have no excuse when it comes to the temptation to own hard real estate assets – they should resist it at all costs.
Many business decisions are unwisely led by the asset acquisition and ownership decision, with the client getting “stars in their eyes” at the thought of a sparkling new building, purpose-built to their needs and glowing with pride – “I own that!”
But the reality for those who are not in the business of asset ownership or management is that there are two good days in the life cycle of property ownership – the day you buy it and the day you sell it.
Think seriously about your business and its strategic edge before embarking on any real estate acquisition and understand that there are many solutions that provide all the accommodation benefits without the costs, risks and headaches of ownership.
