By Devon Maresco
There’s plenty of overlap in the world of asset management and property management—after all, property is an asset. That said, asset property management is a confusing concept that overlaps with real estate and portfolio management. To make matters more confusing, there’s also the concept of “property asset management” to consider. It begs the question: what is asset property management?
Facility managers need to get familiar with the concept as part of a broader understanding of how to oversee facilities. Here’s a look at where asset property management falls into context alongside other forms of asset management and property management.
What is asset property management?
Asset property management is part of the spectrum of asset management. It trends toward the macro end of the scale:
- Asset management involves oversight of assets
- Property management involves oversight of property
- Property asset management involves oversight of properties as assets
- Asset property management involves oversight of assets within properties
The difference between “property asset management” and “asset property management” is largely semantic. Most companies practice both in conjunction with each other, which further adds to the ubiquitous nature of the definition. Moreover, most facility managers and portfolio managers see property and property assets as one in the same. For example, it’s difficult to separate the HVAC system from the building it’s tied to. For all intents and purposes, they’re managed together.
Asset management in the real estate market
There is one important distinction to make when looking at assets within properties and the property itself: one of value. The overall value of real estate comes from many individual factors. In commercial real estate, capital systems play a significant role in the value of the building.
For example, a building that is in great shape but has poor HVAC may cost more in upkeep, raising the total cost of ownership. Conversely, an older building with great HVAC may be worth less, but operates more efficiently. When it comes to evaluating these buildings, portfolio managers need to consider how the assets that govern each property play into the total value of the holding.
Put another way, asset property management plays a big role in portfolio management. If the sum total of capital systems in Building A costs more than the sum total of an identical Building B, it’s a sign of the need for better asset management. The decision to act (or not to act) contributes to the value of that building within the company’s broader real estate portfolio.
Tips for better asset property management
The golden rule for asset property management is to be proactive, as opposed to reactive. While it may seem counterintuitive to spend money up front on maintenance, this ideology manifests in saving asset managers the cost of unanticipated, unexpected repairs.
Similarly, tracking the asset over time is an important part in managing it. Through inclusive asset tracking it’s possible to identify upcoming maintenance, budget for costs, understand cost of ownership, and more. All this factors into keeping capital assets in functional condition.
Finally, it’s important to understand assets in context. Consider a building with an antiquated HVAC system. While it might run smoothly, there’s no guarantee it’s running efficiently, which could cost building operators more than they realize. Moreover, it might contribute to a stuffy atmosphere within the workplace—or worse, Sick Building Syndrome (SBS). Looking at cost and upkeep alone aren’t enough. Asset property management needs to include context.
The goals of property asset management
The goals of asset property management are cost reduction and ROI optimization. Managers need to first justify the cost of an asset, then work to optimize its returns beyond the break-even point. For capital assets within real property, this means looking far ahead at the entire lifespan of an investment.
Take, for example, renovations that upgrade the efficiency of facilities. There’s an immediate cost to undertake these renovations, however, they’ll return value through both the efficiency upgrades and the productivity they enable. The goal of an asset property management approach is to reach that break-even point as quickly as possible, and to enhance the ROI beyond that. This means staying on top of upkeep costs in order to minimize them and understanding how to measure and record ROI.
Ultimately, the role of good asset property management is to extend the life and value of an asset, in order to ensure the ROI reaches the highest levels possible.
Software improves property asset management
As is the case for many modern-day facility metrics, asset property management is best tracked using software. IWMS or CMMS software provide critical insights about the cost of operating facilities—particularly their capital systems. These asset insights lay the groundwork for how much it costs to operate a property and set the benchmark for its performance against other real estate holdings. Moreover, they provide insight into how to better-manage individual property assets.
There’s significant opportunity in treating capital systems and properties like the assets they are within the context of facilities management. The more attention given to the cost, upkeep, ROI, and utilization of assets, the more opportunities are available to better govern them.