By Dave Clifton
Strategy is everything in executing a successful plan. This is especially true when considering asset management. Aside from buying, selling, and maintaining assets, it takes a compelling strategy to use them effectively, and to generate expected ROI from them. To understand and foresee the purpose and benefit of assets—especially capital investments—means developing a property asset management strategy.
Property asset management is a difficult endeavor because it often involves an entire committee of decision-makers. Facility managers provide context for the asset. Finance managers bring together the cost details. Maintenance managers deliver life cycle management data. The number of people at the table can grow depending on the asset and investment. Regardless, stakeholders need to come together to create a strategy that ensures maximum ROI on smart investments that offer clear and present benefit.
What is an asset management strategy?
An asset management strategy is the plan for an asset, which encompasses all major phases of ownership: purchase, upkeep, and disposal. It focuses on all major aspects of investment management, including:
- Budgeting and costing for acquiring and maintaining the asset
- Ownership and management of the asset within the company
- Use and utilization, and expected lifespan of the asset
- Accessibility and integration of the asset into operations
- Maintenance, upkeep, and repair of the asset
The goal of an asset management strategy is to set goals that optimize the ROI of an investment. In doing so, it’s possible for a company to track the asset’s costs, performance, and other important variables, to ensure it meets expectations. It also delegates responsibility for the asset.
What is property asset management?
The term “asset” can encompass many different things. In the context of “property asset,” it typically refers to a building or property. For example, if a company purchases a small 5,000sq/ft satellite office building, it’s considered a property asset. This is the broadest definition of a property asset, but not the only one. Many companies will also call capital systems “property assets,” such as HVAC, plumbing, and electrical investments.
Considering both definitions, “property asset management” typically refers to asset management for property and essential systems required to keep that property functioning. This, as opposed to more traditional assets, which might include things like equipment items, vehicles, and other non-integrated investments.
What are the benefits of asset management?
The benefits of good property asset management are clear. From a facility standpoint, there’s tremendous ROI available for both employees and companies alike. Employees benefit from facilities that are well-maintained and keep in safe, comfortable, accessible condition. As a result, employees will use the facilities available to them, which justifies their expenditure for companies.
There’s also cost savings to consider. As is the case with most assets, proactive upkeep and maintenance results in a lower cost of ownership over time. Quarterly service on an HVAC system may cost $250 each time ($1,000 annual), but it’s a far more preferrable cost to an emergent $4,000 repair that also affects productivity. Moreover, upkeep costs are predictable, whereas reactive repairs and maintenance are unexpected.
Finally, there are intangibles to consider. Well-maintained property assets tend to evoke a sense of price among employees. Workplace pride encourages everything from a positive mood while at work, to a better caliber of work done, to feelings of loyalty to the company. All these and more add up to benefits for both employee and company—all the result of smart property asset management.
The goals of property asset management
The bottom line in a property asset maintenance strategy is cost justification and ROI optimization. Property assets first need to pay for themselves to justify their cost of ownership. Then anything beyond that becomes ROI, and it’s in the best interest of stakeholders to stretch that ROI as far as it’ll go.
In different context, this is a matter of bottom-line justification and top-line exploitation. Every asset comes at a cost. An asset management strategy is the initiative to reduce the burden of that cost, while maximizing the potential of its benefits.
Consider a very simplified example. If it costs $30,000 to lease an office space annually and another $10,000 to maintain it, total revenue generation needs to exceed $40,000 by a factor of X to justify the cost of ownership. Good property asset management will seek to optimize the space to both increase its revenue generation capabilities and reduce the upkeep costs associated with it.
Software is imperative in property asset management
It’s one thing to have a property asset management strategy. It’s another to continuously benchmark and observe it. Asset management software is an important part in bridging decision-making with expected outcomes, no matter the time horizon.
From the moment of expenditure to the moment you retire an asset or it falls off of your books, it’s important to track as many functional aspects of that asset as possible. What is the cost of ownership? When is the expected break-even point? What’s the upkeep cost and maintenance schedule? Where is that asset right now and what service is it performing? Software makes it possible for all stakeholders to fully understand an asset within the context of a unified management strategy.
Whether it’s a reinvestment in the facilities themselves or a tangible asset tied to them, every asset deserves a management strategy. Every company deserves software that allows them to coordinate and observe that strategy, from cradle to grave.
Keep reading: What is Real Estate Asset Management?