By Devon Maresco
Managing a commercial real estate portfolio is more difficult than ever. Work-from-home, flex work, and agile workplaces have all made it more difficult to benchmark and optimize workplaces—and to understand their efficiency. Thankfully, there’s real estate portfolio management software. As the workplace becomes more dynamic, specialized software helps portfolio managers better-understand the various physical cost centers a company operates.
To be effective in managing a portfolio of buildings and workplaces, managers need to understand them. What’s the cost to operate them? How do they assist in revenue generation? What kind of maintenance and upkeep goes along with them? What’s the demand for each workplace? Answering and acting on these questions is the primary role of a portfolio manager. To do it effectively, they’re increasingly relying on real estate portfolio management software to give them the lay of the land.
What is real estate portfolio management software?
Portfolio management software offers top-down insight about the governing metrics of properties operated by a company. It can show top-level information such as the location, occupancy, and lease costs of a facility. It can also narrow down to more specific metrics such as utilization, total cost of ownership, or even real-time data about how employees use it. The purpose of this software is to gauge property as an asset. How does it contribute to the success of the company?
The purpose of using real estate portfolio management software is to get insights and make decisions about how to maximize the productivity and cost efficiency of each workplace. It boils down to return on investment. Is a facility helping to generate more revenue and profit than it costs to operate and maintain? If not, what opportunities are there to right-size it on the balance sheet? The answers come from portfolio management software; specifically, the tools it offers.
Here’s a look at five must-have functions that make portfolio management software an asset to decision-makers charged with maintaining a healthy real estate portfolio.
1. Lease administration
Cost is everything in maintaining a real estate portfolio. To understand its weight on the balance sheet, portfolio managers need lease information pertinent to each location. What are the monthly and annual lease costs? What is the cost per square footage? If it’s a triple net lease, what fees or additional expenses factor into the building’s operation? These variables demand attention as part of the real estate evaluation process.
2. Accounting tools
It’s important to have an accounting standard that benchmarks all properties in a real estate portfolio relative to one another. What percentage of budget is allocated where for each location? What are the ROI metrics for each location against a clear standard? Accounting is an important function of real estate portfolio management software because it provides clear and unbiased insights about the cost of ownership for portfolio properties.
3. Budgeting and forecasting
Alongside accounting tools come budgeting and forecasting capabilities. These critical functions give portfolio managers context for understanding assets from a forward-looking perspective. The ability to look at past years’ expenses and projected costs allows for a more complete understanding of the cost of ownership of properties now and into the future. This fuels better decision-making about how to allocate spend and whether to expand, reduce, or sustain leased square footage or even entire locations.
4. Strategic planning
With cost and operations data in-hand, strategic planning is possible. Portfolio managers can liaise with individual facility managers and executive leadership to determine if the current portfolio meets the needs of the company. Strategic planning also happens at the facility level, such as the decision to undertake a capital project based on the likelihood of occupying that space for the foreseeable future. Real estate portfolio management software brings these insights together with context.
5. Space utilization oversight
Second to justifying the cost of properties within a portfolio, real estate managers need to ensure they’re utilized to the best of their abilities. While this utilization occurs at the facility level, portfolio managers can use high-level data to make decisions about how to optimize each location. The portfolio manager may reduce leased square footage at Location A by 10% and charge the facility manager at that location to optimize space—all this, while saving significant cost to the company.
How do I manage my real estate portfolio?
Property portfolio management software is an essential ingredient in the future of business cost management at a macro level. Facility overhead is the largest tangible expense on a company’s balance sheet (outside of salaries). It’s vital to have software that can drill down into each workplace to identify those expenses and, more importantly, how they’re offset by revenue generation. In doing so, portfolio managers can make better decisions about how to invest in real estate—or identify when it might be time to divest.
Portfolio management software needs to provide decision-makers with clear and valuable insights about each physical location, from a cost-center perspective. That means relying on tools for lease admin, accounting, budgeting and forecasting, strategic planning, and utilization metrics. Given these features, real estate portfolio management software becomes a valuable instrument in making smarter decisions about physical workplaces as a whole.
Keep reading: What Can You Do with Real Estate Analytics?