How the right procurement strategy can aid property management

Ilija Ugrinic is UK market director at Proactis

Let’s face it: an orthodox 9-5 in the office is a thing of the past. Recent research suggests only one in eight workers wants to return to their office full time1.

While this is a natural shift for workers, it is a seismic shift for commercial property developers and managers.

The stark reality is that most businesses have learned to be equally as productive (if not more so) without the bricks-and-mortar presence they once valued so highly.

This has real consequences for the commercial property market, which has been depressed for some time now. JLL analysis suggests global investment volumes have fallen across all regions, with direct investment down 29% in the first half of 2020.

The dual effects of strategic change in the use of buildings and financial change in how investors view commercial property as an asset has had a real impact on how to make the most of the property you manage.

Until relatively recently, commercial properties were being developed with two main objectives: to be carbon-neutral; and to be inclusive, engaging workspaces. Recycling capabilities, green rooftops and electric vehicle charging stations were – and will remain – increasingly important aspects.

And yet the coronavirus pandemic has forced employers to quickly turn their attention to safety and wellbeing for those using an office; and to financial savings if their offices are empty.

The procurement and supply chain implications of this are significant. Those involved in designing, sourcing, and managing commercial office space will be re-writing the rule book. Old principles of buying in bulk, embracing international networks and long-term planning will have been supplanted by new principles of agility, local sourcing, and short-term flexibility.

A robust procurement strategy responds to these shifting sands. Marrying the need for generous space with the likelihood tenants will have reduced capacity and an increased cost per head is not easy.

For those managing long-term leases, adjusting their properties will be vital. Take micro-mobility as an example. As commuters try to avoid public transport, e-scooters and e-bikes, bicycles and car sharing are all likely to grow in popularity. How property managers are set up to accommodate increasing volumes of these transport options, from storage to provision, is likely to impact business performance and investment returns. This is particularly true when property and facilities managers face growing pressure to reduce costs and increase service at the same time.

Indeed, managing what you spend is critical in terms of getting the best value possible for the goods and services you purchase – especially in times of escalating costs, and reduced income. It’s equally important to make purchasing efficient and transparent. Tenants and owners want their facilities to be consistently well run, but they are also driven by their bottom-line. So, they expect clear, accurate and timely accounting for all expenses, particularly now.

But the more sites you manage, the harder this can be.

Bringing together disparate systems and procedures across properties and tenants is another way to make efficiencies. Streamlining business processes, enhancing procurement, ensuring compliance, and driving down costs are all benefits.

Smart building management is a wider trend linked to this. There are significant operational benefits to having a range of data at your fingertips, from lease terms to energy consumption, structure charts or even how buildings are used by staff – the more information you can extract from your building, the more productive and cost effective you can make it. Sourcing the technology and infrastructure to deliver improved data is likely to grow in importance.

Cash flow management is another important area of consideration. Owners rely on regular payments from their properties so they can pay other expenses, including debt repayments. If tenants are coming and going, lease terms are changing and there are increasing requirements for fresh capital investment in properties, being able to closely manage all elements of cash flow will increase your chances of coming out of the pandemic stronger.

These are unorthodox times for everyone. It has never been more important for property managers to think differently about their role in creating value.