Real estate owners in the Nordic region are increasingly focusing on asset management to boost the performance of their buildings now that a sustained period of yield compression and capital values increases has ended.
Real estate owners in the Nordic region are increasingly focusing on asset management to boost the performance of their buildings now that a sustained period of yield compression and capital values increases has ended.
The Nordics - led by Sweden and Norway - was the strongest performing region for All-Property Total Returns in Europe last year, according to the Investment Property Databank (IPD). The region returned 14%, while the Eurozone recorded a return of 9.9% and Europe 5.9%. Havard Bjora, head of business development, IPD Norden, told the recent IPD - KTI Nordic Property Investment Briefing last week that the Nordic return of 14% capital growth accounted for 8.3 of the score, with the income return contributing 5.3.
Michael Haddock, director of EMEA Research at property consultant CBRE, said total investment volume across Europe will be down an estimated 30-40% in the second quarter of this year due to the turmoil in the financial markets and tighter credit markets. Various speakers at the conference emphasised that investment volumes actually rose in the Nordics in the first three months of the year after a drop in the latter part of 2007, and that the prospects of rental growth remained good. All agreed that asset management would play a key role this year. 'When properties were returning 25% growth, people didn't want to spend time fiddling with a property and redeveloping to get an extra 2-3%,' Haddock said.
Haddock said active cashflow management, 'anything to do with inflows and outflows', was now more important than ever to maintain performance. He said it was not just a matter of cutting back on expenditure as money not spent now could negatively influence cashflow in other ways. 'Ultimately the tenant might move out,' Haddock said.
Morten Madsen, head of portfolio management at Aberdeen Property Investors Denmark, said each building in the portfolio had its own business plan covering re-letting, the desired tenants, maintenance, investment and the values chain. He gave practical examples of how the performance of individual properties could be improved by moving tenants around, development/expansion or offering prospective tenants various fitting-out options to suit their needs and budgets.
David Neil, director of Genesta Property Nordic, stressed the importance of pro-active leasing agents with a ‘ high value add’ approach rather than agents offering just an introduction service to potential tenants.