Performance Measurement in Real Estate Operation
by Uwe Falkenberg
Measuring the performance of single
properties, portfolios or service providers like property managers are vital
to any sound management decision: "What you measure is what you get!"
Depending on the depth and size of the organisation the measurement can take
place at various levels and can then be aggregated upwards. From property to
location to portfolio etc..
It is also important to measure the performance of service providers
influencing the performance of the property: Asset Manager, Property
Manager, Facility Manager or the own internal organisational units.
In order to establish measurements as management tools the "philosophy" of
the property or the portfolio needs to be defined and broken down into
targets to be fulfilled to meet the philosophy. What does that mean?
Ambitious but somewhat achievable targets for rent and value development
have to be set and determined which are the immediate factors determining
their development. This process is best done by looking at historic data,
available data from comparable (good performing) properties and/or property
benchmarks. The measurement then includes the targets against their set
values and the defined factors like tenant turnover, payment backlog etc..
It is of great importance that these factors reflect not only what has
happened, like already occurred payment backlog but also warning indicators
like tenant turnover or late payments.
All of these performance indicators are then mapped against their targets in
a graph which will show the decision maker at one glance where the
performance is as expected or better and where attention is required. These
graphs are produce at every level where measurement takes place and can be
aggregated upwards: A graph for each property, each location, each manager
or the entire portfolio.
When applied in the right manner, this can be one of the most powerful tools
for managing a property portfolio.
The performance indicators are based on the Balanced Score
Card philosophy. Decisions based purely on financial
data can only be reactive whereas the consideration of average contract
durations, tenant turnover, payment moral etc., are early warning signs for
developments and provide a guideline for areas to focus on.
Click
on the graph to enlarge.
For more
detailed information please visit the website of
Berlin Portfolio Ltd or
contact the author by clicking on this link: E-Mail
This work is licenced under a
Creative Commons Licence.
