PROPERTY ASSETSAssets you cannot afford to waste!

Robert ChapmanRobert Chapman & Company

12th February 2004

Property:the Cinderella of business strategy UK commercial property worth £400 Billion Property and construction contribute 12% of GDP Property represents 34% of total business assets Second highest cost after salaries Welsh businesses waste £1 Bn annually (UK £18

Bn) through inefficient use of property Putting this right would boost gross profits by

13%

Source: Property in Business: A Waste of Space?Roger Bootle, Capital Economics

The Wasted billions:what goes wrong? Few companies integrate property into corporate

strategy Not using property as an enabler for business

objectives Virtually no chartered surveyors on boards of

major non-property companies 1 in 4 blue chips had not even discussed property

at Board level in three years (Boardroom blindness) “Dark properties” – many don’t even know what

they own Owner-occupiers see property as “free” and waste

space

Missed Opportunities Sale and leaseback could release capital to

invest/reduce debt Surplus space could be sold or sublet Hot desking/tele-working can save money

and attract staff - and save £6.5 Bn A 10% reduction in FM costs is feasible and

would save UK businesses £1.3 Bn a year Owner-occupiers should emulate tenants,

using 12% less space per employee, saving £9.5 Bn

Rates appeals could save £300m a year

Relevance to SME’s: context Entrepreneurship Action Plan

Create culture and environment SME’s represent 99.9% of 3.7M businesses In Wales: 99.9% of 144,000 businesses are

SME’s with approx. 76,000 VAT registered New firms important for job creation:20%

grow to 5 EE’s; only 2% grow to 50 EE’s Research shows that 66% of SME’s in Wales

have plans to growSource:Small Business ServiceNational Omnibus Survey Wales Autumn ‘02

SME’s and Property Property issues are low on the SME senior

management agenda across all sectors Property ownership has both costs

(opportunity costs) and benefits Property ties up large amounts of financial

capital – money that could be more productively employed elsewhere

Managing property also ties up managerial time – its an SME problem

Source: SFRU

Important constraints on growth (Source: SFRU)

0%5%

10%15%20%25%30%35%40%45%50%

Percent

FinanceSkillsPremisesTelecoms

SME’S – property solution checklist Finding the right premises: it’s a jungle out there! Buy or lease? Building survey Insurance: getting the right level of cover Rates: possible reduction Service charges: are you paying too much? Rent reviews / lease renewals: what to do? Construction and alterations:manage cost, time & quality Planning:guidance through the maize Sales, assignments, sublettings: exploring flexibility Dilapidations: keeping the final bill down Tax allowances: not a lot of people know that

SME’S – property solution checklist Millcroft Design Adco Print

SME’s – property solution checklist On Screen Productions Omnia

Property

Tackling Property IssuesWhat should senior managers consider?

Corporate strategy and vision Strategic fall-back plan Financial possibilities & constraints Details on current use of property Future accommodation requirements Ideas about FM and EFC Knowledge of the property market

Business and property: the way forward Property needs to be put on the agenda –

not considered as an afterthought Good leaders ‘do better things’ Business education: MBA’s; business

studies degrees etc Not someone’s problem! Know what you don’t know Integrate into business planning Not rocket science but increasingly

complex

Business and Property:Conclusion

It is important to seek good advice on those aspects of property that are not within the normal skills base of an SME manager

Remember the opportunity cost …………..repent at leisure!!!!

PROPERTY: the missing link Thank you for your attention

Property Solutions: www.rics.org www.rchapmanandco.com

Robert Chapman & Company robert@rchapmanandco.com