By Brook Stotesbury, Head of Commercial Asset Management and Investment at Martin’s Properties
I hear the phrase asset management at least 10 times a day in the real estate market – mostly linked to ‘value add opportunities’ as investors strive for transactions that will pay them back in terms of a compressed yield in 3-5 years.
To different investors, however, asset management means different things: a change of covenant, some light capex, minor refurb or extension works, decarbonisation to name a few. Some investors will appoint a contractor to do the works, an adviser to tell them what to do and project manage it or negotiate on their behalf. Most will pay third parties in some format.
The real opportunity for asset management is being able to see the opportunities that others can’t before the deal has even gone through due diligence. In this market, that’s a stand-out point of difference.
Recognising the full potential of an asset is critical to making informed investment decisions. We have had hundreds of deal opportunities presented to us in the last two years and many of them have positive attributes. But crucially, we know what makes a deal special.
With an in-house project management team, development, management and commercial expertise, future gazing is not only possible, but essential, as is adaptability and agility and, when an opportunity is spotted, moving with speed is key.
In order to do this, it's important to have an asset-by-asset business plan, not just an overall AM strategy. Each individual acquisition will have a separate business plan with flexibility built in to adapt as the asset matures. It's also important to be flexible on hold periods and adjust business plans to optimise this, especially in such a changing market where often the only certainty is that we will experience some level of uncertainty along the way.
Whilst our focus has been on building the regional and development portfolios in recent years, we recently had the opportunity to acquire another asset for the Chelsea portfolio where we can add value to the vacant asset through a mixture of development, asset management and repositioning. This will deliver longer term value and secure income.
Of course it helps to have cash funding available. Debt is available but for the right opportunities only but it does looks like the UK commercial real estate lending market is beginning to recover after a rather challenging period.
In recent research by Bayes Business School, which gathered information from 80 banks, insurance lenders and debt funds, new loan volumes were up by 11% year on year by the end of 2024 with over £36bn lent and a real upsurge in the final quarter. No doubt lenders were buoyed by two interest rate cuts from the Bank of England and, with two subsequent cuts in February and May so far in 2025 these figures are certainly likely to improve. That said, the market has largely priced in two further cuts – most likely to be seen in August and November, finishing the year at 3.75%, but we may always be pleasantly surprised this month too. However, lending still requires solid relationships and track record as well as a robust proof of concept to underpin the transaction’s attributes. In this market, those opportunities are few and far between and having cash, private ownership and agile leadership provides another competitive advantage to move quickly for opportunities without the need to line up all relevant parties and go through various approval stages.
Asset management can take on various forms but having an in-house team who can decide what strategy is possible to adopt and seeing the hidden opportunity before even acquiring an asset, is the real secret weapon.