How to future-proof your property portfolio

No one can ever know exactly what the future holds, but when it comes to protecting your assets there are strategies you can put in place to ensure your property portfolio is resilient to market changes.

Consideration of obsolescence has become more important than ever for investors, says Josh Rutman, head of capital markets – JLL Victoria

“Pre-pandemic it was more common to see an investor with, for example, a high-end office building and a secondary office asset. But now, that secondary asset isn’t going to price you into the market because there has been a change in what occupiers want and need and you simply won’t find tenants for those older assets,” Rutman says. “It is now necessary to actively take steps to meet the wants and needs of tenants. For many investors, this is an opportunity for refurbishment of office buildings to increase value. If you don’t evaluate and upgrade, there is a risk for your assets.”

When evaluating assets, Rutman says the pandemic is still influencing the occupier market and investors should take note of the key features occupiers are now looking for.

“Requests for better ventilation, access to a terrace or an outdoor space, more natural light, and accessibility by all forms of transport have all increased as a result of the pandemic,” Rutman says. “Before the pandemic, cark parks with office buildings were looking like they were a thing of the past but they are once again very relevant because people want flexibility when it comes to transport. Offices need to offer car and bike parking, access to public transport, and end of trip facilities.

“Another key trend we are seeing is occupiers no longer needing their office location to be in traditional thoroughfares, which means investors can diversify their portfolio to include the city fringes because there is a long-term future in investing outside of traditional office spaces.”

Investment in sustainable upgrades is one of the best ways to improve rental returns and ensure stronger pricing if you choose to sell, says Caitlin Uren, Head of ESG & Repositioning - Capital Markets JLL Australia.

“In Australia the investor market is strongly focused on ESG alignment and net zero targets are influencing investment strategies,” Uren says. “There is a big opportunity for investors to reposition their underperforming assets to support the decarbonization of the built environment. Retrofitting emits significantly less carbon than a knockdown and rebuild, so it should be a key consideration for any owners looking to ensure their portfolio remains resilient in the market.”

When looking to increase the value of your portfolio, Rutman says responding to what tenants want is key to ensuring your assets remain relevant.

“Build out your value proposition and you will be able to achieve a higher rent from tenants, which will increase the value of your portfolio,” he says.

“You need to provide more than a desk, people want a range of experiences and amenities like a café, gym, and end of trip facilities so they can work, live, and play at the office. With many employees able to work effectively from home, the phrase ‘earn the commute’ to give people plenty of reasons to come to the office is central to any strategy to future-proof a portfolio.

Engaging a trusted advisor to review your portfolio and provide strategic advice is an excellent way to take the guess work out of future-proofing your assets.

“At JLL we help landlord and owners by conducting health checks on their portfolio to review assets and provide advice on leasing opportunities, outgoings, property management, market perceptions and potential fit-out needs,” Rutman says.

“Understanding what the supplier pipeline looks like and how you are placed to meet those needs goes a long way to future-proofing your portfolio. For example, having the flexibility to be able to subdivide floors to different sizes to be able to accommodate more or different tenants is a huge advantage to have in the current market.

“At every life stage of your asset we can provide advice, help with due diligence and investigate ways to extract value and connect you with several JLL expert teams to ensure you are getting the best out of your property portfolio.”