The Potential of the Real Estate Managers to Adding Value to Commercial Estate Investments - Essay Example

The potential of the Real E Managers to adding value to Commercial E Investments and Barriers limiting this potential (Course) (Tutor) (Date) Introduction Management of real estate is a special kind of management process, which typically aims to realize the effectual ownership and occupation of buildings. The real estate in itself is the property, which includes land and the buildings on it, together with the natural resources that grow or are located at that very place. With the recent development of ownership of private property, real estate has improved and become a major area of business, which is now referred to as commercial real estate. To be able to acquire a real estate, it requires a significant amount of investment. Furthermore, each piece of land or building that is in question has unique characteristics that cannot be compared with any other (Haynes and Nunnington 2010). This has made the real estate industry to evolve into various distinct fields. Due to this fact, it needs people with expertise who can be able to analyze the field in every angle and make sure they completely understand in details what it entails. Some of the areas that need experience are the management, where we have the asset manager, property manager and the facilities manager. The asset manager has a wide area where he deals with buildings beyond the individual ones. Property manger’s work is the opposite to that of the asset manager in that he focuses on specific buildings and takes care of tenants (Sharpe 1964). The facility manager also focuses on specific buildings, but for them, they deal with the physical services around the property. The management is the one to oversee the business and control of the real estate. This is done by monitoring and giving answerability for its constructive life and conditions. The management in whole involves the progression from the start, systems and manpower that are needed to run the life cycle of all the acquired assets including repairs, utilization and disposition (Haynes and Nunnington 2010). This paper is going to analyze ways in which real estate managers can add value to commercial real estate investments using their potential, and the barriers that limit this potential. Real Estate Managers and the Commercial Real Estate Investments The most important role that the real estate managers perform is to bring out or set up the link between the asset owner and the actual leasee. They have to perform a proper testing and screening of the applicants’ credit, unlawful history, rental record and their capability to be able to pay (Haynes and Nunnington 2010). Also, the alleviation and remediation that ascertains the issues regarding repairs, that is within a certain financial plan, with prior consent and agreement by the property owner are taken care by the managers (Haynes and Nunnington 2010). They have to manage the financial records and capital of the real estate properties and take part in litigation with tenants, the contractors and insurance agencies. The real estate managers have the potential to add value to the commercial real estate investment (Bosak, and Mayer and Vogel 2007). They can add value to the investor and the person occupying the property. Performance Measurement Some aspects that need to be incorporated by the real estate managers are by setting up a measurement of performance. No one is able manage what they do not measure because they do not have the clear picture of what they are dealing with. The purpose of performance measurement aids in setting up a flat-form for continuous improvement by measuring progress in context (Haynes and Nunnington 2010). They will be able to assess those activities that are very vital for the achievement of their specific goals. Key performance indicators or rather the key success indicators define and measure progress towards the goal of an individual or an organization. A mechanism for good rewards will be seen when the drive performance and the set up priorities are well used. The performance measurement is also the vital key communication tool that influences the management at the senior level when people are dealing with a big group and also at the lower level, which provides clarity of direction to the team. According to the business, data has to be collected, which assists the managers in analyzing the performance of the deals that are taking place. If one of the previous arrangements did not fulfill the conditions that were expected, then the strategies will have been well detailed and understood (Banfield 2005). The managers can revise them and reevaluate the portfolio and the investments. By doing this, they will be able to master the management data and give out the account and conditions that need adjustments. When the performance measurement is well laid by the real estate managers, it helps them to perform operatives and make plans of the costs and revenues within the business. With this, it is very open for them to gauge how the industry is making a profit and prevent losses from occurring (Banfield 2005). The key figures and data have to be evaluated, analyzed and controlled. All these optimize the operational effectiveness across all the functions to finally progress the performance of the industry in general. Increasing the Corporate Real Estate value For the value of commercial real estate investment to be added or increased, certain tactics have to be incorporated in the system. These will aid in controlling the way the investment are being held and prevent losses from being incurred by both parties. This is done by improving the sales, increasing productivity, facilitating growth and creating a flexible ground of operation. Increasing Revenues In order to increase the revenues, the sales of the assets within the real estate have to be improved. This can be done by creating innovative layouts that are attractive to the tenants and also improving on the location where the buildings have been set. It makes it to be attractive and eventually pulling more customers who will want to engage in the deal to purchase the real estate (Edwards 2004). Increasing Productivity Increasing productivity will also increase on the revenue that is gained from the business. To increase productivity, new technology has to be introduced to the process of building, maintaining and other production activities of coming up with a good property. For example, new layouts that will be appealing to the tenants. The real estate managers have to come up with better negotiation skills that will enable them to pay less in relation to the funds that they have to spend in the construction of the property. When they are doing their own analysis of the economy, they have to make sure they purchase their products at the right place by spending less and getting good products. After this, the recourses have to be well utilized and avoid wastage. This will reduce the cost they have to further incur when they replace the damaged goods (Daft and Marcic 2009). For the process to be very effective, the right resources have to be at the required place at the appropriate time and everything spend wisely (Sharpe 1964). The source of capital has to be from a wide sector. It will provide a sufficient amount of money to make sure that perfect job is done to come up with a good property. These can be from: pension funds, sovereign wealth funds, insurance companies, investment banks, endowment charities and the private investors (Edwards 2004). Organization of the Real Estate Management The way the system is organized in terms of its management has an effect on the results that come afterwards. Strategies and policies have to be set in ways that they do support the organization. They have to maintain the properties of an appropriate workplace, identify and getting rid of the space that the organization no longer requires and deciding what type of property solution is best for the organization. The management is structured in many layers. There are several stake holders in the property whose needs differ and may appear to be conflicting. Investment management, property operator and the service partners have to make sure their roles are well defined so as not to come to a conflict in terms of the responsibility that are supposed to be tackled by part of the group (Deakin 2004). When the processes are planned by developing an asset strategy and agreeing on an asset management plan, then there will be a good flow of information that will clear in terms of activities to be undertaken. The organization has to be organized by allocating work and coordinating the group and establishing a formal communication system (Haberberg and Rieple 2008). After these, standards have to be established also. It shall give them control over the system in ways of taking up corrective action after checking the performance against the standards. A better organized management is able to have a stable way of dealing with its environment, social-culture, economic issues and legal together with the political ideas that arise any moment. It offers a way of understanding the way things are handled in an organized manner and establishing a mutual relationship in terms or work, respect and knowledge. Every person, or group shall be responsible for their own actions and rewards will be accredited to them for the achievements they come up with (Edwards 2004). Aspects of management that add little value to the Commercial Real Estate Investment Although most of the processes seem to add value, there are some little aspects in management of the real estate, which seem to add little value to its growth. It has been stated that the value is at most determined by the customer or the service user. To be able to attend the many meetings that are frequently set by the committees does not actually produce much benefit to the industry. It is just a means of reviewing the past work and set ways for other field work to be conducted. This time should be limited and set only when it is much needed. If not it may end up contributing to the loss of some aspects in the industry (Banfield 2005). Activities and Skills that could add Value to the Commercial Real Estate Investment This field is a growing industry that is dynamic in its operation to the market. It also needs good real estate managers who can be able to keep up with the trend. Most of the managers seem not to find it useful to increase in their ideas of this field. They need to have a diverse knowledge base and skill set responsive to change. They must also be able to undertake their tasks in the same time following up the current local and state law news (Edwards and Ellison 2004). This is because the government agencies of cities, states shall be the deciding factor in how the commercial real estate will be managed and what is needed for the license of the real estates is. Communication is very important here. A manager must be in a position to converse with the public on the phone, in person and over the internet. They need to be well acquainted with the computer and other forms of communicating technology. Honesty, reliability and patience, are some of the needed fundamental ethics that are required to set up trust with people while they conduct business and the negotiation (Hill and Jones 2012). They also need to be very organized with how they deal with issues. Some of the real estate managers do posses these skills but others do not. It is very needful in terms of settling up a stable organization because it offers an environment that is well managed to develop and add value to the investments of the commercial real estate (Banfield 2005). Some of the issues that that the real estate managers should be doing are to put their focus on the occupier and use of the property and not the investment value. This is appropriate way to come up with the best property ever. It gives the opportunity to come up with better ideas and layouts that are above and desirable than others and the amount will not be a limiting factor to what they can build. Barriers that Limit the Potential of Real Estate Managers Even though it may appear that, this industry has a clear ground of conducting its activities. It is not the easy due to the barriers that it encounters. There are different times of barriers, which include restriction to capital accounts and the legal barriers which relate to the taxes and ownership of foreign assets (Geltner et al 2007). Capital control affects the opportunity of investors to repatriate their investments. This hinders the real estate investors in conducting their investment in different countries, and which finally destroying the development of commercial real estate investments (Edwards and Ellison 2004). Legal Barriers The legal barriers arise from the different legal status of foreign and domestic investors. It may come in the form of ownership restrictions or imposition of higher taxes. Some of the informal barriers that arise are because of the differences in the availability of information, accounting standards and investor protection. They are also risks that are equally important in the promising markets which are like that of the coinage risks, political risks, liquidity risks, trade and industry policy risk and macroeconomic unsteadiness. Political Barriers Politics can influence economic decisions and the country’s degree of openness to foreign investment. From this, it can be seen that investors will be deterred from investing in non-democracies. The currency movements have a large impact on the equity returns for the foreign investors. Many developing economies manage to keep the exchange rate volatility lower than that which is typically in industrial economies. In this system, it is hard for real estate investors to be able to make a reasonable profit out of the investments they are making (Haynes, 2010). Cultural barriers and their influence to Commercial Real Estate Investments There are cultural barriers, which are mostly seen when dealing with countries with certain religious beliefs. One of the most important cultural factors is the one related to communication and in particular the language barrier. It is related to the level of education and familiarity of the culture. This affects the real estate business because it is a diverse market, not a centralized market. Some of the poor cultural factors that end up limiting the potential of the real estate managers are the widespread routines of breaking of the safety rules, failure to comply with the organization’s policies and the team leaders failing to engage in proactive safety behaviors (Deakin 2004). Their cultures are necessary at achieving the outcomes that are needed in adding value to the business. The safety culture of an industry is the product of the individual and group values, attitudes, perceptions, competencies and patterns of behavior that determine the commitment to the industry (Edwards and Ellison 2004). To be able to get to a different higher level, the results of the previous progress has to be assessed and discussed of the effective way to change and come up with the better way of adding value to the commercial real estate. Finally, the risks have to be controlled and value added to the system (Geltner et al 2007). Bibliography: Banfield, A., 2005. Stapletons Real Estate Management Practice. London: Taylor & Francis. Bosak, A and Mayer, B and Vogel, H., 2007. Real estate asset management. Vienna: Europe Real Estate Publishers. Daft, R and Marcic, D., 2009. Understanding management. Mason. Cengage South Western. Deakin, M., 2004. Property management: Corporate strategies, financial instruments, and the urban environment. New York: Aldershot Ashgate. Edwards, V and Ellison L., 2004. Corporate Property Management: Aligning Real Estate with Business Strategy. London: Blackwell Publishing. Geltner, D., et al., 2007. Commercial real estate analysis and investments. [Cincinnati, OH]: Thomson South-Western. Haberberg, A and Rieple, A., 2008. Strategic management: theory and application. Oxford; New York: Oxford University Press. Haynes, J and Nunnington, K., 2010. Corporate real estate asset management: strategy and implementation. London: EG books. Hill, C. W. L. and Jones, G. R., 2012. Strategic Management Theory: An Integrated Approach. Ohio: South-Western Cengage Learning. Sharpe, W. F., 1964. Capital asset prices: A theory of market equilibrium under conditions of risk, Journal of Finance, 19 (3), 425-442. Read More