IFC Second Edition The A-Z of facilities and property management David Martin Published by Thorogood 2006, updated and reprinted 2008 and 2010 Thorogood Publishing 10-12 Rivington Street London EC2A 3DU Telephone: 020 7749 4748 Fax: 020 7729 6110 Email: [email protected] Web: www.thorogoodpublishing.co.uk © David Martin 2010 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying, recording or otherwise, without the prior permission of the publisher. This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than in which it is published and without a similar condition including this condition being imposed upon the subsequent purchaser. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher. A CIP catalogue record for this book is Special discounts for bulk available from the British Library. quantities of Thorogood books are available to corporations, ISBN 1 85418 696 5 institutions, associations and other 978-185418696-6 organizations. For more information contact Thorogood by telephone on Cover and book designed and 020 7749 4748, by fax on typeset by Driftdesign 020 7729 6110, or e-mail us: [email protected] Printed in Great Britain by Marston Digital The author David M Martin FCIS FCIPD FIoD The author David M Martin has been Assistant Secretary of two public companies, Scaffolding Great Britain and Gaskell & Chambers, where he was directly involved in property and contractual matters as well as personnel and corporate administration. He was subsequently appointed Secretary and then Director and Secretary of one of the top 250 listed PLCs where he remained for nearly ten years. David was responsible for a range of disciplines – including property and insurance as well as statutory and legal requirements and corporate/internal communications. The property portfolio comprised over 400 units including retail, manufacturing, warehousing and domestic premises. Following a takeover, he founded his own business consultancy – Budden - brook – in 1985. Buddenbrook carries out various projects for a range of clients, large and small, including conducting property negotiations, acquisitions and disposals, rent reviews and renewals etc. David is also an employer’s representative for the panel of members for the Employment Tribunals and a member of one of the Registrar of Companies committees. He speaks at around 90 seminars each year and is author of around 50 business books. A sixth edition of his title The Company Director’s Desktop Guide and a third edition of his The A-Z of Employment Practice are now available from Thorogood. iii Foreword It’s for you! “I’m not into property – I just want to make widgets.” This is entirely under- standable, but whether your organization is making widgets, selling insurance or leasing aircraft – or, indeed making and/or selling anything else, then, like it or not, you arein property. Property is often the most valuable of an orga- nization’s fixed assets; for example, trading in UK property portfolios reached a record £9 billion in 2005. Here, however, we are concerned not so much with property as an investment (other than as a one-off) but with its use and admin- istration for the purpose of an organization’s own business. Some entities employ managers to specialize in property administration; in most, however, either the duties relating to such assets are allocated to a manager already fully committed to his or her ‘real job’ – or they are not properly administered at all. Such a ‘property admin. vacuum’ is not restricted to smaller organizations. In an investigation of a hundred of the largest 1000 UK compan ies, property surveyors DTZ Debenham Thorpe discovered that: • only 20% of those surveyed had a comprehensive database concerning the properties they occupied, and • 10% had such incomplete databases that not even addresses and details of tenure were recorded centrally! The survey also disclosed that 66% of organizations were investigating how to minimize their occupation costs – though how this could be achieved without an accurate database is difficult to reconcile! v A property strategy It may help planning and administration in this area if occupiers develop and adopt a property strategy. For example: Whilst it is accepted that the [organization] needs to occupy property(ies) primarily to facilitate its aims, it is recognized that property occupation/ownership a) generates opportunities to trade in such assets and such opportunities will be explored and exploited b) imposes responsibilities, obligations and liabilities, the full extent and effect of which will be established and considered as part of the regular planning process of the business c) requires regular investment not only to comply with legal obligations, but also to maximize its value and protect the investment. Some organizations may wish to adopt a strategy which commits them to trade actively in the property(ies) they use as well as in their core business, although the dilution of management attention as well as the potential dislocation caused by repeated moves must be carefully considered. ‘Occupational value’ myopia The DTZ report also stated that ‘…proactive management of occupational real estate will make a significant contribution to a company’s performance’. Surely at a time when all organizations are looking at improving performance by realizing assets and cutting costs this strategy should include ‘occupying (their) buildings more efficiently’. This point was emphasized by the Royal Institution of Chartered Surveyors (RICS) which stated that British industry is ‘…throwing away £18 billion every year’ through inefficient control and use of its property assets. The RICS calculated that proper budgetary and cost control, space planning, disposing of surplus space, etc., could ‘boost profits by 13%’. Far too often organizations enter into the long-term commitment of property occupation without fully appreciating the obligations they have taken on, whilst the routine administration of the facility may be handled by a variety of different people perhaps leaving gaps and paying insufficient attention to gaining ‘best value for money’. The DTZ survey suggested that only around 50% – 70% of occupiers monitor their property costs, whilst only 25% – 40% review existing and potential property values. Property can be improved, altered, have its use changed, be used as loan security and sold – all strategies which can work to the financial and efficient benefit of the business. vi THE A-Z OF FACILITIES AND PROPERTY MANAGEMENT FOREWORD Duties The obligations of those responsible by appointment (or default) for the administration of their organization’s property assets are three fold: 1) Facilities administration, which the British Institute of Facilities Manage- ment defines as: • the integration of multi-disciplinary activities within the built environment and the management of their impact on people and the workplace • (combining) resources and activities (which) are vital to the success of any organization, by contributing to the delivery of strategic and operational objectives • providing a safe and efficient working environment which is essential to business performance whatever its size and scope • the provision, maintenance and development of myriad facility services which range from developing a strategy, managing space and putting in a communications infrastructure to building maintenance, administration and contract management. 2) Budgetary and expenditure control. In many organizations there is an apparent ‘cost blindness’ to property expenditure, so much so that facility costs are regarded as fixed and immutable as taxation. Indeed in some instances costs are passed for payment with hardly any examination as to correct calculation and/ or appropriateness. This is doubly curious since presumably costs related to other purchases are surely not passed for payment without investigation. Of course property costs could be among the most expensive in the budget. 3) Property administration, which could include: • long-term planning of requirements • compiling and administration of records • interfacing with regulatory bodies involved in building, fitting out and occupying properties, and those having access to them • interfacing with landlords and/or agents • administration of cleaning, security, reception, housekeeping and safety, waste disposal, gardening etc. services • ensuring compliance with covenants under leases • interfacing with, providing information to, and making claims on insurers vii • interfacing with utility and other bought in service providers • preparing and updating contingency and/or disaster recovery plans • interfacing with neighbours and trespassers • assisting with planning and implementation of relocation • overseeing the renegotiation of leases, agreeing rent reviews and renewals and so on – and on – and on! With this range of obligations it is obvious that in any organization with more than a few properties (particularly if leased) this should not be a job to be added to the duties to be undertaken by someone who already has enough to do. It poses specific problems and challenges which, if not dealt with properly, could involve (and often does) considerable cost, waste and inconvenience. The challenges of the 21st century Both the working environment and the location of such work are subject to considerable change and, assuming these changes continue in their current direction, present new problems for the property administrator. For example, around 3 million people in the UK work at home and this number has been projected to grow to around 9 million by 2010. (Although the recession has substantially increased the numbers unemployed, a considerable number of those thrown out of work have started their own businesses working from home so these projections could still be met.) If correct, this would mean roughly a third of the UK workforce could be working at home within the next decade, which, apart from the beneficial effect it would have on public transport and road congestion, could mean a substantial reduction in demand for commercial property. After all, if an organization can operate effectively with only two-thirds of its workforce commuting to, and working in, its traditional workplace, at the very least the size of those workplaces should be re-assessed. Organizations should ensure NOW that they do not commit on a long-term basis to space which could become a costly surplus in the future. viii THE A-Z OF FACILITIES AND PROPERTY MANAGEMENT