Kinnisvara blog

In Newsec we measure two important items we believe indicate and predict the success of our business within real estate in the future; Employee Satisfaction and Client Satisfaction. And in this order.
High score in employee satisfaction is not only having fun in your job, it is much more. It includes for example good leadership; trust in the organisation’s leaders; employees being proud of what they do and achieve; employees enjoying co-operating with other employees; open communication and possibilities to develop in your work.
In tough times like we have now seen in the markets, you could imagine that only hard values matter to achieve the best results. Maybe very short term, but longer term we strongly believe that there is a high correlation between employee and client satisfaction. Therefore we put a lot of emphasis on the components creating a good workplace. We believe that high client satisfaction leads to client loyalty and creates a platform for long term, good business.
Newsec has in Finland participated in the Great Place to Work® – study now three years in a row and has each year also been selected as one of the best places to work in Finland. Within real estate business Newsec is The Best Workplace in Finland
Inspired by this success, the whole Newsec-Group is now adapting this practice to measure employee satisfaction in all Newsec companies in Northern Europe.

I was delighted to see the November 2009 issue of Harvard Business Review tackle about the importance of real estate as a second largest asset of almost every company. As they point out it should be viewed not merely as an operating necessity – wich it obviously is in the Nordic winter – but as a strategic resource to boost productivity and encourage innovation, if managed professionally.
What senior management needs to do, HBR points out, is a high-level view of their real estate situation, which they won’t get from the site-by-site analysis that is generally the focus of internal staffs and systems. Executives need a "snapshot" of the company’s footprint: the locations, the land and building types, the utilization, the lease terms, the operating costs, and the financial and environmental risks. In short, they need to think of real estate holdings as a portfolio – not a set of discrete properties.
The portfolio approach is especially important when a company is going through a major change, such as a merger, an acquisition, or a divestment. Rationalizing an organization’s real estate – matching space and facilities to strategic and operational needs – can be as important as rationalizing the workforce. Portfolio analysis can also inform leaders about a property’s costs and uses over time.
The most efficient organizations often do the least to operate their business real estate. Instead, they team with firms offering the full range of real estate functions and services. According to HBR, such partnerships succeed, if both parties agree on two conditions. First, the organization must be willing to share some control over its properties. Second, the real estate firm must agree not to focus solely on transactions but to work toward long-term goals such as strategic advantage, occupancy-cost reduction and employee satisfaction – and do this all in a sustainable way.
Therefore HBR encourages all leaders to embrace sustainability – it is here to stay. Companies of all types are beginning to transform the buildings they use to reduce emissions, and many leaders are making it clear that environmental concern is not a fad or a PR gimmick. As WPP CEO Sir Martin Sorrell said, "Our green approach is not altruism; it’s good, responsible business. CEOs ignore this issue at their own peril".

Arttu Ruismäki

You may have tried to do it yourselves. Noticed that there is no time. What to do?

Real estate professionals specializing in Asset and Property Management may be the best solution. The right choice can lead to cost savings and working community well-being. There are many different companies and services. When you know what works best, you have the key to success. Real Estate Investment is a major decision. It is also crucial who takes care of your property. It is important to choose a partner you can trust and with which you know that you are getting good cash flow, the best return for your investment and also satisfied tenants. Price alone should not be a crucial selection criterion. If the price of the service is low but the quality does not meet expectations, you get what you pay for.
 
Delegating decision-making is the most important part of the client and service provider relationship. Once you have selected the best of the Managers´ and delegated responsibilities you can leave the daily affairs to professionals.

Have a nice and relaxing Holiday Season and a Happy New Year 2010!
 
Mikko Salla

Inflation expectations among economists are quite different right now. One side agrees upon the outlook for moderate price level increases, whereas the other side expects high inflation figures due to recent highly expanding monetary policy worldwide.

But what if the prices indeed begin soaring; how one can hedge against inflation? Real estate is a good choice. This is a widely discussed issue among academics, and full unanimity has not been reached. Nevertheless, the majority seems to agree that real estate provides at least partial inflation hedge, and in the following my supporting arguments are presented.

In most cases income stream is inflation-protected as contract rent is often tied to Consumer Price Index, providing the landlord with a robust shield for both expected and unexpected inflation. One might argue that there are still risks involved in the development of operating cost level, because as seen in the course of past years, operating expenses tend to increase faster than gross rents. This is very true, and hence, even stronger hedge is attained where tenants get the responsibility for costs through a net lease agreement.

The downside here is that when the inflation starts soaring the interest rates will also be higher, which in its turn affects the yields - and thereby capital growth. Typically when inflation hedging capability is discussed, this component of total return is omitted. However, owing to recent significant yield shift, properties are today priced fairly moderately, leaving less room for further capital depreciations.

Some alternative property type may provide better inflation hedging capability than others, but the best ones have at least one thing in common: low vacancy rates. In Finland I would argue that rental apartments and shopping centres would serve as the most efficient inflation hedge today.