P

roperty is often considered to have

THE HEADQUARTERS OF LLOYD’S REGISTER – AN IAM
PATRON – IN LONDON. THE NEW EXTENSION WAS greater significance as an overhead to
DESIGNED AS PART OF A CORPORATE CHANGE the business than as a productive
AGENDA TO REINFORCE MODERN WORKING asset. However, this view is changing.
PRACTICES AND PROMOTE A CONTEMPORARY
IMAGE OF THE ORGANISATION. Many owners and occupiers of
property are re-assessing their
approach to managing property assets
to find ways in which buildings and
facilities can best add value to the business operation.
Asset Management is defined by PAS 55 as ‘the
optimum way of managing assets to achieve a desired
and sustainable outcome’. This approach closely matches
professional best practice as it is evolving in the UK
property sector. The Institute of Asset Management’s plan
to make property the subject of the first of a suite of asset-
specific guidelines supporting PAS 55 Parts 1 and 2 is,
therefore, timely and appropriate.

THE CURRENT SITUATION

Conventionally, the prime objective of managing real
estate assets has been to control short-term running
costs. The main concerns have been with immediate,
operational and maintenance matters. There are a
number of reasons for this approach:
▲ Expenditure on property is generally the second
highest business cost after payroll, so that it is an
obvious target for cutting costs to boost annual profit
▲ Property is often perceived by managers to be a
‘sunk cost’ that has little impact on strategic decision-
making
▲ Operating and maintenance costs of property
assets are easily measured, whereas the long-term
strategic benefits of buildings and facilities are less
readily quantified and their effect on the ‘bottom line’ is
not so apparent, so that they tend to be overlooked
▲ Property is a relatively permanent asset and the
transactional costs of acquiring or disposing of property
assets are high, which tends to reinforce the status quo
▲ Information shown on the financial statements,
including surveyor’s valuations, often influence property-
related decisions – but valuation techniques and the
accounting framework do not provide the full picture of
the economic costs and benefits of property assets that
are needed by managers to inform decision-making.

PROPERTY
ASSET MANAGEMENT
THE NEED FOR CHANGE
The changing approach to managing property assets is
illustrated in the diagram below. The conventional
concerns of property management, which lie within the
blue circle, can be contrasted with the approach of Asset
Management, which occupies the area enclosed by a green
oval. Asset Management involves consideration of short-
term, operational as well as long-term, strategic issues, and
includes both costs and benefits. The arrows represent the
IAM Council MemberTim Lloyd outlines the main issues and shift in thinking and practice needed to move from the
the plan for PAS 55 Part 3 on Property current situation to meet the requirements of PAS 55.

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CURRENT AND EMERGING PRACTICE of concern about managing the asset … but you’re never
IN THE MANAGEMENT OF PROPERTY going to save your way to prosperity’.
ASSETS ▲ Whole-life cost analysis is leading to a shift in the
(DIAGRAM ADAPTED FROM STEPHEN BROWN 2001 COMMUNICATION balance between short-term construction costs and
IN THE DESIGN PROCESS)
long-term running costs in favour of increased capital
Focus on outputs / investment.
benefits
▲ Integrating the facilities management function
and the procurement process, as in the Public Finance
Initiative, is resulting in the closer co-ordination of
design and operation of buildings
▲ Greater attention is being paid to the economic
POST-OCCUPANCY STRATEGIC value of good building design, particularly the links
EVALUATION PLANNING between business performance and the built
environment
Operational Strategic ▲ Increasingly, the value in use of a building is being
outlook future situation outlook
seen to be more important than its exchange value,
current which might be quite different
situation ▲ Organisations are becoming more aware of the
potential for buildings to affect profitability through a
OPERATIONS / PROCUREMENT wide range of ‘soft’ issues such as promoting
MAINTENANCE STRATEGY organisational change, attracting and retaining staff and
so on. Decision-making more often includes intangible
costs and benefits, not only ‘hard’, measurable factors
▲ Managers are increasingly using building assets
to position their organisations strategically. Property is
often the point of delivery for public services, such as
Focus on inputs /
libraries, schools and hospitals; whereas managers of
costs companies in the private sector are increasingly using
buildings to reinforce brand image, thus increasing the
There are several reasons why the range of issues value of the business
affected by the management of buildings and facilities is ▲ The design and procurement process is
expanding and becoming more closely aligned with the increasingly attempting to reduce the risk of owning
scope of Asset Management. Some of these are listed property assets by ensuring that buildings can be
below: adapted in the future to suit changing uses
▲ Advances in information and communication ▲ The property market is adopting more
technology, particularly the growing use and relevance sophisticated and efficient arrangements for owning
of the Internet, are eroding the traditional importance and leasing property assets.
for many businesses of geographical location and
resulting in a requirement for accommodation that
supports new and more flexible work or production PAS 55-3.1
patterns Despite the common ground that exists between the
▲ Increasing competition, particularly from rival emerging trends in managing real estate assets and
organisations in other countries, are forcing businesses Asset Management, awareness of the principles and
to consider how all their resources, including real estate, practices of Asset Management amongst property
can be actively managed and combined in new ways to professionals is low compared to other industry sectors.
maintain a competitive edge Discussions between IAM, BSI and Consilian at the
▲ Growing demand for limited resources is resulting end of last year led to a process of research and informal
in greater emphasis on social, economic and inquiry to determine how these organisations might
environmental factors that affect the sustainable work together to promote the practice of Asset
development of land and buildings. Management in the property sector. It was decided that
PAS 55 Parts 1 and 2, which were launched on 11 May
2004, should be supplemented by a Part 3 document
THE FUTURE SITUATION that provided bespoke guidance tailored to the
Some of the recent changes in the management of real management of property assets.
estate assets in the UK can be summarised as follows: An important outcome of these discussions was the
▲ More businesses are adopting property strategies engagement of the Royal Institution of Chartered
that seek value for money rather than least cost. In the Surveyors (RICS), which is represented by Alan White, to
words of Bob Cawley of Meta Group USA: ‘There is a lot be a partner with IAM and BSI for this project. The early
involvement of RICS will ensure that the collective views
and expertise of its members, who are generally perceived
as ‘the property profession’, will be communicated in an
effective manner throughout the project.
An additional benefit of forming an alliance with RICS
is the opportunity to promote the IAM to more than
110,000 chartered surveyors across the world. This link
with the world’s largest property organisation is certain
to encourage individual and corporate members from
the property sector to join and participate in the activities
of the IAM.
Preliminary market testing has indicated a strong
demand from both the public and private sectors for
bespoke guidelines for the management of property
assets. In response to this demand, Consilian has
prepared a draft Project Initiation Document for the
preparation of PAS 55-3.1. Once this plan has been
submitted and approved by the IAM, it is anticipated that
the project will make a formal start in the Autumn 2004.
NEXT STEPS
The preparation of PAS 55-3.1 will follow BSI’s process in
a similar way to Parts 1 and 2, where a Steering Panel of
technical experts determine the content and format of
the guidance under the overall management of the
Project Team. The draft guidance prepared by the
Steering Panel will then be circulated for comments
around a wider Review Panel of about twenty interested
parties that are likely to be affected by the publication of
the final document.
The following organisations in the public sector have
agreed to take a place on the Steering Panel:
▲ The Office of Government Commerce, Property
and Construction Directorate
▲ The Department for Constitutional Affairs,
Facilities Management Group
▲ The Institute of Public Finance
At the moment, three or four places are reserved on
the Steering Panel for project sponsors from the private
sector, who will provide the funds needed to continue
the project. Sponsorship of PAS 55-3.1 will provide
organisations with the opportunity to help develop
authoritative guidelines in managing property assets
that are endorsed by the leading UK bodies for
promoting best practice in physical Asset Management,
for preparing national standards and for professional
practice in the property sector.
Anyone who is interested in joining either the Steering
Panel or the Review Panel should please contact John
Woodhouse or Tim Lloyd for further information. ▲
John.woodhouse@twpl.co.uk
Tim Lloyd on mail@consilian.co.uk
For more information on PAS 55 Parts 1&2
see issue 2 of Assets. They can be ordered
from the BSI on 020 8996 9001 or
orders@bsi-global.com.
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