Management of Municipal Real Estate Property

Management of Municipal Real Estate PropertyMunicipality possess very much real estate. From research and in practice, managing and exploiting that municipal real estate especially representing technical operational management and maintenance and not much more than that. Of financial management, account management, risk management or simply put: real estate management is not or hardly any. For a long time there were no problems with it on the air. The last years by all kinds of developments in the area of the municipalities increasingly critical looked at the use of the resources available to the municipalities (people, money, real estate). And it is becoming more clear that the management of real estate falls far short on the management of human and financial resources. And that is the use of the instrument real estate.

With the many real estate are many purposes served and achieved. But the question is whether optimal is handled with the housing of all kinds of social institutions. Let the municipalities not all kinds of opportunities, and do they themselves (real estate is capital intensive and to date also quite labor intensive decorated at municipalities), civil society and the social institutions not shortage?

In short: there is not much too much time and money wasted, because municipalities the management of their real estate not in order?

Size portfolio
What are we talking about then? Municipalities are the largest owners of public real estate. A large part of the total social real estate in Netherlands turns out to be owned by municipalities. This then goes to town halls, libraries, schools, community centers, theatres, sports facilities, and so on. Municipal real estate represents a value of an estimated 30 billion, which is almost as much as the total commercial office market.

Real estate management and municipalities
Real estate management in municipal organizations is below par. The Institute of real estate management has researched the property management municipalities. The research is also representative of the entire municipal market.

Many municipalities also find real estate but a tricky issue. Statements like “we are not” or “property management is not a core function” come up with some regularity in the Advisory practice. At the same time also a nice austerity seems real estate post. There is recognition that in the real estate deal and the necessary money so there must be a budget cut with it. But which? The drip-feed method is applied to occasional financial advantage, but there is usually not made clear what the structural consequences. Put pressure on Budgets that are been whittled down the manage and operate the real estate and that brings risks.

The users will not all of a sudden the maintenance yourself. The municipality continues as owner responsible for major repairs and the municipality remains responsible and liable if things go wrong. Injuries by not well maintained sports grounds, chlorine vapors as filters in swimming pools, the damage after fire while fire fighting equipment was not functioning. The municipality is and remains as the owner responsible for quite a lot of play at the end. And then this obligation is even heavier at the municipality, which also has a responsibility in the enforcement on legal requirements.

What can go wrong? A range of incidents involving municipal real estate has the last years the newspapers. The fatal accident in a Takashi swimming pool in 2011 is a sad low point, where technical maintenance and monitoring. On many places have aldermen have to give up their portfolio because financial shortages came to light. The recent commotion in the Council on the disorder within the municipal real estate organization plays for quite some time. On multiple planes walk municipalities risks when it comes to own real estate portfolio.

Financial: it often turns out that municipalities financial flows around real estate objects not picture completely. Sometimes the available budgets, insufficient even for meeting legal obligations that a building owner has. Sometimes they are all been whittled down.

Tax: tax issues (particularly VAT) in real estate complex. Often there is insufficient attention to fiscal matters and remains there or is money – financial-risky deal with sales tax structures. Towards the tax authority the municipality as Government a party that should be an example in society. BTW-constructions than risky and are sensitive.

Enforcement: Municipalities play different roles in the real estate. Municipalities play a number of roles that come with other property owners not for, namely legislation and enforcement. That is reserved to the Government. It can be tricky as the eigenaarsrol and the handhavingsrol of municipalities. A municipality that for the renovation of its own objects no or insufficient attention to the permitting procedure as an example. Or a village house which is owned by a municipality where complaints are regarding noise pollution. Sometimes this “resolved” within the lease. Then the private law and public law can responsibilities by each other, what risks and possible damage claims.

Accountability: municipalities with regard to their real estate portfolio more and more forced to act as a “regular” real estate owner/administrator, with hidden subsidies are not allowed. Of course there is room for subsidies, but clear and visible and according to strict rules. Recently (2013) is the law market and Government. In the foreseeable future, it is expected that municipalities also have to pay corporate tax on their real estate business.

In practice, there are many situations where appointments are set out in leases that are in conflict with the law market and Government. Municipal real estate is still often rented at below cost to social institutions. Sometimes this below cost leased areas all kinds of commercial activities. Village houses where parties and celebrations are held. Canteens operated as a café. But also shops in the possession of the municipality, where below market rent is rented, is competition for commercial landlords. These are all examples of unauthorized forms of support, of hidden subsidies that the market may cause undesired operation. There is getting sharper on the light from the Empire (via the Consumer Authority and market).

In summary: lack of understanding of the technical condition, no financial transparency, no Director or organization, no policy and vision and act in violation of laws and regulations are the factors that play in the real estate needs of the municipalities. When it comes to about 30 billion euros of public money is that a shocking conclusion.

Let municipalities outside the described risks also many opportunities. Municipal real estate sometimes contains real estate gems (Silver) that promising and can be exploited. Good property management not only supports in achieving social goals, but can sometimes also attractive financial gain (one-time gains and structural cuts in maintenance). That does mean that the entire portfolio on the right way in map.

Good real estate management starts with the base, the information should be on order. Now the available info often technical in nature. Financial data is missing often, as well as good contract management and good account management. Send on financial parameters is an unknown phenomenon among municipalities. Better purchasing and procurement to achieve economies of scale is still scarce. On tenants contact and customer satisfaction is not sent. There are all great opportunities to optimize.

That requires that the current situation at municipalities need to change. Where real estate especially technically is accessed and the tasks and responsibilities are fragmented across the municipal organization there should be a battle of centralisation. Files in order, gather information to make the right management information. Those are the first basic steps, which anno 2015 still pretty rare. Real estate policy needs to be developed. If equipment must be real estate, like finance and staff, be recognized as a solid pillar in the organization.

Cope well with the challenges coming on the municipality requires an optimal use of all means. Facilities in village centres are under pressure. The three large decentralisaties provide more tasks for municipalities. In many cores are the educational facilities under pressure by declining numbers of pupils. Sport associations have difficulty with aging and hazing. For municipalities is the choice more difficult where the funds are going to be used. Which activities are still supported and which are going to be phased out?

Space remains necessary, but there may be dealt with by giving them different and smarter to use multifunctioneler to get up by occupancy rates, cost to bring down and rent prices more transparent and cost recovery. Subsidisation not through the real estate, but through the activities, which have to pay rent for the property to create transparency. And especially choices where it started is by the municipality, so that better on the use of real estate can be sent.

Professional real estate management at municipalities, it sounds very simple and that is the ultimate too. But simple is not easy to achieve. Within the municipalities is a completely different take on the commitment of resources. So how do we deal with real estate, what goals we want to achieve, and what we have apply for about. Here is a lot of time, money, and political-administrative courage. To the real estate professionals the task to continue to make clear the benefits of the good use of real estate. That is still a world to win, for sure.

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