CRE Asset Management: Transitioning from a Tactical to a Strategic Role in 2024

Today marks an exhilarating era for asset managers, as they stand at the threshold of unprecedented opportunity. It’s not just about deals anymore – it’s about transitioning from a tactical approach to a strategic one. It’s a time to embrace new responsibilities and showcase your indispensable value within the organization, transforming challenges into triumphs and setting new benchmarks in excellence! This shift alone can help CRE firms set the stage to “thrive until 2025” and be prepared for long-term success. 

Read ahead to learn the importance of this shift, how the role has changed, and steps to smoothly make the transition.

The Shift Matters: Everyone is an Asset Manager

Today, market conditions like rising interest rates and deal scarcity have changed the commercial real estate (CRE) industry as we once knew it. Consequently, the asset manager’s role has undergone a significant transformation. As the focus shifts from glorifying new deals to the strategic management of existing transactions, asset managers find themselves in the spotlight. Asset managers are now tasked with a more critical evaluation of assets, ensuring alignment with organizational strategy and considering the right “next steps” to keep existing assets afloat.

However, finding staff who comprehend both tactical and strategic asset management can be challenging. To fill the gap and ensure optimal performance, everyone within the firm needs to contribute. Amidst cash flow concerns, execs are even becoming intimately involved in asset management. The shift from tactical to strategic asset management matters in navigating these challenging times. “All hands on deck” should be the motto for firms who want to successfully make this transition.

Strategic Vs. Tactical CRE Asset Management – What is the Difference?

Strategic asset management involves conducting a comprehensive portfolio evaluation. Asset managers who lead with strategic asset management seek to address questions such as

• Is the asset well-positioned in the market/portfolio?
• Is the portfolio’s performance dictated by me, the property manager, or by market conditions?
• What might current property valuations be if/when we transact?
• What learnings from a troubled or successful asset can we apply to future deals?

Strategic asset management also delves into understanding the most important factors affecting the asset within a specific timeframe and aligning them with the broader investment horizon. Additionally, evaluating troubled properties and scrutinizing the effectiveness of past dealings are examples of strategic asset management.

On the other hand, tactical asset management deals with immediate, tangible issues like broken pool chairs and pumps. Tactical asset management represents the day-to-day operational challenges that require swift attention. 

Balancing both strategic foresight and tactical problem-solving ensures a holistic approach to asset management. However, asset managers and property managers executing the same tasks can create inefficiencies. For the most effective asset management, asset managers shouldn’t be responsible for the daily operational challenges. Instead, the property manager should focus on activities, like routine property maintenance. Then, the asset manager can avoid getting into the weeds and instead execute on strategic initiatives to advance portfolio growth.

3 Steps to Transition from Tactical to Strategic Asset Management

If your firm isn’t accustomed to a strategic asset management approach, you’re not alone. We’ve outlined three steps to help you seamlessly shift to this new management style:

• Step 1: Clearly Define Asset Managers’ and Property Managers’ Roles.

As we mentioned earlier, asset and property managers should have clearly outlined roles to avoid overlap and organizational inefficiencies, ensure maximum effectiveness, and streamline the decision-making process.

• Step 2: Empower Asset Managers with a Holistic View of Portfolio Data

Asset managers need a holistic view across the asset and groupings of assets to make the most strategic decisions. At minimum, they should have monthly access to view operations, financials, capital and debt structures, and property comps and valuations that can be used to make informed decisions. Otherwise, they are only seeing a small view of the portfolio and can quickly get lost in the weeds.

• Step 3: Enforce an Organizational Culture Shift Around Asset Management

Strategic asset management won’t work without an organizational culture shift around asset management. You’ll need to create a plan to help team members understand the importance of the strategic shift, how it impacts their individual contributions, and how it impacts the organization at large. With complete adoption, your team won’t lose sight of the bigger picture across the market and portfolio.

How Lobby CRE Can Help You Shift from Tactical to Strategic Asset Management

Recognizing the time-consuming nature of reporting, Lobby CRE enables asset managers to dedicate more time to extracting meaningful insights. With technology, the transition to strategic asset management becomes more accessible and tailored to the unique needs of each manager. Lobby CRE assists asset managers in addressing specific weaknesses across operational and financial data and embracing the notion that asset management is not a one-size-fits-all. 

As the market continues to shift, asset management will remain at the forefront of the conversation. If you want to “thrive until 2025”, you’ll need to understand the operational performance levers and how they affect one another. Having a holistic portfolio view, setting the right processes, and establishing well-defined roles and clear strategic initiatives will be key in switching to strategic asset management.

Watch the webinar, 2024 State of CRE: Insights to Help You Survive the Next Market Cycle,to help you keep an eye on trends and market indicators to understand how they may impact your asset and portfolio performance this year.