How Commercial Real Estate Investors Can Optimize Returns through Targeted Measures
In today’s fluctuating interest rate environment and changing market conditions, commercial real estate (CRE) investors face the challenge of safeguarding and enhancing their profitability. A recent survey conducted by Gunnar Gombert Strategy Consulting in June 2024 highlights key strategies that offer CRE investors the greatest leverage for improving profitability. The following measures provide actionable insights for maximizing returns and minimizing risks.
1. Customer Centricity: The Key to Long-term Profitability
The top priority for investors is understanding their most important and profitable customers. Do you know your core customers? Successful strategies rely on identifying and targeting the most valuable customer segments. Increasing market penetration among these high-value customers not only boosts short-term revenue but also strengthens long-term relationships.
Action Point: Develop detailed customer profiles and segment them based on profitability and growth potential to enhance penetration within key customer groups.
2. Cost Optimization: Distinguishing Good from Bad Costs
Cost management is a crucial factor in profitability. Not all costs are created equal: Some investments create long-term value, while others become unnecessary burdens. Identifying “good” versus “bad” costs allows investors to optimize resources and improve efficiency.
Action Point: Conduct a thorough analysis of fixed and variable costs to identify areas where savings can be made without compromising service quality or core business operations.
3. Sales Optimization: Unlocking New Revenue Streams
Beyond optimizing existing real estate assets, there are additional opportunities to grow revenues. What additional services or adjacent segments can you monetize? CRE investors can significantly boost their margins by offering services such as facility management, digital solutions, or bespoke value-added services.
Action Point: Develop a portfolio of additional services that cater to the needs of your tenants and investors, delivering clear value while generating new income streams.
4. Technology: Leveraging Automation for Efficiency
Technology plays a critical role in automating administrative tasks and reducing overhead costs. Operating at scale through technology means achieving efficiency with limited resources. The right technology investments can streamline operations and unlock further growth potential.
Action Point: Conduct a technical due diligence to identify areas where automation can add value and reduce costs within your organization.
5. Standardization: Streamlining Processes for Efficiency
Standardizing processes is key to achieving operational efficiency. What processes, products, or services can be standardized without sacrificing quality? By implementing repeatable and standardized workflows, investors can reduce errors and leverage economies of scale.
Action Point: Identify areas where standardized processes can lead to greater efficiency while minimizing operational risk.
6. Scaling: Achieving Growth with the Right Strategy
Achieving the right scale is essential for long-term competitiveness. What minimum scale is required in terms of assets under management (AUM), square meters, or project volume to realize economies of scale? The goal is to reach a size that delivers cost advantages and operational efficiencies.
Action Point: Set clear growth targets and develop a strategy for achieving economies of scale through organic growth or acquisitions.
7. In- and Outsourcing: Focusing on Core Competencies
Not all processes need to be managed in-house. What non-core activities can be outsourced to save costs? By outsourcing non-differentiating functions, investors can focus on their core competencies while reducing expenses.
Action Point: Evaluate your core strengths and assess which activities can be more efficiently managed by external providers without compromising on quality.
Conclusion: Increasing Profitability through Strategic Measures
The results of the Gunnar Gombert Strategy Consulting survey make it clear: By focusing on the right levers – customer centricity, cost management, sales optimization, and technology – commercial real estate investors can enhance their profitability even in challenging market conditions.
At Gunnar Gombert Strategy Consulting, we not only help clients develop tailored strategies but also support them in implementing profitability measures. Together, we identify the greatest opportunities for your business and help you leverage them effectively.
Contact us to learn how we can help your company stay on the path to success.
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