3 Strategies to De-Risking Your Real-Estate Portfolios During Constant Change

Things are changing constantly in the real-estate market and so taking the steps to de-risk your commercial real estate (CRE) portfolio isn’t just a necessity—it’s a strategic advantage. 

There will be never-ending economic uncertainties and plenty of regulatory complexities ahead, therefore CRE portfolio holders face unique challenges that they need to prepare for now to protect their assets. 

Below we’ve shared a guide that not only addresses these hurdles, but also provides actionable strategies to turn these challenges into opportunities.

But first, let’s address these challenges: 

Working With Economic Volatility

The economic environment is shifting fast due to inflation and rising interest rates that continue to push up the cost of doing business. Capital is harder to secure, borrowing costs are higher, and new lending restrictions can make refinancing a big challenge. 

If your portfolio isn’t prepared, you could be left scrambling when it’s time to restructure loans originated during a more favorable interest rate environment.

Managing Regulatory And ESG Demands

Environmental, social, and governance (ESG) standards are being taken very seriously and they are something that CRE portfolio holders can no longer wait to address. ESG standards are critical components of any forward-thinking CRE strategy. The properties that align with modern consumer behaviors and sustainability requirements are setting themselves up for success in the long-term. 

Those that don’t have their properties aligned with these standards are facing increasing regulatory pressure and environmental risks that could severely impact their value, which is critical to address right now. 

Understanding The Potential Of Technology 

Technology waits for no one. 

Older buildings, once prized assets, may now be seen as liabilities due to technological advancements making them obsolete. Properties that fail to keep pace risk becoming irrelevant, especially as the monetary environment slowly loosens and refinancing becomes a necessity.

The 3 Proven Strategies for De-Risking Your Portfolio

1. Diversify and Conquer

Think beyond traditional property types and geographic boundaries. By diversifying across sectors (e.g. office, industrial, retail, and residential), you are protecting your portfolio against market fluctuations. 

Consider tapping into under-serviced markets, like residential spaces for retirees for example. These assets often boast strong cash flows and are less sensitive to interest rate spikes, providing a solid buffer during economic downturns.

2. Create Premium Experiences

In the age of hybrid work, the office needs to be more than just a place to pull up a chair and work – it needs to provide a positive experience. 

Invest in creating office spaces that offer the ‘wow’ factor, making employees eager to return to the workplace. While this may require upfront investment, the long-term payoff is substantial: higher occupancy rates, premium rents, and a reputation for owning top-tier real estate.

3. Embrace Sustainability for Long-Term Gains

With energy costs linked to global geopolitics, improving the energy efficiency of your buildings isn’t just good for the planet – it’s good for your bottom line. 

Proactively adopting ESG-friendly practices, such as energy efficiency upgrades and sustainable materials, can boost your property’s appeal. Explore investments in technology-driven real estate like data centers or logistics facilities, which are in high demand and align with a sustainable future.

What’s The Payoff?

De-risking your CRE portfolio may seem like a lot of work and a huge challenge, but with the right strategies in place, it can be done. 

By diversifying, innovating, and embracing sustainability, you are building a solid foundation for the future of your real estate portfolio, which will ensure long-term profitability and relevance in a market that changes constantly. 

Take the first steps in de-risking your portfolio and see what potential awaits the future of your properties.

About Map Mortar

Map Mortar is the only solution on the market that gives an eagle eye view of the decarbonisation status of your entire real estate portfolio. 

The innovative technology simplifies complex financial planning, helps reduce and de-risk CAPEX and also gives the strategic oversight Heads of Sustainability need to succeed in their roles within the commercial real-estate industry. Visit their website at mapmortar.io.

Written with MapMortar