Any organisation, be it commercial or not-for-profit, needs to have a property strategy – a formal document that sets out how that entity considers its operational and, as applicable, its investment/freehold real estate.

Formulating and then implementing an effective property strategy is a crucial element of any organisation’s governance – and it is achievable with the right approach. It is an important building block of the G of ESG.

For the smallest businesses, say operating out of one location, a property strategy would set out the rationale to lease or buy property and if the former why a particular lease length was selected. For larger multinational businesses the property strategy would be materially more comprehensive, but it would, like the small business, consider the P&L and balance sheet impacts of its property interests. By way of example, lease obligations to pay rent and service charges will impact the P&L as will the interest charges on any borrowings needed to buy freehold property. Whilst not a cash flow item there should be prudent provisioning in the accounts for end of lease liabilities (such as reinstatement and dilapidations) and the annual writing-off of fixtures and fittings over the term of the lease or their economic life if shorter.

Whilst the above accounting policies for leasing or owning real estate are standard for an experienced bookkeeper there are decisions required for a property strategy that needs to be evaluated by an experienced Finance Director who may require some consultancy advice to supplement their own experience and skills. Once the strategy is prepared in draft it should be debated and ultimately sign-off by the Board or, as applicable, the Trustees or Governing Body.

So, let’s now consider some of the key questions for every property strategy. As a starter, does the existing property portfolio service, support and enhance the Business Plan of the organisation?

The critical point here is that the organisation first needs to have a clear Business Plan – it’s “raisin d’être”. Remarkably many businesses and charities do not have a formal plan and go by a “seat of the pants” approach. We would suggest that a Business Plan is critical and that only once there is a Business Plan can anyone assess now the various property interests service, support and enhance its delivery.