By Gordon Baxendale, Business Leader – Program, Cost and Asset Management, Arcadis AusPac
As the infrastructure sector faces a period of increased uncertainty and rapid transformation, the question arises: are these changes here to stay? Gordon Baxendale looks at how COVID-19 may shape the way we think about asset ownership and resilience.
The unprecedented period of upheaval due to the COVID-19 pandemic and resulting economic uncertainty has proven that the post COVID could look very different in terms of social and economic norms.
In terms of asset portfolios, it is becoming increasingly clear that our need for space will undertake a massive shift.
Global quarantines and social distancing regulations have upheaved traditional ways in which we shop, educate and work.
Sectors who have traditionally rejected new ways of working, have quickly embraced flexibility and remote working out of necessity and survival. But are these changes here to stay?
Whilst online retail has been devastating the high street for years, the past 6 weeks has likely seen this accelerated by ten years.
Food retail, in particular, has been force to undertake massive restructuring, wherein households currently fight to secure delivery slots and supermarkets rush to recruit drivers and expand logistical space to meet the demand.
It is envisaged that supermarkets will likely require more ‘dark’ stores and less distribution and retail space as more deliveries come direct from the supplier to dark store, then straight to the customer.
Key questions to ask are which stores will be hit hardest in terms of footfall? Which distribution hubs will be bypassed because of the changing route to customers?
Commercial office space has already been on its own journey over the last 20 years, from ownership, to lease, to shared workspace.
It is hard to imagine how any corporate CFO can return to the office without thinking of ways to optimise flexible working, consolidate and move to a more suitable leasing model. Shared workspace providers have been growing exponentially in our CBDs, with many commercial landlords developing their own offerings to keep pace.
However, clearly the CBDs are so ‘pre-covid’. Why travel to the CBD for that meeting or workshop when you can conference call and workshop on-line? We will have had six months to master the art of the Teams whiteboard, Miro or Zoom!
We may well see the acceleration of decentralised commercial office space, with the growth of smaller business hubs closer to where our people live and play, eliminating the time-wasting commute. Commercial asset managers should be re-looking at their portfolios.
Is Class A space still a priority for the post-COVID business? Are the city’s prime locations still relevant and what does that do to rents? Where are the new priorities for investing?
Tertiary education is also facing an upheaval. There is no such thing as a typical university. The disparity of prestige, wealth, funding, portfolio size and ownership model means there is no one size fits all Asset Strategy, with many institutions employing sizeable internal teams to manage their ‘bespoke’ needs.
In Australia, one thing universities have in common, is the reliance on foreign student fees for investment. Changes in teaching methods, modularisation of courses and aging assets has already seen the need for portfolios to react to changing demands.
Some institutions have migrated from out of town campuses and into leased city centre facilities that resemble agile commercial office buildings, giving optimum flexibility for the universities and their landlords.
As institutions adjust to their changing landscapes, there is an opportunity for asset and property management functions to take a fresh look at their assets at portfolio and asset class level, to understand how properties might have changed priority within their portfolio and how some individual assets may now be critical in supporting the new business needs of a post-COVID world.
Now is the time to look at the maturity of our Asset and Data Management functions. They hold a wealth of information that if used correctly, can underpin investment decisions that will unlock significant sustainable opex savings.
Are they adequately funded and supported to be able to fulfil this function? Whilst most industries have embraced data, are they well equipped to recognise useful data? Can it be analysed to predict and prescribe the future?
Mature functions recognise that re-procuring contracts to drive down cost is short-termism. By looking beyond basic factors such as condition and stakeholder wants, we can apply a triple bottom line approach (i.e. economic, social, environmental) to produce a holistic appraisal that will inform strategic decision making across the asset portfolio.
This approach is particularly beneficial in the public sector, where there is no clear lead indicator like revenue to distinguish the performance of one asset against another.
Asset criticality is another area of focus. Where capex is in short supply, it is essential to squeeze out every ounce of performance from those expensive pieces of equipment.
Understanding how things might fail, the effect and likelihood, then overlaying business criticality helps us plan to avoid failure, but also unveils opportunities to balance cost with risk and realise savings.
This partner content is brought to you by Arcadis. It forms part of a series of blogs in relation to Arcadis’ 2020 International Construction Costs Report. To learn more about the Australian construction and asset ownership industry and the probable effects of COVID-19, click here.
If you would like to hear more about how Arcadis can help you unlock the value of your data and inform smarter portfolio investment decisions – please get in touch.