HIGHLANDS RANCH, CO—Amid continued demand for warehouse and logistics space, industrial corporations may be sitting on a potential gold mine they have no plans to tap: disposing of surplus properties. In what it says is the first-ever global surplus property management benchmark report, consulting firm Arcadis recommends that companies make such plans—or give the plans higher priority than they receive at present.
“With the industrial real estate market booming in western economies and the availability of property diminishing, now is an excellent time to take advantage of disposing of surplus property,” said Arcadis SVP Mark Fenner. “By planning strategically, corporations realize major benefits such as higher profits, an optimized asset portfolio, reduced liabilities, healthier balance sheets and an improved public image.”
Arcadis says surplus industrial properties, ranging from manufacturing plants to idled service stations, typically remain dormant for an average of 18 to 20 years, “creating decades of potential risk exposure and cost. Why are they held for so long? Several reasons.
“First, management believes properties have value, and by holding on to them, they are sitting on an appreciating asset,” according to the Arcadis report. “Second, they feel trapped into inactivity because of the real or perceived risks associated with the property such as environmental remediation. Lastly, they misunderstand the true costs of holding onto the property and the potential value locked within.”
The firm surveyed executives from more than 30 large, primarily multinational companies representing a variety of industrial sectors with a combined gross revenue of $1.5 trillion and approximately $2 billion in surplus property holdings in 2016. Thirty-five percent of the companies surveyed said they had no formal plan for surplus property disposal, while 81% don't make it an executive-level priority.
In addition, more than 90% reported selling surplus properties individually rather than as a portfolio, thus increasing average transactional costs and often leaving behind harder-to-sell, lower-valued assets. Fifty-four percent spend more than $5 million annually in carrying costs to hold onto surplus industrial sites, with costs including compliance, permits, licenses, taxes, utilities, security and site maintenance.
The report cites the success that global energy producer Bayernoil had with disposing of a redundant, 266-acre German refinery in Ingolstadt, Germany. Arcadis helped Bayernoil strategically break the property into parcels which could be sold to generate cash for remediation. Within two years, a parcel was decommissioned, remediated and converted into a 16,000-seat soccer stadium, while the remaining property was sold and converted into a business park and innovation campus for automotive research and development.
“The closure of the Ingolstadt refinery has created a new legacy for the site resulting in an attractive urban center for the community, improving quality of life for residents and a better bottom line for Bayernoil,” according to Arcadis. Click here for the complete report.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
