Unlocking Value: How Active Asset Management is Transforming Real Estate in a High-Interest Era

The approach to managing commercial real estate has changed significantly in recent years due to a combination of a high-interest rate environment, reduced occupancy, and associated plummeting asset values in certain sectors. 

 

Meeting Changing Demands

The era of using leverage and/or refinancing to turn a profit is largely over, and funds are needing to focus more on active asset management strategies to drive value – e.g. through increasing Net Operating Income (NOI). The market is seeing a shift towards greater demand for flexible working patterns, technological developments, increasing focus on customer experience, and a greater emphasis on sustainability. Assets able to adapt to this shift are realizing opportunity and value creation. Assets unable to pivot are often seeing continued sub-par performance. 

How can real estate owners manage these shifts when borrowing has become pricier, and tenants are seeking more from their spaces? 

 

Utilizing Active Asset Management

Effective asset management strategies in real estate support risk management and value creation through several means. Strategies often require proactive planning, an understanding of market trends, and efficient execution to deliver success.  Three common examples we see that seek opportunities to increase rental rates, as market conditions allow, and reduce vacancy periods include: 

1. Asset Risk Analysis: Research led factors to analyze supply and demand, rental rates, vacancy rates, incoming regulations, changes in market conditions, and/or sentiment and demographic shifts to identify opportunities and manage risk. 

1. Asset Repositioning & Enhancement: Strategically progressing capital projects that maximize returns through enhancing environmental and/or social performance can mitigate obsolescence risks. Examples include physical enhancements such as renovations and reconfigurations, offering desirable amenities, and/or rebranding to enhance market appeal to tenants with strong covenants and/or attracting a more diverse market segment 

1. Operational Efficiency & Cost-Saving: Implementing preventative maintenance, monitoring and benchmarking performance, and costs, and identifying opportunities for operational efficiencies through implementing energy/water-efficient measures and practices. Reviewing utility tariffs and insurance premiums is also increasingly under scrutiny to ensure fair value in third party contracts.  

 

So, what are the trends and implications related to integrating sustainability within each of the asset management topics introduced above? Let’s discuss the possibilities and solutions that are, or could, drive greater demand for sustainable buildings.  

 

Asset Risk Analysis

Incorporating sustainability-related risk analysis in commercial real estate decision-making is commonplace for professional investors. Risks need to be considered throughout the investment life cycle, including research, due diligence, investment decisions, management, and disposal. Some of the key facets of risk analysis EVORA is seeing include: 

• Local Insights: Undertaking deep dives into specific market dynamics, such as demographic trends, economic drivers, competitor analysis, and future development plans, can enable informed decision-making regarding asset acquisition, tenant attraction and retention, pricing strategies, and overall market positioning. 

• Carbon Performance: Understanding asset carbon performance, and how it relates to market norms and/or regulations, has become standard practice for leading funds. Understanding the opportunities, and associated costs, to reduce carbon impacts over the near to medium term is a material aspect of asset management as carbon performance is an important component of tenant, and investor, decision making.  

• Resilience: Due to increased incidence of extreme weather events, and their direct and indirect financial consequences, improving property resilience to physical climate change through retrofits and reconfiguration can help to enhance the long-term value and marketability of properties. 

• Regulations: Outcome-based policies and building performance standards; those that evaluate compliance based on measured, real world performance, pose ever increasing risks for real estate investors and operators. Many regulations result in direct financial consequences for sub-par performance, including penalties, heightened obsolescence, and ultimately price chipping and write-downs. Tracking and navigating regulations is critical to minimizing current and future risks.  

• Social Impact: Understanding social aspects, such as the well-being of occupants, community engagement, and connectivity, can help manage on-site health and safety, improve quality of life, and foster inclusive and collaborative environments. 

 

Asset Repositioning & Enhancement

Asset repositioning in commercial real estate is a dynamic strategy aimed at enhancing the value of underperforming properties. Sustainability related enhancements can come in a variety of guises, such as energy efficiency upgrades, infrastructure improvements, and/or improving amenities. These measures should result in sustainable value creation – win-win outcomes for stakeholders and society that preserve or enhance asset value. Here are some key trends EVORA advises on: 

• Sustainability Upgrades: Identifying and incorporating green building practices and energy-efficient systems that reduce costs to drive NOI, avoid penalties, and / or maintain asset performance with market norms is key. This may include installing solar panels, upgrading HVAC systems, and improving insulation to meet stringent sustainability standards. 

• Market-Driven Adaptive Reuse: Tailoring renovations to optimize occupancy and meet current market demands, such as creating flexible office spaces to accommodate hybrid work models or enhancing retail spaces to offer unique shopping experiences. Equally, converting obsolete or underutilized properties into new uses, such as transforming old office buildings into residential units or mixed-use spaces can deliver significant savings in embodied carbon vs demolishment and rebuilding 

• Amenity Rich Assets: Focusing on the social aspects of repositioning, such as creating community spaces, improving accessibility, connectivity and fostering inclusive and collaborative environments can increase occupancy and enjoyment of building users.  

• Health and Safety Upgrades: Post-pandemic, there is a heightened focus on health and safety. Improving air quality systems, touchless technologies, and enhanced cleaning protocols can safeguard the well-being of occupants, and lead to increased use of buildings.  

 

Operational Efficiency & Cost-Saving

Operational efficiency can reduce operational expenditure and drive net operating income – facets that are especially important in today’s competitive market. Here are some key trends we see: 

• Smart Building Technology: Technology including Internet of Things (IoT), automated systems, and advanced security features that help monitor, control, and optimize building operations are increasingly seen within Class A assets.  

• Predictive Maintenance: Using predictive maintenance techniques, such as sensors and data analytics, helps identify potential issues before they become major problems. This approach can minimize downtime to help maintain good tenant satisfaction and significantly reduce repair costs. 

• Data-Driven Decision-Making: Leveraging data analytics to make informed decisions about property management and operations. This includes using data to optimize space utilization, improve tenant satisfaction, and enhance overall efficiency. 

• Tenant Engagement: Maintaining open lines of communication and regularly seeking tenant feedback and collaboration, can help meet shared goals through cost-saving improvements. 

 

Maintaining Strong Returns in Today’s Tough Market

Balancing higher borrowing costs, changing tenant demands, and sustainability pressures calls for renewed thinking. But each property faces its own hurdles and opportunities; what initiatives should you implement, at what scale, and when? What barriers are you facing that’s holding back progress, and can you overcome them? 

For those making these decisions daily, think about what’s working best in your portfolio. What factors – whether market shifts, regulations, or tenant expectations – are driving the greatest changes? And critically, what happens if repositioning doesn’t go as planned? 

Commercial real estate is changing, and the old playbook of easy refinancing is gone. Instead, the focus needs to be on actively managing your assets by studying market risks, repositioning properties to meet modern needs, planning capital expenditures wisely, delighting building users, and cutting unnecessary costs. Owners and investors who adapt to these changes – by staying flexible, paying attention to emerging trends, and making targeted improvements – will stay competitive and maintain stronger returns in today’s tougher market. 

 

How EVORA can help

EVORA Global helps real asset investors navigate today’s challenges by integrating sustainability, risk management, and value-driven strategies into their portfolios. Whether through asset repositioning, operational efficiency, or data-driven decision-making, our team provides the expertise needed to future-proof assets, drive NOI growth, and meet evolving tenant and regulatory expectations. With deep industry knowledge, and a combination of human thinking and technology, we support clients in making informed, sustainable investments that enhance long-term resilience and performance.