European cities lack real estate overview: Deloitte

With a few exceptions, European cities lack a clear overview of their real estate activities and their management of public properties is extremely fragmented. This is hampering their strategic planning processes at a time when many cities are looking to dispose of real estate as a way of cutting costs. These are the main findings of a study on real estate management in 15 European cities by consultancy firm Deloitte.

Rotterdam and Munster emerged as the only cities which have completely centralised their real estate activities. Deloitte says these are, coincidentally, also municipalities which are facing ‘considerable challenges’ when it comes to creating cities that are attractive to residents, businesses and visitors. Several other municipalities, including Utrecht, Bordeaux and Paris, are considering centralisation while six cities have no plans in this direction whatsoever.

The study found that in several cities, at least five departments are - to a lesser or greater degree - involved in real estate management. ‘In such circumstances, maintaining an effective and permanently up to date overview is an impossible task, leading to a lack of central steering, ultimate responsibility, planning and control, and uniformity in policy and processes,’ Deloitte says.

The researchers further found that only about 25% of major European cities can provide reliable data on the size and value of their real estate portfolios. ‘This is both a striking and alarming conclusion,’ the report notes. ‘Without an up-to-date and complete overview of a municipality’s real estate portfolio, it is impossible to manage it professionally and efficiently.’

Although 60% of the cities stated that real estate was taken into consideration in cost-cutting programmes, only 20% said that steps to sell off assets had actually been taken. Milan is the only city to use financial performance as the main driver of real estate portfolio management. Sustainability was not found to be a strategic priority for any city.

The cities participating in the survey - Antwerp, Brussels, Esbjerg, Bordeaux, Paris, Essen, Munster, Nuremberg, Milan, Luxembourg, Amsterdam, Rotterdam, Utrecht, Barcelona and Madrid - have a real estate portfolio (excluding social housing) of around EUR 2.6 bn for each one million residents. Relatively, Luxembourg has the largest portfolio (EUR 5.1 bn per 1 million residents) and Madrid the smallest (EUR 0.8 bn per 1 million residents). The average real estate portfolio consists of between 2,000 and 3,000 properties (with an estimated GFA of 2-3 million m2) for each one million residents.