Newsec to help develop Latvian state property management strategy

Newsec together with the consulting firm Civitta have won a tender and begun providing advisory services to the Latvian state property management company SJSC State Real Es-tate on matters related to the development of a state property management strategy.

According to Mindaugas Kulbokas, Newsec’s Head of Research & Analysis, Newsec together with Civitta won the Latvian state property manager’s public tender for the provision of consulting services on the company’s long-term strategy for the use and management of property.

“Latvia’s state property management company currently manages more than 1.2 million square meters of real estate at more than 500 properties, and over 10 million square meters of land. So its team faces challenges like state real estate management accounting, loss of value of real estate that’s unused, and a growing need for modern office space. Thus our consulting work on strategic issues covers many areas – from the rational and efficient use of buildings to the reduction of property maintenance costs. In other words, the Latvian state property management company is looking for partners to find ways to increase the value of the state’s property and answer questions about how much and what kind of real estate are needed in order to carry out the functions that are assigned to the state,” Kulbokas says.

Seeking reserves to boost the value of RE

The Newsec expert notes that it is not just the Latvians, but that other countries also face endless challenges in managing large amounts of property. Still, when you adjust the management of assets on that scale in the right direction, you can always find reserves for increasing the value of the property.

“For example, the Latvian state real estate administrator is implementing a project to move institutions to new office complexes on the outskirts of Riga. It has calculated that by taking them from seven different places (with 20 300 square meters) and consolidating them in one 12 000 square-meter business centre, the state will save 510 000 euros a year and the premises the institutions occupy will shrink 40 percent,” says Kulbokas.

He says rational economic factors are involved in the need to optimise space and reduce the costs of man-aging it, by moving everyone to a common office or, on the contrary, replacing old no-longer-apt premises. But state institutions still have very little experience with such efforts. It is because of that lack of competencies that the experts from Lithuania are being retained.

Bringing market professionals in more often

Private and state-owned companies choosing to hire specialists to handle certain jobs is quite common in the Nordic countries, the expert notes. Little by little the practice is also taking root in the Baltics.

“It’s very hard for a state property management company to have all the specialised skills it needs under one roof, so it’s standard to turn to professionals in the market. In the Nordics, for example, the practice of involving third parties in optimisation processes has been in place for decades, and it’s now becoming common in the Baltics too. State property managers in the Nordics have gone even further, keeping only the strategic functions of representing the state, while third parties handle the technical aspects of property maintenance,” Kulbokas notes.

Applying experience elsewhere

“Experience acquired working with Lithuania’s Government Chancellery, its state property manager Turto Bankas and its Ministry of Finance have become success stories for us that we can now apply in other countries. The joint work of Newsec and Civitta has earned the trust of public sector clients for improving the efficiency of state-owned property. So the Latvian state property manager’s choice to develop a strategy together with real estate advisory professionals shows it has serious intentions and aims to manage the assets entrusted to it with maximum efficiency,” Kulbokas says.

Lithuania’s experience has shown that when countries include outside professionals in efforts to improve the efficiency of property management and save on operating costs, that helps them effectively reach their goals.

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