Translating uncertainty into defined risks: How to stress test your property portfolio

Commercial property owners are always responding to changing economic conditions, the need to translate uncertainty into defined risk has never been more crucial.

While change has always been a constant, property owners now operate in an environment that is volatile, complex and ambiguous.

As a consequence, they are being asked increasingly challenging questions. How severely will we be affected by the current volatility? How can we anticipate the future? How can we identify and act on opportunities now and when economies recover? What can we do to avoid being blindsided by the next big shock?

And the biggest question of all? How do we make good decisions in an uncertain world?

Stress testing helps banks, investors and asset managers to analyse future economic scenarios, understand risk exposure and uncover hidden vulnerabilities and opportunities. Stress testing supports proactive decision-making as portfolio owners have a better understanding of how their assets will fare in a range of circumstances.

There’s nothing new about the need to stress test. What is new is the extent to which the commercial real estate sector is being asked to report on the health of their assets, and the number of scenarios they need to understand.

The level of detail now required to stress test these scenarios can take months, and teams are being asked to put aside their day jobs – and in some cases their weekends – to analyse a complex range of assumptions. Making decisions in times of rapid change is never easy. But there’s also never been better tools at hand to help us ride the peaks and troughs.

With the help of ARGUS Enterprise, portfolio owners and managers can test assumptions in a matter of minutes, not months.

Watch our quick demo video below to see firsthand the powerful sensitivity functionality of ARGUS Enterprise.

 

In summary:

Rather than asking individual asset managers to contend with cumbersome spreadsheets and set aside time they don’t have for extra reporting; one analyst can do all the heavy lifting with the help of ARGUS Enterprise.

ARGUS Enterprise makes it easy to evaluate multiple scenarios on cross-sections of an entire portfolio or on single assets. Stress tests can be performed using multiple variables at once, and high-level impacts analysed against key performance indicators, including valuations, returns, occupancy and cash flow.

Commercial property is a long-term investment, and investors are well aware they must ride the ups and downs. No one knows what the future holds, but the portfolio owners with a well-organised data set and the right tools are best placed for the “new normal”.

For more information on ARGUS Enterprise please click here.

 

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