Scaling smart in European CRE - The strategic edge of valuation management outsourcing

There are signs that the European CRE markets might be heading into a positive growth cycle. As volumes pick up, scalability and efficiency in valuation management teams are key watchwords for investors. If more efficient valuation processes can also free up time for internal teams to focus on high-value tasks, so much the better.

The commercial real estate landscape has grown increasingly complex. With this comes heightened investor scrutiny and regulatory attention. Accurate, transparent, and consistent valuations are more important than ever. Currently, many teams handle these valuations internally. However, what happens when firms need to scale up, launch a new fund to market quickly, or expand valuation capacity further?

A Valuation Management Service (VMS) can be a valuable partner in the European CRE market, helping to scale and formalise valuation capability quickly, without the need for making complex in-house changes or onboarding new FTEs. Just valuations support and extra expertise when it’s needed.

Independent valuation reviews: Expand existing valuations capability the smart way

One of the main tasks of a VMS is to act as an independent reviewer during the valuation review process — testing underlying assumptions for reasonableness, confirming the accuracy and completeness of reports and models, and ensuring valuations are aligned with industry best practices (e.g., RICS, INREV) and regulations (e.g., AIFMD).

A VMS supports internal teams in understanding valuation movements, potential changes in valuation methodology (e.g., UK traditional valuation to DCF), reinforcing governance and oversight, and ensuring valuations are robust and consistent across portfolios, especially when a fund has third-party valuations completed by different firms in different regions.

This offers an evolution of existing operating models. One that can be tested on existing funds to free up in-house capacity, or rolled out to new funds to ensure consistent, effective valuation processes without the need to hire in new talent. Additionally, VMS offerings can be scaled up during periods of business expansion, and easily scaled down in times of uncertainty and volatility, giving fund managers flexible, adaptable business support across market cycles that change easily with evolving needs.

How outsourcing internal valuation management roles benefit funds

A VMS thus offers an independent third party to oversee all firms participating in the valuation cycle, be it on the delivery or execution front. Alongside this consistent management and oversight, firms can look forward to:

• More time for internal teams to focus on high-value tasks, such as portfolio optimisation, fundraising, and tenant relations

• Simple, effective scalability, allowing for expansion (or contraction) of valuation processes as business needs change

• Experience a modern, tech-enabled process that drives greater efficiency.

As European regulatory bodies demand more stringent and independent valuation processes, having an independent third party to lean on will become increasingly important and help ensure that funds comply with regulatory requirements and industry best practices.

Reduced workloads and better insight without reduced control

These valuation worries are keen for COOs, CFOs, and fund managers running diversified portfolios, for whom scalability and agility can be difficult to capture. Using specialised external support is well established in fund operations such as accounting, property management, fund administration, and depositary services. A valuation management service offers similar support to manage growing workloads and tight deadlines.

For many companies, keeping strict vigilance over the valuation process is a key concern. When outsourcing CRE valuations, key decision makers aren’t outsourcing their due diligence or control. They’re simply leveraging a trusted advisor to help with the routine details of valuation cycles, retaining full control but easing administrative burden and allowing in-house teams to benefit from greater insight and support.

How Altus can support your valuation cycles

Altus’ European VMS offerings focus on the review process for valuations and managing all third-party firms responsible for executing and delivering valuations, taking the burden off in-house teams. This is slightly different from the full RICS Red Book valuations offered by third-party valuation firms, working more synergistically with in-house capabilities.

Altus can assist firms looking for that level of VMS support with the following:

• ARGUS ValueInsight is a valuation workflow solution, purpose-built for managing property valuation processes with third parties, tracks and logs all communication regarding valuations, ensuring a clean and clear audit chain.

• Additionally, as Altus values over €100 billion in AUM each quarter, we’re able to offer more market intelligence and insight than many internal teams can generate, backed by effective analytics.

• This gives companies using Altus’ VMS offerings extra agility, free from the knock-on effects of internal staff turnover. Instead, companies can pivot with market changes, launching and even closing funds without intensive in-house costs and investment.

Make valuations a true strategic advantage

VMS offerings are another tool to help CRE professionals strengthen oversight and operate efficiently, while enjoying deeper portfolio intelligence and valuations transparency.

Supporting internal valuations capabilities with the right external expertise can make a real difference. If you would like to explore how using a VMS could help support your valuation process and existing teams, Altus can help find a solution tailored to your firm’s needs.

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