CRE Strategy and decision-making within financial institutions in disrupted property markets: strategies to improve disposal of collateral real estate assets

Following the 2008 financial crisis many financial institutions in Europe, particularly banks, have found themselves as holders of unwanted collateral real estate assets. Few of them had prepared an effective strategy to deal with asset management and disposal. Such property assets could be both expensive to maintain and dispose.When property markets are distressed accompanied by economic turbulences, decision-making needs to be adapted to the specific conditions and size of local market. Whilst some developed markets returned to growth faster, distressed economies are continuing to affect property markets across global developing markets, One of the main outcomes of the crisis in Central Easter European emergent property markets consisted of banking institutions being forced to hold and asset manage property assets as a result of recent defaults. The global dimension of this problem is better illustrated by the recent Chinese market turbulence, which may well lead to a similar problem for global financial institutions involved.Clearly business strategies adopted prior to 2008 did not include a specific Corporate Real Estate (CRE) dimension. Post 2008, financial institutions needed to reassess their approach to CRE to comply with political and financial regulations set by the European Union, the European Central Bank and national financial regulators. Financial institutions became unwittingly ensnared in a dilemma which requires them to either dispose of build assets at unacceptable discounts or hold and manage those assets despite political pressure and the interests of their investors.This paper adopts a two-fold analytical approach surrounding the decisionmaking process; First, what are the factors that would affect the decision to dispose of unwanted properties in the near future when the property market is disrupted? Second, what are the strategic measures that could facilitate a successful sale in the near future?Specific findings highlight the importance of adopting a specific strategy to align Corporate Real Estate decisions with the current business strategy and the most important factors affecting the decision-making process. One of the main measures to facilitate a sale is of course to improve occupancy, despite of this not always being achievable. Thus, the paper explores new strategic alternatives that might provide future solutions.