It’s one thing to accumulate a collection of properties, it’s quite another to construct a Portfolio.

By Doug Parker, Montbart
First published 28th July 2026

I’ve seen over the years that some commercial property holdings have not really been built in line with a carefully produced plan.  They have more ‘evolved’.

A building may have been originally bought simply because it was close to an existing asset. Or it may have been bought because the tenant covenant seemed exceptionally strong. Another asset might have been inherited, transferred from an operating business or purchased simply because the opportunity came up at the right time.  Each acquisition may have made absolute perfect sense at the time, and when considered individually.

The difficulty arises when separate rational decisions accumulate without the owner ever stepping back to ask whether the assets still work together.

I tend to think of a property portfolio as something more planned and intentional than just a number of assets held under common ownership.  To me, a true portfolio is more of an inter-related group of assets, selected and managed in relation to one another.  And each property serving a purpose within a wider plan. 

Of course, others may define the term differently, but for me there is an important distinction between owning several properties and managing those properties as a portfolio.

What role does each asset perform?

In simple terms, every property should have a reason for being and remaining in the portfolio.

It might be to provide a secure income, OR it might be rental growth, redevelopment potential, capital appreciation or simply controlled exposure to a particular location or sector. 

Some assets might provide stability; and others may offer better potential returns but carry more risk.  The important point here is that the owner should fully understand what each property contributes to the whole.  And if that purpose cannot be easily pinpointed, it may be worth asking whether the asset is still earning its place.

Of course this doesn’t mean every property has to be sold if it becomes difficult to manage or begins to underperform. There may be entirely valid reasons to keep hold of an asset through a period of vacancy, or invest in refurbishment, renegotiate a lease or even to accept initially weaker short-term performance on the ‘promise’ of a longer-term benefit later on.

The decisions should be deliberate though, and the risk is not necessarily in owning an imperfect asset, it’s keeping hold of it without ever fully knowing why. 

An interesting way to test an asset’s role is to borrow from the logic of the BCG matrix. Some properties might offer dependable income, others might suggest stronger growth potential, and some might need some capex investment before their future value becomes clear. The important point is not to force every building into a neat category, but to recognise that different assets should perform different roles, and also that those roles may change over time.

Diversification is not just about owning different buildings

A group of properties might appear diversified because it includes different types, tenants or locations, but it’s not that simple.  It’s easy to concentrate the underlying risks, for example several assets may depend on the same local economy.

A retail unit, an office and an industrial unit may look fully diversified. And they might also be three unrelated problems requiring three completely different sets of expertise and market knowledge. Maybe a high proportion of rental income comes from tenants operating in the same economic sector.  Maybe too many lease expiries and break clauses fall within a narrow period of time?  Or several buildings need capital investment at the same time.  It’s also possible that more than one lending facilities expire in a way that exposes the assets to refinancing risk.

So it’s important to look upon how assets behave together, rather than looking at them individually.  What might appear to be a well-diversified portfolio, could be exposed to several concentrated risks. 

On the other hand, two seemingly different assets might actually complement each other well.  One might offer stable income for an extended term, whilst another offers more growth potential.  One asset could be very liquid, whilst the other is planned to be held for the long term. A specialist portfolio of industrial units (for example) could still be diversified across locations, tenants, lease expiries and sources of demand.

It’s important to understand the relationship between them all.  In investment terms, it’s about correlation.  This is the extent to which different assets tend to move in the same direction under the same conditions. If every property responds similarly to interest rates, consumer demand or one local economy, owning several of them may not provide much genuine diversification.

Assets with lower (or occasionally negative) correlation could soften the portfolio’s overall volatility. Unfortunately that protection often has a price though. When one part performs exceptionally well, the assets moving differently can dilute the overall gain.

A portfolio should always reflect the owner’s objectives

The ‘right’ portfolio for one owner may be entirely unsuitable for another.  A family seeking reliable income and capital preservation will have significantly different priorities from an investor pursuing high growth. 

An owner approaching retirement might want to reduce management intensity, simplify all ownership structures and/or increase the liquidity of the assets.  Alternatively, another may be happy to accept greater complexity because they have the time, expertise/team and appetite to actively improve the assets.

The wider strategy matters.  Property decisions should not be made in isolation from questions of debt, taxation, succession, liquidity, risk tolerance and the owner’s wider financial position.  Unfortunately this is often where property advice can become fragmented across advisors.

A commercial property agent (looking at rental prospects) will think very differently to a Lawyer (who is likely to focus on the lease). Likewise an accountant (looking at tax consequences) will think differently to a Financier (who will look at debt and covenant).

Each perspective is valid, but someone still needs to bring the advice together and decide what it means for the owner and the portfolio as a whole.

A portfolio requires an exit discipline

Decisions to acquire assets usually get a great deal of attention, but retention?  Much less so. It is important though that each asset is reviewed from time to time against the reason it was originally bought.  The investment case might not stack up anymore, or the property might simply not be fulfilling the role expected of it.

Perhaps the level of risk has increased, or would more investment improve the asset?  Or would the capital be better spent elsewhere?  Has the owner’s wider objective simply changed?

A property might have been entirely appropriate ten years ago, but not fit the strategy today. It doesn’t mean the original purchase was wrong, but portfolios, assets and investments evolve over time and priorities most certainly change. 

From a collection to a portfolio

A portfolio is a ‘live’ investment that always asks the questions ‘Why do we own the assets, how do they fit together, and what would have to happen to make us change?”

A collection of properties simply asks – “what do we own?” 

For commercial property owners, the distinction is important. The ‘ideal’ is not to create a perfectly engineered group of assets or to remove every element of risk. That would be unrealistic.  It is rather to fully understand what each property contributes, how the assets interact and whether the portfolio still serves the owner’s objectives.

A collection of buildings may arise naturally over time, but a portfolio begins when those buildings are considered as part of a deliberate whole.

First published by Montbart Limited on 28th July 2026
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