Could Your Property Become a Stranded Asset?

The Real Question: Competitiveness, Not Compliance

The term stranded asset has become closely associated with decarbonisation, climate risk and regulation. While these are important considerations, they do not fully explain why buildings lose value. In practice, properties rarely become stranded because of a single event. Their competitiveness usually erodes gradually as occupier and market expectations evolve, operating costs increase, capital requirements rise and financing conditions become more demanding. Individually, each of these developments may appear manageable. Together, however, they steadily reshape a property’s long-term prospects.

A stranded asset is therefore rarely the result of one poor decision. It is the cumulative consequence of many decisions that were deferred, postponed or never taken.

An asset becomes “at risk” when its competitiveness, income resilience or strategic flexibility begins to deteriorate. The key is recognising these changes early, before they materially impair long-term property value.

The real question is therefore not whether a building meets today’s standards. It is whether it is likely to remain competitive throughout its remaining economic life. This distinction fundamentally changes how owners should assess real estate. Rather than asking whether a property complies with current requirements, they should ask whether it is likely to remain relevant in a market that will continue to evolve long after today’s standards have changed.

How Competitiveness Erodes Over Time

Every property exists within a constantly evolving environment. Occupier and market expectations change, technology advances, demographics reshape demand, regulation becomes more demanding, financing conditions tighten or ease, and capital markets continuously reassess risk. Competitiveness is therefore never static. It is determined by how a building performs relative to the alternatives competing for occupiers, investors and lenders.

Location, functionality, technical condition, sustainability, operating efficiency and user experience all contribute to that competitiveness, but they are only part of the equation. Markets evolve continuously, and the most successful buildings evolve with them. Those that fail to adapt rarely lose relevance overnight. Instead, competitiveness gradually erodes, giving attentive owners time to respond, provided they recognise the warning signs before strategic options begin to narrow.

The process rarely begins with a dramatic event. More often, rental growth slows, vacancy gradually increases, building systems age, maintenance is deferred and capital expenditure requirements continue to rise while competing properties become increasingly attractive. No single development creates a stranded asset. Rather, risk emerges when several begin reinforcing one another until the property’s competitive position gradually weakens.

Financing conditions often provide one of the earliest market signals that an asset’s competitiveness is deteriorating. When lenders become more selective, refinancing terms tighten or buyer demand weakens, the market may already be signalling risks that owners should not ignore. Insurance conditions can provide a related signal: rising premiums, narrower coverage or reduced availability of insurance may begin to affect operating economics, financing and market liquidity long before physical vulnerability is fully reflected in value.

The earlier these signals are recognised, the greater the strategic flexibility that remains.

Recognising those warning signs, however, is only part of the challenge. Competitiveness is determined by far more than the physical condition of a building.

Competitiveness Extends Beyond the Building

Buildings are often assessed primarily through their physical characteristics. Location, architecture, technical systems, energy performance and overall condition remain fundamental determinants of value, but they do not tell the whole story. Long-term property value also depends on income resilience and strategic flexibility. Financing conditions and market liquidity influence how effectively owners can respond as market conditions evolve.

Owners should therefore look beyond the building itself. The quality and diversification of income, the structure and maturity of leases, the strength of tenant covenants, the resilience of the financing structure and overall market liquidity all influence how well a property can withstand changing market conditions. These factors are closely interconnected. A technically excellent building may still struggle to preserve its long-term property value if its income becomes concentrated, refinancing becomes more difficult or occupier demand changes fundamentally.

Lease events deserve particular attention. Break options, upcoming lease expiries and the potential loss of key occupiers can fundamentally alter a property’s risk profile. In some cases, these events trigger a gradual decline in competitiveness. In others, they accelerate value erosion because alternative strategies have not been prepared in advance. Recognising these developments early provides owners with significantly greater strategic flexibility than reacting after they have begun to affect performance.

A property’s ability to remain competitive is ultimately determined by the interaction between its physical attributes, income resilience and strategic flexibility in a changing market.

Recognising these factors, however, is only the first step. Preserving long-term competitiveness ultimately depends on how owners respond to them over time.

Why Active Portfolio Management Matters

Recognising declining competitiveness is only valuable if it leads to timely action. Long-term competitiveness requires continuous evaluation and timely decisions throughout the ownership lifecycle. Owners must continually reassess an asset’s position, anticipate change and respond before strategic options become constrained.

Active portfolio management is therefore about far more than maintaining the physical condition of buildings. It requires a continuous assessment of income resilience, lease events, refinancing requirements and changing market conditions, while considering whether each property continues to support the owner’s broader investment strategy. That process inevitably raises a series of fundamental questions. Is the asset becoming more or less competitive? Does further investment preserve or create sufficient value? Has the property’s role within the portfolio changed? Should it be repositioned, adapted or refinanced? Would the capital be better deployed elsewhere? And perhaps most importantly, is this still the right asset for us to own?

These questions should not be asked only when performance begins to deteriorate. They should become part of an ongoing ownership discipline that continually tests whether a property’s competitiveness remains aligned with changing market conditions and the owner’s long-term objectives.

The objective is not to react when problems become visible. It is to act while multiple strategic options still remain available. Active portfolio management is the discipline that enables owners to recognise change early, evaluate strategic alternatives and adapt before declining competitiveness materially impairs long-term property value.

Maintaining that flexibility, however, ultimately depends on how capital is allocated. Every strategic decision competes for finite financial resources, making disciplined capital allocation one of the defining characteristics of successful long-term ownership.

Capital Allocation Determines Outcomes

Every strategic decision ultimately competes for capital. Whether owners choose to refurbish, reposition, redevelop, decarbonise, improve accessibility, invest in digital infrastructure or dispose of an asset, each decision represents an allocation of finite financial resources. The challenge is therefore not deciding whether to invest, but where capital is most likely to preserve or create long-term property value.

Decarbonisation illustrates this well. It should not be viewed in isolation or as an objective in its own right. Like any other investment, it should be evaluated in the context of the individual asset, its role within the portfolio, the owner’s long-term objectives and its expected contribution to maintaining competitiveness over time.

The same principle applies to every significant investment decision. Capital should be deployed where it strengthens a property’s long-term competitiveness, improves income resilience, preserves strategic flexibility or supports the broader objectives of the portfolio. Equally important is recognising when additional investment can no longer be justified and when capital would be better deployed elsewhere.

Disciplined capital allocation translates strategy into the preservation and creation of long-term property value.

If the same building may justify different investment decisions under different circumstances, what ultimately determines the right strategy?

Ownership Objectives Shape Strategy

The same building can justify very different investment decisions depending on who owns it and what they are trying to achieve. Buildings should therefore never be assessed in isolation. They should always be evaluated in the context of the owner’s objectives, recognising that those objectives naturally evolve over time.

A family preserving wealth across generations may reach different conclusions from an entrepreneur preparing for succession. A corporate owner may seek to release capital to support future growth, while an institutional investor may prioritise portfolio optimisation or risk rebalancing. In each case, the building may remain unchanged, but the appropriate ownership strategy may not.

The objective is therefore not to preserve every building indefinitely. It is to preserve and create long-term property value in a manner aligned with the owner’s objectives. For some properties, that requires continued investment. For others, repositioning or a change of use may create greater value. In some situations, the most effective decision is a well-timed disposal because another owner is better positioned to unlock the property’s next phase of value creation.

Understanding whether an asset continues to support those objectives is therefore just as important as understanding its physical condition or market position. Buildings rarely become assets at risk because of a single external event. More often, they become vulnerable when the evolving requirements of the market and the changing objectives of ownership gradually fall out of alignment.

Successful ownership is ultimately about maintaining that alignment over time.

Viewed through this lens, the discussion also begins to change. The more useful question is no longer whether a property has already become stranded, but whether it is gradually becoming an asset at risk.

Before an Asset Becomes Stranded

The distinction between a stranded asset and an asset at risk is more than semantic. A stranded asset describes a loss of competitiveness that has already become material. An asset at risk directs attention to deterioration while meaningful strategic options still exist. For the purposes of this article, an asset at risk is a property whose competitiveness, income resilience or strategic flexibility has begun to weaken, but for which the owner still retains credible alternatives.[1]

Viewed in this way, the more useful question is not whether a property has already become stranded. It is whether its ability to compete, sustain income or adapt is beginning to decline. That change in perspective encourages earlier intervention, more disciplined decision-making and better capital allocation.

An asset at risk still offers choices. Owners may invest, reposition, adapt the use, refinance or divest. The earlier these alternatives are considered, the broader the range of strategic options and the greater the likelihood that long-term property value can be preserved.

Successful owners do not wait until a property becomes stranded. They recognise when it is becoming an asset at risk and act while meaningful choices remain.

Takeaways

• Buildings rarely become stranded overnight. Long-term property value is usually eroded through a gradual loss of competitiveness rather than a single event.
• The warning signs are usually visible. Deferred maintenance, ageing systems, weakening income resilience, changing occupier and market expectations, tightening financing conditions and reduced availability of insurance may emerge years before long-term property value is materially impaired.
• Competitiveness extends beyond physical quality. Income resilience and strategic flexibility are equally important, while lease structures, financing conditions and market liquidity influence how well an asset can adapt to changing conditions.
• Active portfolio management enables timely decisions. Its purpose is not simply to manage buildings, but to recognise change early, evaluate strategic alternatives and act while meaningful options still remain available.
• Every strategic decision is ultimately a capital allocation decision. Investment should be directed where it is most likely to preserve or create long-term property value in line with the owner’s objectives.
• Ownership objectives shape strategy. The right decision depends not only on the building, but also on what the owner seeks to achieve both today and in the future.
• Think in terms of assets at risk rather than stranded assets. Recognising declining competitiveness early creates opportunities that are no longer available once a property has already become stranded.

The Valinfort Perspective

Buildings rarely become stranded because of a single event. More often, they gradually lose competitiveness as markets evolve, occupier expectations change and the decisions required to preserve long-term property value are postponed or never taken.

Successful ownership is therefore not defined by avoiding every risk. It is defined by recognising change early, evaluating strategic alternatives with discipline and allocating capital where it can best preserve or create value. In some situations, that means investing. In others, repositioning, adapting the use or refinancing may represent the better course of action. Sometimes preserving long-term property value requires recognising that another owner is better positioned to unlock the property’s next phase of value creation.

Viewed in this way, stranded assets are not simply the consequence of regulation, decarbonisation or changing market conditions. They are often the outcome of declining competitiveness that was recognised too late or addressed too slowly.

The objective is therefore not simply to avoid stranded assets. It is to ensure that every property remains competitive, continues to support the owner’s long-term objectives and contributes to preserving or creating long-term property value throughout its lifecycle.

[1] The distinction between stranded assets and assets at risk draws in part on Natasha Chaudhary’s 2024 I4CE report, From Stranded Assets to Assets-at-Risk: Reframing the Narrative for European Private Financial Institutions. I4CE applies the concept to transition-driven stranding risk within the broader financial system. This article develops that perspective at property level through the lenses of competitiveness, income resilience, strategic flexibility, active portfolio management, capital allocation and ownership objectives.

Selected Sources and Further Reading

Chaudhary, Natasha. From Stranded Assets to Assets-at-Risk: Reframing the Narrative for European Private Financial Institutions. I4CE, June 2024.

OECD. Future-Proofing Real Estate Investment: Place-Based Risks. OECD Urban Studies. Paris: OECD Publishing, 2025. DOI: 10.1787/2dd12063-en.

Lieser, Carsten. Europe Real Estate Debt Strategic Outlook. DWS, May 2026.

Cornette de Saint Cyr, Philippe, Olaf Rehse, Santiago Ferrer, Neetu Vasanta and Alberto Poncela. “The Future of Real Estate: Ecosystems and Active Ownership.” Boston Consulting Group, 13 March 2026.