December 20th, 2013, By Don Catalano
Before reading on, it’s important to understand that lease administration is not simply an expense. It’s an opportunity! Done correctly, lease administration can create opportunities to both reduce expenses and grow capital investments. Here are the top five ways that lease administration can help your company’s bottom line:
Combining lease information with market research gives your company a negotiating advantage with landlords. For instance, if you offer to lock in a renewal at the same time that a building or its surrounding market is experiencing vacancy issues, you can usually achieve lower occupancy costs through rent reductions or through other landlord concessions. Knowing when payments are due also insures that you don’t miss important dates or disrupt your corporate real estate staff’s workflow.
Leases are complicated documents. Calculating rents, increases, CAMs and reconciliations is rarely a simple task. Furthermore, many companies have unique spaces with different lease terms and different underlying legal documents. Careful lease administration ensures that your landlord isn’t overcharging you. You also want to avoid mistakenly under-paying CAMs, or else it could come back to haunt you in the future with an unexpected reconciliation bill. Understand your lease documents and calculate what your payments should be. That way, if there is an issue, you can find it and fix it before it gets too expensive.
Utilization of your properties is a key part to lease administration. Whether it’s a warehouse with 9% utilization, a retail location that does so few sales that the rent is equal to 15% of total revenues, or an office with more empty cubicles than full ones, a good lease administrator will identify the problems with spaces. Once you know which ones are underutilized, you can begin formulating a strategy to adjust them accordingly.
Your lease administration data forms a strategic road map for adjusting your portfolio. Spaces that are highly productive or have too many employees per square foot can be quickly targeted for expansion. Or, you may find that some spaces need to be reduced in size or removed. Given the amount of time it can take to sublease a space or amortize the cost of an early lease buyout, identifying these issues quickly can give you enough time to take action and protect your bottom line.
Sometimes, lease administration turns into property management. Profitable sites with a long history of positive operation and the flexibility to accommodate your business’ changing needs may be best as owned space instead of leased space. If you use software to import market data, you can identify those markets where the price to purchase space is lower than the cost of renting it and move forward with an acquisition.
Contact us to learn more about how lease administration can improve your corporate accounting and your bottom line. We are experienced commercial tenant representatives and developers of software that helps our clients leverage lease data and data in their markets to make better real estate decisions.
