The Keys to Successful Commercial Portfolio Audits

In this article, you'll learn:

• The importance of managing lease inventory to optimize costs and reduce risks.
• How portfolio audits help streamline and optimize real estate holdings.
• Leveraging data from audits for informed, strategic decision-making.
• Advantages of having a True Tenant Representative™ for effective lease audits.

In today's dynamic leasing landscape, commercial tenants, particularly those in the C-Suite like Directors of Real Estate and CFOs, find themselves at the intersection of strategic cost management and efficient lease administration.

In this pursuit, the importance of conducting thorough portfolio audits cannot be overstated. These audits empower organizations to navigate the complexities of their leased real estate, optimizing costs, mitigating risks, and ensuring alignment with broader business objectives.

So, let’s explore how lease audits empower corporate tenants through managing lease inventory, simplifying portfolio optimization, and pointing out opportunities to cut costs while aligning with broader goals.

Lease Inventory Management

Start by creating a comprehensive inventory of all leased spaces. Include critical lease details such as location, square footage, lease commencement and termination dates, rent, and key clauses.

For example, missing key dates is one of the most common and costly mistakes made by tenants, especially with those with bigger footprints. With larger portfolios, come more critical dates to cover and juggle across multiple properties.

These key dates encompass a range of pivotal milestones that directly impact your lease agreement, and as such, they should be treated with the utmost attention to detail. Often, they signify shifting financial responsibility on the tenant’s part, as with rent escalations.

The right to exercise your options, renew your lease, anniversaries when rent increases, etc. can quickly sneak up on you if you aren’t keeping track.

Similarly, if you don’t reach out by a certain date, you may lose options or rights of renewal. When keeping these days in mind, you want to give your organization enough time to meet internally and determine the best real estate moves (which is another whole rabbit hole). Giving yourself enough time to leverage the value of your tenancy is key to securing your most efficient portfolio. 

Diving into your leases can of course be an extremely comprehensive task. But know that you’re never alone when it comes to launching lease audits. By working with us at iOptimize Realty® you will receive exclusive access to our patented KSD software, REoptimizer®. As our corporate clients have found, this is an invaluable tool in critical date management and identifying the optimal property solutions. Check out the video to learn more.

Thorough lease inventory management can also point to where you’re overpaying because it benchmarks your current leases against market. It also opens up the potential to save through methods like Right-sizing and renegotiating. 

Portfolio Optimization

Regular lease audits are a strategic tool for corporate tenants to achieve portfolio optimization. In essence, lease audits empower you to make data-driven choices that optimize your real estate portfolio in line with your company's evolving needs.

For example, a systematic evaluation of your real estate holdings will identify opportunities to streamline underutilized or surplus spaces. This process can lead to significant cost savings and improved efficiency.

One primary objective of these audits is to evaluate your space utilization and determine whether square footage can be put to better use. Through a thorough audit, you can assess whether these spaces are suitable for subletting or if they can be renegotiated with the landlord for more favorable terms.

A proactive approach can help you recoup costs and reduce the financial burden of underutilized space because more often than not, businesses are downsizing. In fact, half of the world's largest companies are planning reductions in coming years. 

And while any company can benefit from reassessing their use of space, the companies that stand to gain the most, have large footprints. With these large footprints come a substantial potential for wasted space.

Again, if your portfolio contains multiple locations, there is more areas where you can be over or underutilizing your space. This creates a bigger net change when Right-sizing. The larger the portfolio, the easier it is to lose track of optimal utilization. Combat this by doing an internal check. With large footprints, you also have more leverage and this means more opportunities to renegotiate the terms and rental rates of your leases to get back to or under the current market value. As these utilization adjustments add up, you will find that the savings will be much larger.

Conducting an audit can identify other opportunities for cost reduction. This might involve renegotiating leases to secure more favorable rates, restructuring leases to better align with your organization's needs, or exploring alternative workspace solutions which can be cost-effective and provide flexibility.

If you’re in an existing lease you can possibly bring down your costs by leveraging the value of your tenancy against the rocky market. Because even if you want to downsize or Right-size, your landlord likely won’t be willing to just cut the amount of space you pay for. You’ll need to renegotiate.

To get the best deal now, weigh your space utilization, the percentage of vacancies in the area, and the optimal term length of a lease to analyze where there’s room for improving your terms and price. This also means taking a hard look at any renewal options baked into your original lease. The key is conducting an extensive cost-benefit analysis of the comparable properties in your (and alternative) markets. This will give you a better footing for negotiation.

Because at the end of the day, the most crucial aspect of conducting regular lease audits is using the findings to align your real estate strategy with your organization's broader goals.

Data-Driven Decision-Making

Data is the backbone of informed decision-making. Regular audits generate a wealth of information about your real estate portfolio, including lease terms, costs, space utilization, and market trends. By analyzing this data, you gain valuable insights into what's working and what needs improvement. Doing so will identify cost-saving opportunities.

Portfolio optimization requires ongoing attention, and having accurate and up-to-date information is key to success. Regular audits and data analysis empower tenants to make timely, strategic moves that outperform competitors. Leveraging technology, such as lease management software and analytics platforms, streamlines data collection, analysis, and reporting. These tools provide real-time access to critical information, enhancing the agility of your decision-making process.

But there is also the opportunity to facilitate the development of a long-term real estate strategy where resources are devoted most effectively.

Conducting Portfolio Audits With a Tenant Rep

When it comes to conducting lease audits for commercial tenants, having a True Tenant Representative™ by your side is like having a secret weapon. They're not just lease experts; they're also market insiders, providing valuable insights into local real estate trends. True Tenant Reps™ help you strategize your portfolio, finding opportunities for cost savings, identifying redundant spaces, and ensuring your real estate aligns with your business goals. With access to specialized lease auditing tools and unwavering dedication to your interests, they streamline the audit process and act as your tireless advocate. Whether it's resolving disputes or mitigating risks, they've got you covered. In the world of lease audits, true tenant representatives are your critical allies, committed to optimizing your lease agreements for maximum cost savings and strategic benefits.

Learn all of the tools and techniques True Tenant Reps™ utilize to find the best office spaces, prices, and terms on the market.