If your CFO looks at lease administration as an expense, he's missing out on an opportunity. Done correctly, lease administration doesn't just positively impact corporate accounting. It 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:
1. Identify Negotiating Opportunities
Combining lease information with market research can give 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.
2. Prevent Overcharges
Leases are complicated documents and 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. Ensure that your landlord isn't overcharging you or mistakenly under-collecting CAMs in a way that could come back to impact you 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.
3. Identify Underutilized Properties
Part of lease administration is paying attention to how much space is actually being utilized. 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 these spaces. Once you know which ones are underutilized, you can begin formulating a strategy to adjust them accordingly.
4. Portfolio Size Adjustments
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. On the other hand, the underutilized space that you identify can be transitioned out of your portfolio. Given the amount of time it can take to sublease a space or to amortize the cost of an early lease buyout, identifying these issues quickly can make sure that you're able to take action while there's still time to protect your bottom line.
5. Identify Acquisition Opportunities
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 your lease administration software lets you also import a 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.
If you'd like to learn more about how lease administration can improve your corporate accounting and your bottom line, contact REoptimizer®.
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