REoptimizer^® Blog

In many ways, industrial utilization is one of the easiest parts of your corporate real estate portfolio to manage. Industrial spaces are frequently straightforward, offering predictable shapes and a great deal of space on both a square and cubic foot basis. While they may be less expensive to rent than office or retail properties, the need to maximize the benefit you get from them is just as great. Here are four ideas that can help you to squeeze more from the warehouse or manufacturing parts of your portfolio.

If you’re part of a company who is constantly seeking to cut back on the most expensive aspects of operation, it's time to start looking at your corporate real estate portfolio.

As a major expense for most companies, evaluating occupancy costs throughout your corporate real estate portfolio can be the key to freeing capital and staying competitive. The strategies you use to manage your real estate expenditures depend on the remaining term of your lease or, for owned properties, how long you intend to remain in that location.

In 2008, the Financial Accounting Standards Board, which is the body responsible for GAAP -- the generally accepted accounting principles that govern American companies -- embarked on a project to conform its lease accounting standards to those of the International Accounting Standards Board. In August of 2014, this project suffered a major setback.

The United States is one of the only countries in the world to allow companies to choose the tax- and accounting-friendly operating lease treatment. When you treat your real estate leases as operating leases, you don't have to enter an asset on your balance sheet and you don't have to depreciate it. Instead, your only lease accounting task is to write off your payments as expenses as they occur. This lets you keep your organization lean and debt-free while also maximizing your tax write-offs.

Under the IASB standards used in the rest of the world, leases are usually treated as capital items. This means entering the value of the leased property on your balance sheet and accounting for your lease payments as a mixture of interest payments and depreciation. The capital lease treatment is on-balance sheet, complicated and is frequently tax-inefficient.

From 2008 through 2014, the FASB and the IASB worked together to find a way that the American standard could be brought closer to the international standard. They came up with the compromise of splitting leases into two broad camps. Type A leases were to be for equipment, while real estate leases would enjoy a special Type B treatment that would effectively be similar to the current operating lease structure, but not as favorable as the current style of lease accounting.

A transition to this system could have shifted the equation between leasing and buying space for many companies since leasing would end up being slightly less attractive than before. However, when the IASB scrapped the negotiation stating that it would only recognize the more stringent Type A lease rules, it essentially removed the impetus for the entire lease accounting reform process.

As of August 28, no one has announced that the negotiations between the IASB and FASB have been canceled. Nevertheless, with the two bodies now further apart in their views on how lease accounting should be conducted than they were before they started in 2008, it appears like any changes to how leases get treated here in the United States are, at best, years away. With this in mind, changing your corporate real estate strategy to conform to these rules' changing has ceased being necessary.

NOTE: This posting should not be treated as accounting advice. Given the extreme complexity of lease accounting, it is important that you contact a qualified accountant for assistance in understanding the tax and financial implications of any lease or purchase transactions.

While office leasing is best left to the professionals, if you're going to occupy commercial real estate, it's good to understand what is going on in the documents that define your spaces. Knowing what goes into a lease can help you to work more closely with your tenant representative to negotiate the best deal possible.

If you've ever wondered what it's like to switch sides and become a commercial real estate broker instead of a client, read on. This is a great industry -- and an exciting one -- but it isn't an easy one. Here are five tips that you need to know to make it in our business:

Once, commercial real estate benchmarking focused on identifying a space's productivity and its cost effectiveness. With the growth of the green movement in the CRE sector, exemplified by the popularity of LEED certification, benchmarks have changed. Today office users look at buildings on the basis of their environmental efficiency, and these commercial real estate benchmarking tools are not always directly correlated to economic efficiency.

The movement to green created quantum changes in how spaces get used. Square footages are shrinking, with the old benchmark of 225 square feet per employee being reduced by more than 50 percent to goals in the neighborhood of 100 square feet. Other changes include looking at energy efficiency as an end, instead of a means. These new focuses created cost savings and public relations benefits but ultimately harmed operations as too-green buildings hurt retention, morale and productivity.

With the end of the calendar year looming, many companies have cost cutting on their mind either to maximize profits for 2014 or to get 2015 off to a good start. While rent might seem like a relatively inflexible cost due to the long term nature of many leases, you have more control over your occupancy cost than you might expect. Here are three ways to help you cut your rent and occupancy expense now. 

A commercial real estate broker may very well be the most valuable tool available to you in managing your real estate portfolio. Whether you are looking to lease or buy space, brokers help you with every stage of the process. Furthermore, in most cases, their services won't cost you anything.