REoptimizer^® Blog

Step back a second and really think about the role that your company's real estate portfolio plays in its success:

Warehouse occupancy costs are a necessary part of doing business. If you have goods to move, ship or fulfill, you need space to store and handle those goods. However, applying good strategies to your warehousing can significantly lower your overall occupancy cost:

Corporate real estate occupancy is usually one of a company's largest expense lines after labor and the cost of goods sold. With that understanding, it is important to analyze your portfolio in order to make better decisions.

Building out a space isn't just about slapping up office walls and installing phone wiring anymore. Both workers and clients expect to see offices that are creative and specialized. At the same time, the changing workplace demands a unique tenant improvement plan to accommodate varying worker locations, changing work relationships, and potentially dynamic corporate location needs. 

Your CAMs are a significant part of your occupancy cost. Unlike your rents, they're usually not a set figure. Your landlord is free to pass through CAMs to you, whatever they cost, and you're obligated to pay them. While you can't always manage this part of your occupancy cost, you can prepare for any changes in it by tracking a few basic metrics.

There's a reason that the phrase critical date management gets used to refer to tracking the timing requirements under commercial real estate leases. In a commercial lease, missing a single date could invalidate a renewal option or put you in default. Tracking the critical dates within your lease is a business imperative.

Commencement and Termination Dates

With a commercial lease, commencement and termination dates aren't always straightforward. Frequently, you end up with multiple commencement dates that all mean different things. Here are the ones that you should be watching:

• Delivery date: The date on which the landlord has to have the space ready for you or suffer the sanction spelled out in the lease.

• Lease commencement date: The date on which the lease officially starts. Frequently other dates in in your lease are tied to this one, so it's an important one to track in your critical date management system.

• Rent commencement date: Frequently, you don't start paying rent when you move in, and the rent commencement date takes free rent and other concessions into account to let you know when to start sending rent checks.

• Termination date: The termination date is the date when your lease ends. Usually, you need to have completely vacated the space and removed your property by then. Read your lease carefully to see if there is a holdover clause that will let you stay longer, albeit a higher rent.

• Early termination date: Some leases allow you to buy them out after a set period of time. Sometimes also called a kick-out clause, these options usually require you to pay a lump sum, which can be sizable, and have a limited time in which they're available.

Rent, Increase and Adjustment Dates

• Due date: This is another key date, which usually falls on the same day of the month as the lease commencement date.

• Rent increase dates: If your lease has increases, these are the dates on which they'll occur. They're frequently tied to your lease commencement date as well.

• CAM reconciliation dates: Every year, most landlords issue CAM reconciliation statements that adjust the CAM budget for the next year and either refund CAM over-collections from the previous year or require payment of any under-collections.

Option and Right Dates

Some leases allow you to expand your space or even buy the building. Others give you the ability to renew your lease at pre-negotiated rates or terms. When these options and rights are valuable to you, most landlords become sticklers about the dates, so they're important to track as a part of your critical date management strategy.

• Right of first refusal/negotiation dates: Some leases give you a first shot at buying your space or let you match another offer, but they typically give you a short time window.

• Renewal option date: Many options carry two dates - the date on which you can first notify your landlord of your intent to renew, and the date on which the option expires. For instance, you may have a five year option that is valid from six to three months before your lease's expiration date.

• Purchase option date: These typically give you until a set date to buy the building.

Critical Date Management

Dedicated commercial real estate software is an excellent tool for handling all key dates together in one place. Managing your critical dates in the sample place where you manage all aspects of your commercial real estate portfolio takes the stress out of critical date management.

Do you need help managing your real estate portfolio? Click the button below to get a FREE demo of REoptimizer®, the world's first commercial real estate portfolio optimizer:

Commercial real estate software is more than just a tactical tool. You can do more than manage critical dates and ensure that you don't miss CAM reconciliations, rent adjustments, options and renewals. Some packages also include detailed expense tracking capabilities that let you do comparisons and strategically analyze your corporate real estate portfolio's performance.

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: