Mar 19, 2014

3 CRE Strategies that Result in Long-Term Cost Savings

By Don Catalano


CRE_SavingsUsing the right strategy can make a big difference in your corporate real estate optimization program. Whether you're researching, leasing or configuring space, tweaking your practices just a little bit from the traditional norms can make a big difference in your results and save you thousands (or millions!) of dollars over the long-term. 


Leveraging Data

Like the rest of the business world, corporate real estate optimization comes from collecting and analyzing data. The more information you can get about your space, your portfolio and the broader market, the more effective you can be.

Basic metrics like square feet and rent are really not that important. It goes without saying that your office in a large market will be smaller than one in a small market and that a regional distribution warehouse will be smaller than your main distribution center. You already know that locations in Los Angeles cost more than ones in Cleveland. Those basic metrics become useful decision making tools when you combine them with business metrics. The number of square feet you have matters when you look at how many of them you need to house an employee, and your rent matters when you look at it relative to your sales.

Your portfolio data adds value when you use it to benchmark sites against each other. Going the next step and comparing sites to ones offered in competing buildings helps you spot noncompetitive lease terms so that you can renegotiate them. In this way, corporate real estate optimization is like any corporate expense cutting project -- vendor comparisons and re-bidding are both important aspects of the process.

Learn to Love Subleases

Subleases may very well be the commercial real estate industry's greatest gift to corporate real estate optimization initiatives. The ability to turn a vacant and unwanted space into at least a partial income stream can be a budget saver. However, many organizations underutilize the tool. For many spaces, the idea isn't to get a sublease that replaces your rent. Instead, it's to find a tenant that will cover some of your expenses. Getting your CAMs covered even if the tenant doesn't pay any of the rent can still help to reduce your outflows.

Subleases could be an even bigger benefit when you are looking to add space to your portfolio. Behind every sublease space is a tenant in trouble and a landlord that is scared that at the end of the lease term, he will be looking at a vacancy. With good market data, you can use their weak negotiating positions to negotiate a long-term lease that serves your company's needs and potentially gives you a lower-than-market occupancy cost. 


Embrace the Open Floorplan

Open floorplans have been around long enough that property management and commercial real estate pundits are starting to spend more time talking about their drawbacks instead of their advantages. However, we've only started to see them result in smaller office spaces leases over the last couple of years.

This is because many companies are taking out open floor plan space and treating it like traditional space, but with fewer offices. To achieve the maximum degree of corporate real estate optimization, work with your space planner to design new office paradigms that take advantage of open floorplans. Typically, these include creating smaller offices and workspaces for those that have them and having fewer defined spaces, reflecting the reality that more and more office workers do their work anywhere but in their office. Adding in some semi-private spaces lets workers that need privacy have it. Along the way, you're using less space with fewer TIs.

Here are a few other articles to check out:

The Benefits of Open Office Space

5 Things You Should Know Before Entering a Sublease

How to Make Better Decisions in Commercial Real Estate


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Topics: corporate real estate optimization

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Don Catalano

Don Catalano