Oct 27, 2011

5 Steps to Optimizing Your Corporate Real Estate Portfolio

By Don Catalano

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Optimizing your corporate real estate portfolio is something every company should strive for. Here are 5 steps you should take to optimize your portfolio:

 

1. Know What You Have

The first step is to systematically collect all your lease information into one place.  Many companies use lease administration systems or “integrated workplace management systems” (jargon for the same thing), or even Excel spreadsheets. 

 

Make sure all operating expenses are also counted.  Even in a “gross rent” lease, the landlord is going to “pass-through” any increases in property taxes, energy, cleaning and maintenance – just to name a few.  By the end of the lease they can add upwards of 33% or more to the already increasing base rent.

 

Scan, PDF & Incorporate – your leases.  You should be able to pull up any lease clause in any lease from wherever you and your laptop are.   Dare I say, even from your tablet computer.  Yes that right, because corporate real estate is going that way.

 

Strongly consider secure, cloud storage of you lease documents for this.  There are many providers, but right now DropBox is becoming the rage because of its “Set and Forget” ease of use.  See my article on “Cloud Computing - The Killer App for Corporate Real Estate”.

 

2. Benchmark to Market

a/k/a – Mark to Market your leases.  You need to compare what you are paying to what the market is currently offering. To do this, you’ll need help. Even companies with dedicated corporate real estate departments typically do not have the resources to do the in-depth analysis of alternative sites for each and every lease that is coming due.

3. Get Expertise on Your Side

So you’ll want to develop a great source of market intelligence.  I know I just said it, but I will say it again: knowledge is power, and I can't stress it enough.  A “Tenant Rep” or tenant representation specialist is your best bet in that they are supposed to be representing your interest.  Most brokers do not and will not focus only on tenant representation.  They simply don't see the money in it, and will not put in the time to understand what you want and what you need.

4. Avoid Conflicts of Interest

That said - make sure of it.  With corporate leases often running into the millions of dollars, if not the tens of millions of dollars, this is an important decision as any other major corporate purchase.  It deserves full and proper due-diligence.
Here’s some questions to ask of any would be Tenant Representative:

  1. Do you represent landlords?

  2. Does your company represent landlords?

  3. If a landlord offers an assignment that would cause a conflict during your engagement with my company – will you refuse it?

  4. Will you put all the above in writing?

 

5. Negotiate Early & Often

Six months prior to a lease expiring is not the time to get spooled up on finding alternative space.  You want the time on your side in any lease negotiation and it often takes 90 days to 180 days to get permits and build out new space and that’s after 30 days for site selection and 45 days for RFP’s, proposals and then lease negotiations.  So allow yourself plenty of time.  We recommend no less that 12 months.

Of course in this recessionary market, that strongly favors corporate tenants, you should really be renegotiating any sizable space early.  We recommend looking at all leases coming due in the next 36 months and places special focus on those within 24 months.

 

REoptimizer® can help optimize your portfolio.  Check out how!

 

Other CRE Optimization articles to check out:

What is Commercial Real Estate Optimization?

How to Optimize Your CRE Portfolio For Now and the Future

What is Commercial Real Estate Optimization and Why You Need It

 

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Topics: corporate real estate, Lease Administration, Commercial Real Estate Software, Optimizing Real Estate Portfolio

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Don Catalano

Don Catalano

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