If you own your building or you have a triple net lease that give you a degree of control over vendor selection, you have the ability to control many aspects of your operating expenses. While each building, each community and each ownership structure is unique, here are a few strategies that you can use to manage and, with some luck, reduce what it costs to operate your spaces.
Audits
The first step in managing operating expenses is to understand what you're spending, where and why. If you can measure each audit in your portfolio against each other one, you can see which expenses at which sites are outside of your company's norms and focus your efforts on fixing them first.
Property Tax
The government agents that determine assessed values for property tax purposes have a great deal of incentive to accurately reflect increases in value and none to pick up decreases in value. As market values grow and contract, it's not uncommon for a commercial property's assessed value to be significantly higher than its real market value. If you can prove that you are over assessed, appealing your property tax valuation could lead to an adjustment that nets thousands or millions of dollars worth of savings.
Utilities
There are three broad ways to reduce the utility portion of your company's operating expenses. Depending on your company's current policies and the configuration of its spaces, any or all of them could apply.
- Policies. One way to save on utilities is to set up policies that encourage energy conservation. These can be as simple as requiring that the lights be turned off at the end of the day or as complicated as reviewing all of your procedures to find ways to reduce energy consumption throughout them.
- Repairs. Buildings become less efficient as a result of natural aging, construction defects or both. Over time, seals can break down, leading to outside air penetrating the building envelope. As HVAC equipment ages, it also develops leaks and inefficiency. Working with a qualified contractor, you can find ways to return your building's systems to their original performance.
- Upgrades. Upgrades can be as simple as adding motion sensors to lights in hallways or as extensive as replacing all of your company's computers with higher efficiency laptops and tablets or adding photovoltaic panels to your building. While upgrades can be capital-intensive, some can also yield fast payback periods. When done as a part of a planned replacement, their incremental costs also drop, letting you achieve reductions in operating expenses without significant additional outlays.
Insurance
Insurance policies are generally designed to be a set-and-forget affair. They automatically renew and, in many cases, have coverage increases built in to keep track with inflation. However, as your company's needs change, you may need different insurance. In addition, the company that had the lowest price five years ago might now be the most expensive. As such, periodically re-quoting your policy is a way to manage operating expenses.
Third-Party Vendors
Like insurance carriers, vendors also usually make it easy to keep doing business with them. However, they can also get comfortable and gradually increase prices. Periodically re-bidding keeps them honest while also giving you the opportunity to potentially find a less expensive option.
See how REoptimizer® can help you with commercial operating expenses!
Other articles to check out:
Subscribe to our blog for more CRE tips!
