Creating a Cost-Effective Corporate Real Estate Strategy
admin / September 10, 2020
Your real estate commitment is an expensive part of your overall company operations. Evaluating where you are and where you want to be in terms of cost and needs, is an important part of strategically managing a profitable business. Do you rent or own? How much time is remaining on your lease? Do you re-up or move? Is the current arrangement good for growth? What about downsizing? Do you need to cut back on leasing expenses? Will some other location give you better terms? Is this location still right for your business?
All of these are important things to assess when you look at the most cost-effective commercial real estate strategy for your company. It can help free capital and allow you to stay competitive.
When leasing, consider these two alternatives and what they mean to your overall strategy:
Your Lease Is Over Three Years
If your lease is over three years, then your options for controlling your costs downward are fairly limited. However, there are still items you can review:
- Consider subleasing some of your space. Find the right tenant and you can reduce your overall occupancy costs.
- Review your utility bills. Changing lighting and computer usage at night or climate-controlled heating and cooling can help reduce energy costs.
- Review your Common Area Maintenance (CAM) expenses. Errors do happen. Make sure the billing is correct and that you understand your charges.
- Consider energy efficient upgrades like installing LED lighting or more energy-efficient machinery.
- Appeal your property tax assessment Most municipalities have an appeals process. If it’s a multi-tenant establishment, you will probably need to work with your landlord. But this is to their advantage as well.
Your Lease Is Less Than Three Years
With a short lease, you have the opportunity to bring your lease down by negotiating with your landlord to reduce costs when the lease term ends or look for more cost-effective space.
- Begin to plan your move by researching the available market in terms of space available, rent, concessions being offered and Common Area Maintenance fees.
- Contact a few buildings to get a better idea of what is being offered new tenants, i.e. three month’s free rent on a 3 year lease, build-out allowances, common area utilization (lounge, conference rooms, gym access, etc.)
- Once you have a feel for what is available in the market, go back to your landlord and offer them opportunity to match or beat the competition (especially if your existing space still fits your needs). See if they offer any concessions for renewing your lease early for if you extend it to match a comparable offer. After all, there are costs involved to move.
- Consider some of the other items mentioned above, i.e. reviewing energy bills, auditing our CAM charges, changing lighting to LED efficient bulbs, etc.
Plan now to make your long-term strategies work for your company.