Galaxy Partners recently conducted a survey on important issues facing corporate real estate. From the results it is clear that the challenges of the current economy will continue to have an effect on how corporate real estate into 2010.

Here are the results:
1.   The most important real estate issue facing my business in the coming 12-18 months is:

• 53% reported Reducing occupancy costs with about the same locations
• 34% reported Expanding the number of locations
• 13% reported Reducing the number or size of our locations

2.   Regarding outsourcing real estate management tasks or services:

• 53% reported Currently outsourcing most or all corporate real estate services needed
• 40% reported Managing real estate in-house and it is working well
• 7% reported Is considering/open to outsourcing most or all corporate real estate services

Observations:

Reducing occupancy costs can be accomplished by managing the portfolio more efficiently with a set of tools and processes. Real-time, instant access to space availabilities and usage will be required.  This allows organizations to be responsive to changing space planning requirements.

Organized and report-able lease data will be needed to provide year over year comparisons of real estate expenses, making variances and anomalies easy to find and remedy. Variances will need to be researched using the lease terms, documents and notes. In addition, current and historical financial data for existing and expired leases will need to be accessible for desktop audits and forecasting.

The remaining 47% are planning changes in their portfolio.  This means that documents, financial information, contacts and critical dates will all need to be tracked and leveraged during the lease life-cycle.

In regards to question 2, whether outsourcing or managing real estate internally, a system is needed to monitor the process.  Changes, progress indicators and information will need to be shared.

Summary:

The combination of well implemented processes and tools can help lower occupancy costs, manage portfolio change, and facilitate an effective relationship with outsourced services. Visual Lease is a system that when combined with effective processes, helps real estate department work more efficiently.  The key features of Visual Lease that are used to meet the requirements in this article are space usage tracking, expense tracking, flexible reporting, centralized documentation and easily accessible lease terms.

About Galaxy Partners:

Galaxy Partners helps companies get the greatest possible value out of their commercial property. Through managing a wide range of lease portfolios and corporate real estate transactions, their seasoned team has solved real estate issues for clients ranging from local businesses to Fortune 500 companies.  Galaxy Partners can be reached at 770-350-0411 or online at http://www.galaxypartners.com

Tenants often think that the only risk of deferring an audit of their lease this year is that they may be unable to recover any of this year’s overcharges. In fact, skipping a year of reviewing your charges can have a profound impact on your costs for the balance of your lease term. Here’s why.

Accepting billing practices may create a presumption that such practices are acceptable. Landlords will often argue that a tenant had an adequate chance to review their charges and object, and by deciding not to do so, accepted the underlying billing practices. To protect against this, there may be specific clauses in the lease that state that the tenant’s failure to object to a landlord breach does not constitute a waiver of its future right to do so. But in practical terms, allowing an improper practice to continue makes it much more difficult to correct in later years.

In addition, in Base Year leases, the tenant’s best opportunity to object to the structuring of the base year’s expenses is early in the term when the expenses are fresh. As with improper billing practices, if the base year is understated, it will result in overstatements of the operating expense and other escalations for the duration of the lease term. Any such understatements should be identified and discussed with your landlord immediately, before they have a chance to become embedded in the landlord’s financial plan. Landlords’ projections of future income rely on upon proper estimates of revenue from operating expense, tax and other escalations, and adjustments to base years raise significant issues as to future income projections.

Originally published as a KBA Lease Tip. For additional lease tips click here

About KBA Lease Services
KBA Lease Services, Visual Lease’s parent company, is the signature provider of commercial lease audit services throughout North America. KBA’s scope of services includes operating expense escalations, utility charges, real estate tax charges and other occupancy costs.

Formed in 1985, KBA (formerly Kislak Lease Services) pioneered the lease audit industry. KBA eliminates billing errors, recovers overpayments and ensures lease compliance. Since our inception we have reviewed over 50,000 commercial leases and recovered many millions of dollars in savings for our clients.