COVID-19 hit us like a ton of bricks. Going into 2020, we were on a high and focused on continue growth in virtually every sector of the economy. Today, the focus of the business world has moved from investing in the ride up, to hunkering down to get through the storm.
With companies looking for ways to control costs and save money, many are turning to their commercial real estate obligations. While looking for ways to re-negotiate or exit unneeded space is the first thing that comes to mind, many companies are missing an opportunity to utilize lease administration to save money by better managing one of the largest expenses on their financial statements. Lease administration is a resource that companies with multiple locations often utilize. As companies grow, wrapping their arms around their lease portfolio becomes increasingly difficult. It reaches the point where companies find themselves at a crossroads. Do you hire more people, invest in software solutions, and delegate valuable resources into managing the leases, or do you work with a professional third-party lease administration partner to handle the responsibility? Here are some benefits of utilizing a lease administration partner.
1. Allow businesses to focus resources on revenue generating activities
Tracking leases could fall under the role of many people in an organization. Whether it be the CFO, director of real estate or facilities, legal team members, or an accounting team, odds are the tracking of leases is not their primary function, nor their expertise. A lease administration partner allows businesses to delegate their internal resources to critical business activities.
2. All operating expense (CAM) statements reviewed
Building operating expenses (CAM charges) are a large expense for users with a portfolio of real estate. One of the most overlooked aspects of lease administration is the expertise needed to accurately review and challenge CAM charges. A lease administration partner will review all statements to examine any erroneous charges by the landlord. Each year we recover hundreds of thousands of dollars for our clients in our operating expense reviews, sometimes completely covering the costs of lease administration fees.
3. Save money by outsourcing work
Companies may choose not to outsource lease administration to save money, but the reality is the time and resources that are needed to do the function properly would cost much more than a third-party provider. As noted above, a good lease administration partner will provide you a team of expert real estate professionals. This is done at a much lower price point than bringing on full-time employees, especially full-time employees that have the real estate expertise necessary.
4. Reduce monetary and operational risks associated with a large portfolio
Many forget that the lease document is not only a legal contract, but probably one of the longest contract forms used in business. Managed properly, the focus of administering a lease should go beyond abstracting the rent obligation and lease term dates.
There are a variety of risks that, without a lease administration team, could be incredibly costly both monetarily and operationally for a company. When abstracting a lease, missing a key lease date or misinterpreting a lease clause are common catalysts for clients to bring us in to help them. A missed termination option can lock you into an unwanted space for an extended period of time. Not accurately interpreting a tenant improvement work letter and missing a deadline for reimbursement can be cataclysmic. On the accounting side, processing rent late can penalize you up to 10% of monthly rent.
5. Trade tribal knowledge for a team of real estate experts
One of the riskier components of in-house administration is the knowledge and dependence put on one or two people. While these individuals can be a source of wealth, their desires to advance their careers will result in lost knowledge over time. When utilizing a good lease administration partner, you will be getting a team of individuals with real estate expertise dedicated to your account and with the proper systems to ensure data is centrally managed. Having this depth of knowledge on your team can be invaluable as they have often come across a variety of difficult situations that tenants rarely know how to handle on their own.
6. Information organized and readily available
Gone are the days of the crowded, inaccurate and error-prone Excel document. With dedicated software solutions available, a lease administration team will keep all information centralized, up to date, and accurate. The data is available online at any time and delivered in easily digestible reports each month.
7. Responsive team
A good lease administration partner will always be available to answer your questions or review landlord issues that arise. Although all lease information we provide is in the reports and secure database, most of our clients give us a quick call to answer any questions. Additionally, if there are any lease issues that arise and need interpretation, a lease expert can provide their input based on experience.
Give the experts at National Lease Advisors a call to see how we can help your team with lease administration.