It’s Now 2013: Do You Know Where Your Lease Is?

This is a re-post of our Jan. 2012 article.  We felt it was worthwhile to update and remind all the real estate deicision makers out there that they need to revisit their lease for 2013.  A lot has changed this past year.  Many markets saw a significant reduction in vacancy in Class A assets and the options that were available last year are not available this year.  If you have questions after you review your lease then give me a call to discuss.  I can give you an update on how you might want to modify your overall real estate strategy for 2013…

Is a lease audit one of the top five tasks you do each year? Did you know that your lease is one of the top five expenses for your company? Every CFO or real estate decision maker should conduct an annual lease audit to stay current with your lease and compare it with the current market.

If you are the proactive type, you have likely already thought about and completed your goals for 2013. Your categories may touch the personal, professional, physical, social and financial aspects of your life. If you have all of these complete, you are on top of your game for 2013 right? Personally yes, corporately no!

Since leases are typically signed, filed and never reviewed until six to twelve months prior to their expiration, there are costly mistakes that can be avoided if you take just 15 minutes to review the lease to refresh your memory on the document that governs the occupancy of your space. The lease document remains the same but the market constantly moves so you need to know how your lease compares.

To keep this drill to 15 minutes or less, I have provided some sections to look for in your lease. At a minimum, focus on the following:

• Dates – Review your critical dates so you are current on when your lease commenced and when it expires. Add the expiration to your calendar with a 12 month reminder (along with my contact info) to begin addressing your expiration. Make sure to look for any commencement date memorandums.
• Rent – Calculate your rent and know how it compares to the market. You can give me a call to obtain your relevant market information. If you are above or below where market deals are being done, you should take note and consider what risks your current situation creates.
• Option to Renew – Check to see if you have an Option to Renew (“Option”). An Option is a benefit to you. It can provide protection from another company taking your space. It will also outline how and when you need to address your current lease. The typical timeline requires the tenant to give the landlord notice from as few as six to as many as twelve months prior to the lease expiring. When you have an option, it is best to comply with the timing so you don’t lose it all together. The notice usually requires you to begin the process of gaining knowledge about the market from eight to fourteen months early.
• Insurance – Lastly, visit the liability insurance section on your lease. Call your insurance agent to see if you can reduce your rates and me to determine if your limits are in line with the present market. Depending on your business, excess insurance coverage can represent unnecessary costs to your company.

After you’ve completed your annual audit, make sure to do the following:

• Set Alarms – Update your alarms in your calendar or lease administration software system. (See Is Lease Administration Software For You? The blog post dated February 28, 2011.)
• Headcount Projections – Update and compare your headcount projections with your current space so you can begin to plan for future changes. This can best be determined by going through a space program process. I can help you with this or refer you to a knowledgeable architect.
• Develop Your Plan – If you’ve identified any sections where savings can be generated, put together a plan to address those areas.
• Verify your Strategy – As your real estate advisor, I will review your new strategy, compare your lease with the market and discuss the items you’ve uncovered. We can then talk about additional areas that may be relevant to you and review those items as well.

Congratulations, you have just completed a very significant task for 2013! If this is more time than you want to spend, call me and I’ll perform a complimentary review of your lease and we can schedule a time to go over the information together.