How to Optimize Your CRE Portfolio

Let’s cut to the chase. There’s always room to improve your corporate real estate portfolio. In order to achieve your portfolio’s “optimal” performance, you need to cut the fat, stay on track, and look for opportunities for savings. So let's not waste any more time, and get into it. These are the top four ways to keep your CRE healthy.  

1. Know What You Have 

The first step is to systematically collect all your lease information into one place.  Many companies use lease administration systems or “integrated workplace management systems” (jargon for the same thing), or even Excel spreadsheets. Make sure all the operating expenses also counted. Even in a “gross rent” lease, the landlord is going to “pass-through” any increases in property taxes, energy, cleaning and maintenance – just to name a few. By the end of the lease they can add upwards of a 33%+ to the already elevated base rent.

The point to remember is analyze your portfolio as a whole. It may afford you the option to make improvements that build off each other. Savings can multiply exponentially when you’re dealing with a corporate real estate portfolio. Never lose sight of opportunities within your portfolio for savings, critical dates, and options. Doing so can avoid a CRE nightmare.  

2. Benchmark to Market 

a/k/a – Mark to Market your leases.  You need to compare what you are paying to what the market is currently offering.  To do this, you’ll need help. Even companies with dedicated corporate real estate departments typically do not have the resources to do the in-depth analysis of alternative sites for each and every lease that is coming due. 

In over 3 decades working with major corporations we have found that once the lease has been negotiated and the documents are signed, it is filed away safely in a fireproof safe not be brought out again until the lease expiration is imminent. Rarely, if ever, do corporations have a systematic method to look at all the costs that are attributable to a location and to compare them against current market realities — and do this on a year-over-year basis. Don't fall into this complacency. You can get a better deal but you'll need to benchmark against current market prices.

For this information you'll probably want to enlist the help of a True Tenant Rep™. Now is not the time to use the landlord's broker. The market intelligence you should be able to rely upon will likely be biased by these firms' loyalty to the landlords. As True Tenant Reps™, iOptimize Realty^® wants tenants to succeed. So, learn the methods to find the best office space for your company by signing up for our free course below. 

Alternatively, you can try to scour the market yourself by performing an Internet search for available properties. However this often leads to frustratingly partial information that you'll find often takes considerable time in phone calls to brokers and landlords to clarify. Of course, then thereafter, you'll be on their solicitation radar screen, further soaking up more of your valuable time.  

So assuming you have gathered quality and unbiased information on market comps you think and start performing a numeric comparison between the asking rent of those market comps to what you are currently paying. This at least is a start but is far from being a truly accurate picture. 

Real estate, by its very nature is a non-homogeneous product. There can be dozens of factors that need to be considered in attempting to evaluate how a particular comp would serve your real estate needs either better or worse. For example, is the commute better or worse with a particular comp as compared to your existing site for your workforce. This, in itself, can be a daunting task to analyze without the proper skills and tools.  

Simpler points of evaluation, or what we call “Key Site Drivers™” or KSD’s, might be the quality of signage available, the quantity and quality of local amenities such as places to eat or entertain clients at, or proximity to the nearest airport (I haven't met the CEO yet who drives long distances to visit sites). Learn more about how Key Site Drivers™ will simplify your portfolio: Key Site Drivers™ for Your Property Search. 

These Key Site Drivers™ should be used to score how well a comp meets your needs. Furthermore, some factors are invariably more important than others, so you'll want to create a weighting of the various Key Site Drivers™. 

3. Get Expertise on Your Side 

A surefire method to ensuring you get the best deal on your leases is by teaming up with a great source of market intelligence.  A True Tenant Rep™ is your best bet. This is a Tenant Rep that has absolutely no conflicts of interest.

Avoid Conflicts of Interest 

With corporate leases often running into the millions of dollars, if not the tens of millions of dollars, this is an important decision as any other major corporate purchase. It deserves full and proper due-diligence. As discussed earlier, unfortunately, the commercial real estate field is inundated with landlord brokers in disguise.  

Conflicted brokers bring deals muddled by the interests of landlords. Worse, you'll probably miss out on properties, and you'll likely accept most of the landlord's terms because the broker doesn't want to widdle down their own commission. 

So, the last thing you want to do is team up with a conflicted broker who may go by the name “corporate service broker.” To avoid getting taken advantage of, identify whether your rep is a True Tenant Rep™ by asking the following questions:  

1. Do you represent landlords? 
2. Does your company represent landlords? 
3. If a landlord offers an assignment that would cause a conflict during your engagement with my company – will you refuse it? 
4. Will you put all the above in writing?

4. Negotiate Early & Often 

Six months prior to a lease expiring is not the time to get spooled up on finding alternative space. You want the time on your side in any lease negotiation and it often takes 90 days to 180 days to get permits and build out new space and that’s after 30 days for site selection and 45 days for RFP’s, proposals and then lease negotiations.  So, allow yourself plenty of time. We recommend no less than 12 months, but all leases coming due in the next 36 months should be analyzed with special focus on those within 24 months.

Of course in this recessionary market, that strongly favors corporate tenants, you should really be renegotiating any sizable space early.

If you still have several years left on your lease, start thinking about your options. Weigh your space utilization, the percentage of vacancies in the area, and the optimal term length of a lease to analyze where there’s room for improving your portfolio. If you agree to a longer-term now with your current landlord, they can offer you a premium rather than if you wait to renew. And think of it this way: why should your landlord counter with a better deal if they know they have you on the hook? 

This goes back to the point that creating competition among other landlords will get you the best deal. If you wait until it's time to renew, you’re missing out on the market research and competition development that will improve your deal for the next few years. Essentially, you’re putting all your eggs in one basket when there are a million other unfilled baskets out there 

Optimize Your Portfolio with a Tenant Rep

Any organization can benefit from making their CRE a more efficient expense. Let the True Tenant Reps™ at iOptimize Realty^® handle your next steps if you feel you want a helping hand in this process or don’t even know where to begin. They can identify where you can save, leverage the value of your tenancy against landlords, and determine the best areas for you to move. True Tenant Reps™ also have access to software and programs out of reach of other professionals. In addition, they come prepared with a vast network of other real estate professionals who can aid the process of finding and securing corporate space. 

Their representation cuts through the hassle and stress of corporate real estate. They also only represent tenants, so you know your interests will be safeguarded through the entire process.

Talk to a True Tenant Rep™ at iOptimize Realty^® today.