Happy New Year! The time has come again, the time for setting resolutions to get to the gym more often, eat healthier, and overall get in shape. But have you spent any time thinking about your business resolutions, and how to keep your business in shape? Here is a list of real estate resolutions for you to consider at the beginning of each year:
Put Important Lease Dates in Your Calendar: If you don’t have a real estate department or lease management software program it is important to make sure you are on top of your critical lease dates. Most leases contain rights that must be exercised by certain dates. Options to Renew, Early Termination Rights, Contraction and Expansion Rights typically must be exercised by a predetermined date in the lease. But it is just as important to calendar non contractual actions. Reviewing your space needs and benchmarking your lease to current market conditions may create some action items that should be on your “to do” list. Is this the year for an early restructure?
Vow to Carefully Review your Operating Expense and Tax Pass Throughs. This is one area I think most tenants overlook and is the lowest hanging fruit to take advantage of each year. Many tenants are uncomfortable challenging a landlord in this area, but you would be surprised how many times an incorrect, and costly, operating expense pass through is just an honest mistake by the landlord. Most landlords operate on a calendar year basis and send out Operating Expense and Tax Statements in March. But some landlords operate on a fiscal calendar, so be prepared to jump into a review immediately upon receiving the statement. Each lease is different and some leases do not provide much time to audit, so be careful not let this one get away this year, especially if it is the first year of your lease.
Track your Tenant Improvements Depreciable Life: Many tenant improvements have a different time frame for depreciation. Are you taking advantage of these accelerated depreciations? Did you move, remodel or give back space before fully depreciating an improvement? Time to make sure you have identified these opportunities and save some taxes. It can be helpful to discuss this “cost segregation” concept with your accountant for more details.
Benchmark Your Lease Rate to Market: How does your lease compare to market? If you analyze this each year you are less likely to miss opportunities to restructure the lease early and maximize potential savings. At least ask your broker to give you a quick assessment.
Review your Insurance Policies: Leases require insurance. Make sure your policies are in line with lease requirements and bid out your policy annually.
Update your Agreements: Have you made any changes to you lease arrangement with your property manager? No matter how slight, it can pay dividends to memorialize these changes. Did you get more reserved parking? Is it in the same location. Are you using storage space? If some of these changes are intended to add permanent revenue to the landlord, can you leverage some incentives?
We hope these ideas can save you some money in the new year. Wishing you, your companies, and your families the best. Happy New Year!