Four Fundamentals of Lease Management

Redline and sign. Aside from lease expirations, that’s about all the attention most commercial leases receive before making their way to the filing cabinet. If that’s the case, your company is losing money…guaranteed!

Whether you’re leasing space for a restaurant, a piece of ground for an ATM or a silo to store grain, you must know your lease inside and out. Fully understanding the four fundamentals of lease management will help you:

  1. Track critical dates and deadlines – Missing critical dates and deadlines in a lease can literally make or break your business. Imagine missing a renewal option and having to move away from a prime location, or not keeping up with the deadline for early lease termination if sales fall below projections. Keeping up with all the moving parts isn’t easy, but it is necessary.
  2. Redeploy valuable resources – Most companies don’t realize how much time is wasted when leases are not properly abstracted into an easily searchable software platform. In fact, lease administrators can spend hours, if not days, every month manually searching for information that is buried in convoluted lease language. And for companies with more than a handful of locations, Excel simply won’t cut it. With the right software, accessing lease information is instantaneous, freeing personnel to focus on other duties that cannot be automated.
  3. Make data-driven decisions – When lease information is tracked in the appropriate manner, occupancy costs (rent, percentage rent, CAM, taxes, insurance, utilities, maintenance and repair, etc.) can be benchmarked. At that point, it’s easier to compare locations in the portfolio using measures like cost per square foot and the total occupancy cost-to-sales ratio. This will greatly enhance decision-making about whether to renew a lease, renegotiate the terms of an option period or relocate the business.
  4. Boost the bottom line – For companies with multiple locations, occupancy cost is most likely your second greatest business expense. People generally perceive this as a fixed cost, with no room for savings. However, when costs are consistently tracked and managed, savings can range from 4 to 20 percent. Sales increases also occur when landlords are held accountable for their lease obligations, from non-compete clauses preventing similar businesses from operating nearby to fulfilling common area maintenance agreements that help create positive customer experiences.

If you have a commercial lease, you have two decisions. Throw that signed copy in a drawer, pulling it out during periodic fire drills when you miss a deadline or important option. Or, you can treat it as a living, breathing document that contains critical information for doing business. After all, your lease portfolio is a significant expense that requires proactive management.

Interested in learning more about how Property Works can help with your lease management needs? Check out our 2-minute video and contact Karla Finnegan at 678.704.4516. You also can schedule a call or demo online at your convenience.