Visibility into Space Utilization is Key

The more efficiently space is utilized across your real estate portfolio, the less of an adverse impact it will have on your balance sheet. On average, office workspace density is between 40 and 60 percent. This leaves a great deal of wasted space that, if leased, now shows up as a liability on an organization's P&L.

The new standards provide an opportunity to re-evaluate that space by looking at office utilization alongside lease debt. When you know which leases are problematic, it's easy to identify potential solutions and work with finance to minimize their impact on the balance sheet. As an example, you may have the option to relocate people from other business units and consolidate buildings in the same area that are nearing lease expiration. Or, you could sublease space. If you're paying $70 per square foot but can sublease it for $75 per square foot, your liability shifts to a net profit. Market data can help evaluate if this is a good option. Other possibilities are buying out the lease or terminating early. While this may involve a short-term penalty, it could result in a long-term gain.

A Single Source for Greater Visibility

None of this is easy to do well without the right technology in place. A growing number of organizations are moving to an integrated workplace management system (or IWMS) for capturing lease, compliance, space and other building information. Rather than maintaining separate processes, practices and silos of information across departments, an IWMS provides visibility into all pertinent information and knowledge in a single source of truth that is accessible to and shared by everyone. With this information on hand, you can:

• form a complete and accurate picture of the entire real estate portfolio
• access detailed leasing information alongside real estate portfolio performance and utilization data
• surface all relevant data about your properties and spaces to more easily capture and analyze needle-moving metrics
• break down silos across teams to enable greater agility
• prepare for and respond to ever-changing standards
• easily identify cost savings and increase the efficient use of space

The new lease accounting standards are a step change for CRE's engagement with the broader organization. By working cross-functionally, utilizing purpose-built tools and following a well-developed plan, you can work with finance and other key teams and stakeholders to efficiently manage real estate liabilities and optimize the entire portfolio.

Craig Gillespie is business area director at Trimble Real Estate and Workplace Solutions. The views expressed here are the author's own and not that of ALM's Real Estate Media Group.