The new lease accounting standards are fundamentally transforming the rules that govern accounting for almost all types of leases. Under the new rules, operating leases now appear on the balance sheet as an obligation and a related right of use (asset). For some companies, this means anywhere from $5 billion, $10 billion or more on their balance sheets. This hefty liability creates a unique opportunity for corporate real estate (CRE) to align with finance as visibility into leases and the resulting financial implications become more important than ever.
A New Alignment: CRE and Finance
As a corporate real estate professional, your role is to optimize your real estate portfolio, constantly evaluating the underperforming leases across your company's portfolio to determine which are causing the biggest pain. When are they up for renewal? What are the options for those leases? What is the current utilization? For example, a really poor performing building (underutilized) with a 10-year lease signed last year may require you to do something different with that space. At the same time, finance is responsible for minimizing the impact of these liabilities on your organization's P&L.
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