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Cost-reduction strategies

Find solutions to reduce your real estate costs in this volatile market.

With energy prices slumping, many companies within the industry are struggling with excess space and the
feeling of being trapped without solutions.

Fortunately, there are a number of short- and long-term options that you can explore to help realign your portfolio, maximize flexibility and better manage overall costs.

Subleasing

The subleasing market is usually the first option for tenants looking to modify their space needs prior to lease termination.

This process involves gaining your landlord’s approval to lease out your excess space to another tenant, who will pay you directly while you maintain your existing lease contract.

While restrictions vary from one lease and landlord to the next, subleasing is often the most cost-effective way to manage your shifting space requirements.


Early lease restructure negotiations

While landlords have not always been willing to budge on lease terms in the past, market conditions have forced a change in tune.

Why would your landlord consider restructuring to offer leniency on your lease terms, and potentially reduce your base rent?

In some cases, the alternative—having a tenant default and vacate—can be more costly than a renegotiation.

By working with a seasoned real estate broker, you can fully understand your options and your leverage based on market conditions.


Sale lease-back

In this scenario, you sell owned, non-core business assets—like your office building—to an investor, and simultaneously lease back the space you need.

Executed properly, the benefits of a sale-leaseback are numerous.


Purchase-to-lease transaction

If you currently lease more than 80 percent of a building, this may be an option for you.

Here, you purchase the building you’re currently leasing, assigning the purchase contract to a financing source. Then you lease back the space, but at a lower rate than you previously paying.


Portfolio review

There are at least 57 ways to reduce your real estate costs that can be identified in a portfolio review, making this an essential part of any cost-saving strategy.

For example, when evaluating one Denver-based energy company’s portfolio, we found that though they were leasing three floors in one building, they really only needed two. So, we worked with them to consolidate the space by moving some people around, and then subleased the now-unneeded floor.


Facility and real estate management 

For companies without dedicated, internal real estate experts, having a partner take on property and facility management can ease unnecessary burdens, and will probably reduce spending.

External partners can also help you evaluate your portfolio against market conditions, so you can best plan for the future.

Learn more: For more on these cost-reduction strategies, download our complete whitepaper