9 ways to
significantly cut
real estate costs

Maximize your cash on hand and position your business for success

Although many of the issues driving our turbulent economy have eased—think clogged supply chains, price gouging and product shortages—we’ve still got to be on the lookout for ongoing inflationary pressures. Many companies are looking for ways to save money and cut costs, but they’re overlooking a huge opportunity to slash their second-largest expense: their real estate.

There are a number of ways to save as much as 25% on your real estate costs that’ll help you position your business for success during this rapidly changing market.

Short-term opportunities

1. Reduce your leasing costs:

When a tenant leaves, the landlord suffers from lost rent, ongoing operating expenses, taxes and significant costs to attract a replacement. In today’s climate, those space vacancies can give you the upper hand in negotiating more favorable terms.

2. Renegotiate your lease to maximize savings:

Rental rates in many markets have fallen, and landlords are eager to retain paying tenants, giving you the opportunity to compare leases to current market rates. Using portfolio analytics tools, you can discover if your property leases are above, below or at current market rents. That’ll help you renegotiate rents to fair market levels. Conducting an audit of landlord building expenses— such as energy and other utilities, maintenance, facility management and more—may uncover opportunities to save even more.

3. Review your lease agreement:

There are ways to protect future flexibility in your lease and uncover hidden opportunities. If you worked with a commercial real estate expert on your original lease, chances are you’ve got termination options. You might also have rights of first offer on adjacent suites and event contraction rights if your needs change and you’re using less space.

4. Reduce excess space and right-size your office:

Subleasing part of your existing space can help protect your flexibility for the long term while freeing up capital. However, certain elements will make your space more desirable in a market currently oversaturated with subleases. Think separate—separate entrance, separate break room, separate IT room—to maximize your pool of prospective subtenants. And make the space plug-and-play: the easier it is for a subtenant to move in and get to work immediately with little or no capital expenditure, the greater chance you’ll have to find a match.

5. Should you renew your lease or relocate?:

Renewing a lease and renovating your space can be less costly than relocating an office.

Long-term opportunities

1. Use data and analytics to find the right location:

By analyzing data such as location—including access to talent, customers, commute times and nearby amenities—you can identify the best and most cost-effective office space for your needs. You can explore potential locations virtually, overlaying macroeconomic data, tax incentives, workforce profiles and other data to help you make a strategic location decision.

2. Understand your occupancy costs:

By knowing how you use your office space, you can better plan it out to help improve employee satisfaction, performance and productivity.

3. Leasing vs. owning: evaluate the pros and cons:

Buying or leasing spaces each has advantages and disadvantages, depending on your business and how you intend to use the space. Work with a commercial real estate expert to determine cost efficiencies one vs. the other.

4. Consider a sale/leaseback and unlock hidden equity:

If you own your own building, a sale/leaseback allows you to sell the property and lease back the space you need to operate. This will also more likely secure you a higher price point than a vacant building, as investors are currently paying more for occupied buildings.

A sale/leaseback also can help you:

  • Unlock “hidden” equity on your organization’s balance sheet
  • Alleviate risks that come with property ownership
  • Right-size your portfolio

Want to learn more about creating a workplace that fits your business goals? Click here.