Strategies To Take Control Over Occupancy Costs

Posted by Anne Sheehan on Feb 29, 2016

Managing property taxes to control corporate occupancy costs is a viable strategy. Are you really in control of your corporate occupancy costs? Increasingly complex CRE portfolios require robust strategic management.

Moreover, demands on CRE teams are growing as the economy continues to rebound from the recession; commercial real estate portfolio expansion is becoming a priority for organizations worldwide.

The following are strategies to help you take control of the cost of corporate occupancy, allowing you to unlock often overlooked opportunities to create meaningful bottom-line savings in your commercial real estate portfolio.

Unlock Hidden Value In Capital Expenditures

Consider the example of a professional services conglomerate that bought several competitors over the course of the last decade. Commercial real estate  was a major component of the acquisition, but amid downsizing staff, a flexible work-from-home policy for many workers and other factors, a lot of this commercial space wound up unused or underutilized.

An easy strategy to lower occupancy cost in this case would be to consolidate the property portfolio. By moving into a space that’s more properly suited to today’s needs, the firm could save a fortune in occupancy cost.

On the other side of the coin, architectural expansions and other upgrades may also turn out to be a boon for your bottom line, even if it requires some initial capital expenditure.

Consider a manufacturing business toiling away for years with an outdated and inadequate production space. Now, with improving market conditions and more available capital, the business is ready to upgrade its assets, either real estate or machinery and equipment.

By moving into a larger and more logically organized space, the manufacturer is able to increase its rate and volume of production. At this new speed of business, it could be possible for the manufacturer to eliminate its third shift (thus saving the expense of running heavily energy-dependent machinery 24/7), or it could up its production and keep the third shift going to make up for the cost of occupying the space with increased sales.

On the surface, a capital expenditure is, quite simply, a cost. But, businesses can make an effort to control overall occupancy costs by making smart capital expenditures.

One final point to consider: Whether you’re rightsizing or upgrading your commercial property portfolio, there is one constant: your property taxes.

Start Viewing Occupancy Cost In A New Light

In organizations across America, countless commercial property tax assessments are received, reviewed with a passing glance and summarily paid without much consideration. The cost of occupancy directly associated with property taxes is significant, and it can typically be controlled.

One of the biggest mistakes corporate occupiers can make is blindly paying commercial property taxes without question.

It’s quite likely that if you’ve never appealed your tax assessment, you’re paying more than your fair share.

The manufacturer from the example above? Its old facility was marred by functional obsolescence. The inadequate space limited the business’s ability to produce. When commercial property tax value comes into play, this obsolescence must be considered and quantified.  But, unless you know to look for it, this is a method of controlling occupancy costs that typically goes overlooked.

Controlling Occupancy Costs Through Strategic Property Tax Management

According to IBM and CFO Research, 44% of finance executives agree that effective management of corporate real estate assets is the most important thing for reducing costs.

By fundamentally shifting your mindset about corporate real estate and its potential impact on your company’s profitability, you should see serious benefits. This paradigm shift allows you to think strategically and at a higher level about your portfolio.  

Adopt agile principles and approach your portfolio from a lean perspective. Start by streamlining operations and assessing your portfolio. Identify areas where you could reduce waste and opportunities to positively alter your physical presence. Consider going through an occupancy cost analysis.

After you’ve done the initial legwork, it’s time to see if you can further take control of your occupancy costs through strategic property tax management.

The smartest CRE teams recognize that certain specialized areas of expertise are better served by a network of trusted outsourced professionals. Just like you may outsource IT support to a dedicated team of experts, it makes sense to do the same for commercial property tax management.

Outsourced commercial property tax management takes the effort and headache out of CRE portfolio management while delivering all of the strategic benefits.

These are just a handful of useful strategies for controlling occupancy costs. Get more tips for improving your bottom line by downloading the helpful resource below.

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