Tips For Reducing Your Operating Cost Now And Into The Future

Posted by Anne Sheehan on Jan 29, 2015

ReducingCostsIn 2008, when the U.S. economy was in the throes of the Great Recession, companies were looking any opportunity to reduce operating costs. Layoffs, invoice renegotiations and other dramatic cost-cutting tactics were rampant.

Now the economy has rebounded substantially, and many of the pains and problems businesses were facing a few years ago have been alleviated. The industrial and office markets in the commercial real estate industry, for example, experienced great improvements in 2014. Some office space is now selling for more per square foot than at any time in recent memory. It’s safe to say that the market is in a significant recovery across the U.S.

But the difficulties of 2008 are not gone from memory. Cost is still a big topic of conversation; people still are looking to reduce costs, even though the economic and business climate has greatly improved in recent years.

Sound familiar? If you’ve been charged with reducing operating costs in your company, you’re not alone.

Here’s some good news. The largest cost of corporate occupancy is property taxes, and there are several ways to lower the tax value of your commercial property portfolio. This translates to lower commercial property tax payments and healthy tax refunds.

Use these tips to leverage your commercial property portfolio as a means to reduce your operating cost now and into the future.

1. Determine what you’re paying for:

Itemize every expense related to your individual buildings and determine what you’re paying annually. Look at what you’ve paid for expenses such as electricity, property insurance, repairs and water bills over the last few years. You’ll see a pattern in these numbers. Some, such as your water bill, should remain fairly consistent year-over-year. Others will be more variable. Identify which expenses are increasing and make efforts to curtail them. Maybe the contract with your landscaping company expired and the rates went up a year ago. It’s worth calling the landscaper to renegotiate a more favorable rate.

2. Identify what expenses have not decreased but should have:

A good property manager sees patterns in costs over time and finds opportunities to reduce them by renegotiating contracts or other means. As you’re conducting this assessment, make sure you’re scrutinizing what you pay in property taxes. If your property tax value hasn’t changed since 2008, it’s a huge red flag that you’re overpaying. Real estate values plummeted in 2008. If your commercial property taxes didn’t decrease (or even worse, if they went up) it’s a sign that someone in your local tax assessor’s office isn’t doing their job.

On average, property tax reductions can range from 25 to 40 percent when you work with a property tax professional. If you’re paying $1 million in property taxes every year, just think of what your company could do if its operating expenses were reduced by 25 percent. You could pay off debt, fund capital improvement projects, hire more people or give larger holiday bonuses — the possibilities are huge!

3. Explore opportunities to make your buildings sustainable:

There are many options to capitalize on alternative energy sources and green buildings, including LEED certifications. In the future, as you build or acquire new properties, make them as environmentally friendly as possible. For instance, solar panels and green roofs require an upfront investment, but that cost pays off in the long run in the form of reduced operating costs.

If you’re looking for even more ways to lower your organization’s operating expenses, consider partnering with a dedicated commercial property tax consultant. Property taxes represent the largest cost of occupancy, over 40 percent. If you reduce your occupancy cost, you’ll lower your overall operating costs, increasing the value of your building and your business. A dedicated commercial property tax consultant is equipped to help you reach this goal.

Download RPTA’s free whitepaper, “7 Signs You Might Be Overpaying Your Commercial Property Taxes" for more insights into the commercial property market and to learn how to uncover hidden property tax savings.
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