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Business Problems With Real Estate Solutions: Bottom Line Management 2

Posted by Ann Salas on December 3, 2019
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Problem Solving Articles Banner Option 2

Bottom Line Management

I need to cut my overhead costs.

  1. Base year caps:  Many companies dread the unknown annual operating expense increases they are required to pay.  Though a consistent and fairly predictable cost in a building with new systems or a long term owner, buildings that require continuous maintenance or are under new ownership may lead to inconsistent, and sometimes substantial, annual operating expenses.  To combat against tax hikes after building improvements, cost sharing of the latest new HVAC replacement, or increased management fees from a new owner, firms with a substantial portion of a building can request a cap on these annual expenses.  This prevents against a major cost at the end of the year and provides a level of predictability for forecasting and reporting.
  2. Efficient floorplans:  Aside from selecting and designing a floorplan that accommodates the largest number of employees in the smallest space, tenants also have to take into account a building’s common area factor when seeking to maximize space efficiency.  Selecting buildings with a low common area factor means that you are paying for more square footage in your space that can be utilized by your company and less square footage being absorbed by the common area amenities.  As an example, all commercial leases are based on a suite’s rentable square footage – meaning the wall to wall measurements of a space plus a common area factor – so buildings that provide shared amenities such as a cafeteria or fitness center, tend to have common area factors closer to 24% while buildings without these common areas tend to be closer to 15%.  This low common area factor requires tenants to take less square footage and therefore saves cost.

For questions or more technical details to consider when looking to manage real estate costs, please reach out to our Director of Corporate Services, Elizabeth Holmes – 508-655-5029.

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