The coming round of lease renewals is a significant opportunity to measure actual use and reduce real estate to the appropriate level without impacting productivity.
Next 24 months will see $1.2T in commercial real estate loans coming due
During 2010 and 2011 over $1.2T in commercial real estate loans will come due and the associated leases will lock in second largest cost for most U.S. businesses. The regular cycle of office space leasing coincides with even more pressure to improve efficiency and productivity and the need to right-size the office space infrastructure that supports the workforce.
[blockquote]the U.S. office vacancy rate rose to 17.2 percent, a level unseen since 1994, as the market lost about 11.6 million net square feet of occupied space during the first quarter, according to the report released on Monday. -Reuters[/blockquote]
37% of space is unused or unallocated
The average office space vacancy rate of 17.2% already means a sizable portion of revenue is wasted, but when that rate of underutilized space is combined with unallocated space or shadow space, the resulting 37% demands attention.
[blockquote]At a macro level, the average office vacancy rate of 17% tells only a part of the story. Estimates of “shadow space”, real estate that is rented but not occupied, range from 5% to 20%. Factoring shadow space means the vacancy rates range from 22% to an extraordinary 37%. - John Vivadelli[/blockquote]
Second biggest expense can be trimmed with real P-to-E results
Understanding how much space is really needed without any loss of productivity can only come from measuring the actual use of space. Renewing leases for the correct amount of space so productivity is not impaired and so space waste is eliminated is a powerful path to more cash, better profitability, improved ratios and increased market capitalization.