Survival Tips & Risk Management in Real Estate
Many business owners are struggling with the current economy. One of the largest expenses of many business owners is the cost of space for their office operations. It is not unusual for a company to have numerous leases for space in various parts of the country or the world.
Many business owners are struggling with the current economy. One of the largest expenses of many business owners is the cost of space for their office operations. It is not unusual for a company to have numerous leases for space in various parts of the country or the world.
Leases in traditional office buildings can be problematic in that in tough times, you have to pay for the space even when it is not needed. In addition, most long-term leases appear on your *balance sheet and represent long-term liabilities. This may make it more difficult to obtain loans or maintain lines of credit.
The use of executive suite facilities for branch offices may be a solution for some. Executive suite space can also be described as “Flex-Space.” Executive Suites typically allow a lease term of one year or less. As a result, they are frequently categorized as short-term liabilities and therefore are more favorable to a lender.
Short-term executive suite space allows a company to expand and contract quickly and economically. Bret Chapman of ABT Executive Suites in Dallas, Texas says, “Many of our clients grow and contract several times during their tenancy with us. They find it especially helpful that we can meet their expansion requirements in the good times and help them defray costs in economically challenging times.”
When a company is considering regional, national, or international business, they should always explore the executive suite solution. Landlords find this type of facility to be a major benefit to their building complexes. Executive suites allow a Landlord to accommodate space users that are too small to be profitable for the Landlord. By taking a large floor and building it out as an executive suite center, a Landlord can build out the space and make minimal changes over a ten or twenty year period.
If you are managing multiple leases with various termination dates, you should carefully consider letting some of your less desirable leases expire and moving your operations into an executive suite facility. While your cost for the space may be more per square foot, you will realize significantly better economies in that you share conference rooms, kitchen and break areas, and large reception or meeting facilities.
A careful analysis should be done of all of your real estate leases. This analysis should include a long-term transition plan to minimize higher risk, long-term leases with shorter more flexible arrangements.
I am a Realty Advisor, Consultant & Real Estate Broker in the State of Texas. I am not a tax consultant or financial planner. Please contact your Financial Advisor or Accountant for your specific situation.
Please call me if you would like to discuss.
Sonny Moyers
Ebby Halliday Realtors - The O'Dea Moyers Group
972-464-4110
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