Businesses are changing how and when they sign new leases as workplaces grow smaller, more employees work remotely and new lease accounting standards come into play.
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The Visual Lease Data Institute survey also found that 100% of those surveyed believe it is impossible to sustain lease accounting compliance with recent standards like ASC 842, IFRS 16 and GASB 87 without proper lease administration practices in place. Nearly three-quarters (71%) of private companies are not entirely confident they know how much their leases cost their business. Only 32% of senior real estate executives believe they're very collaborative with their company's finance teams, and just 10% of senior real estate executives think they have access to all the data they need to make an informed decision about their company's lease portfolio.
Almost half (45%) of the senior real estate executives polled said their companies have overpaid rent or expenses due to inadequate lease controls, and 70% of the respondents indicated their companies are looking to add space as a part of their real estate strategy for 2023.
More than half (52%) of senior real estate executives reported their companies are planning to add new satellite locations, while 28% are looking to downsize existing spaces. Businesses see flexibility as a core advantage and are implementing hybrid work arrangements, fully remote hires and shared workspaces. This year 46% of the senior real estate executives polled reported that shared desks or offices (booked as needed by workers) provide the best office working environment for their companies.
"In today's macro-economic environment, business leaders have to be even more strategic with resource allocation," said Visual Lease CEO Robert Michlewicz in a statement. "As a result, companies are changing how they view their real estate and equipment leases. Once a widely overlooked area of the business, lease portfolios are now helping companies remain agile by providing opportunities for significant hard- and soft-dollar savings. The key, however, to accessing these many benefits is first implementing a strong lease controls framework."
The report also found a correlation between leases and environmental, social and governance programs and reporting, with much progress yet to be made in developing ESG initiatives, as 95% of companies don't have a fully established ESG program and 41% haven't begun any ESG initiatives yet. However, 99% of those surveyed believe it's important for their company's future leases to reduce its carbon footprint. Despite having access to all the details within a company's lease portfolio, 55% of senior real estate executives have little to no involvement currently in ESG reporting at their organization.
