Posts Tagged ‘CoreNet Global’

Accounting Rules Revision May Impact CRE Leases

Thursday, July 8th, 2010

Accounting rules mean big change in real estate.  A new accounting standard could alter the way tenants lease space, a move that carries serious implications for commercial real estate.  The Financial Accounting Standards Board (FASB) has been cooperating with the International Accounting Standards Board to combine its generally accepted accounting principles (GAAP) with international standards.

According to Russell G. Golden, the FASB’s technical director, the change is intended to put a halt to “significant off-balance-sheet activity for leases.”  Barry M. Gosin of Newmark Knight Frank notes that “We are busy preparing clients to make them aware of the changes and help them analyze how it might impact them.  There are so many complicating factors that will make this an administrative nightmare”.  Because the new standards remove many of the differences in the way companies account for buildings that they own and lease, firms may move towards purchasing properties rather than leasing them.  Shorter leases could be another byproduct.  “If you have a 10-year lease, it will mean putting twice as much debt on the balance sheet as a five-year lease, so some companies may want to go short term,” said Dale F. Schlather, executive vice president of Cushman & Wakefield and chairman of CoreNet Global’s New York chapter.

Office and industrial building owners will see new accounting treatments as well.  Golden notes that as the new rules were written, landlords would record the obligation to provide space as a liability and record the rents they receive as an asset.  Because landlords currently book all of their revenue as rental income, the rents will be recorded partly as interest income and partly as a reduction in the obligation to provide space under the new standard.

R. J. Brennan: Cost Cutting in a Real Estate Portfolio

Thursday, November 5th, 2009

badloans2Don’t waste a good crisis.  Right now is a great time to sit down and rethink and reinvent how we look at real estate and the workplace.  That’s the opinion of R. J. Brennan, Associate and Director of Workplace Strategies at IA Interior Architects in Chicago and former president of the Chicago Chapter of CoreNet Global.  Additionally, Brennan has lectured internationally on sustainable design, high-performance work spaces and change management.

In a recent interview for The Alter Group Podcasts on Real Estate, Brennan notes that a new study by CoreNet Global called “Portfolio Research Consortium” has found that Corporate America’s highest priority is cutting costs.  Space consolidation and alternative workplace strategies occupy second and third place.  The danger, Brennan warns, is not to cut so much that companies eliminate critical components necessary to support change.  If you don’t have adequate space to move staff as necessary, that creates a problem with doing business effectively.

Procurement, especially in terms of furniture, is another critical area where potential savings and greater value can be achieved.  Furniture systems, case goods and demountable walls are a strong negotiation point that can achieve an additional savings of three, four or even five percent.  On a 300,000 SF headquarters building, that could add up to a savings of more than $1 million.

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