How Companies Approach Lease Administration

by CoyDavidson on September 25, 2010

2010 lease administration benchmarking survey

The consulting firm Deloitte conducted a survey to assess how companies were approaching lease administration issues. The survey was completed by 209 executives at companies involved in lease administration including companies that lease commercial space (“tenants”), building owners who lease commercial space to tenants (“owners”), and companies that provide lease administration services (“service providers”).

Key findings:

  • Centralized structure favored. With technology making it easier to supervise diverse operations, many companies are seeking to improve management and reduce costs by centralizing. More than three quarters of both tenants and owners used a centralized organizational structure for lease administration, up from two-thirds in the 2006 survey.
  • Outsourcing used by many companies. Roughly half of tenants and owners said they used third-party service providers to handle some or all of the work of lease administration. Roughly two-thirds of tenants and owners who outsourced used service providers for lease abstraction, while three quarters of tenants used them for lease audits.
  • Some rely on Microsoft Office applications for lease administration technology. Roughly three quarters of the companies surveyed used a lease administration technology system, including 95% of tenants that managed 100 leases or more. However, 20% of companies said they used Excel or Access to handle lease administration, rather than one of the software applications specifically designed for the job.
  • Not all companies staying current with technology. Although many companies reported that they recently purchased or upgraded their lease administration software, roughly one third of tenants and owners had not done so for three years or more.
  • Progress on integration of lease administration and accounting systems. The percentage of tenants who said their lease administration technology systems were not integrated with their financial systems declined from 81% in 2006 to 59% in the current survey. Among owners, only 22% said they had a stand-alone lease administration system, down from 46% in the prior survey.
  • Companies focusing on abstracting the most important lease administration attributes. Although 71% of tenants, owners, and service providers said they abstracted lease attributes into lease administration databases, there were still 30% of companies that did not follow this practice. Many companies now appear to realize that they can be more effective and efficient by only abstracting the most important lease attributes, rather than attempting to be comprehensive. Among owners, 70% said they abstracted less than 50 attributes, while only 53% abstracted this number in 2006. For tenants, 53% said they abstracted less than 50 attributes, roughly the same as in the prior survey.
  • Data accuracy and integrity remains a challenge. Ensuring the quality of data was considered to be a very significant challenge by 30% of tenants, 40% of building owners, and 51% of service providers. Employing reliable and consistent data is essential for accurate reporting and sound management decisions.
  • Benefits from lease audits and reviews. Roughly two thirds of tenants that conducted lease audits said that they had resulted in cost reductions, while about half of the owners who conducted lease reviews said they had resulted in increased expense recovery. While the benefits achieved depend on the nature of the lease, in Deloitte’s experience, lease audits and lease reviews can result cost reductions or expense recovery of $0.50 to $2 or more per square foot.
  • Hey Coy,

    As a veteran of all three sides (LL, Tenant and 3rd party), the Deloitte survey held some surprising numbers for me.

    I found it especially surprising how high the personnel turnover rate is in lease administration. Both Tenant and Owner side administration reported over 40% turnover in 2009.

    I did a presentation on a similar topic focusing on the migration of lease administration from desktop software (Word and Excel) to web-based SaaS solutions. If you’re interested, the slideshare from that class (June 2010) is here.

    http://www.slideshare.net/realogicinc/lease-administration-step-up-from-word-excel

  • CoyDavidson

    Miles, thanks for the link to the slideshare presentation

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