The Rise of Lease Management Outsourcinghttps://consultasg.com/wp-content/uploads/2022/05/ASG_LeaseManagement-Header.jpg1440428ASGASG//consultasg.com/wp-content/uploads/2021/09/asg_195_WIP-web.png
A Decline in Institutional Knowledge is Leading to an Increase in Lease Management Outsourcing
Before the pandemic, there were 10,000 boomers retiring every day, taking an enormous amount of institutional knowledge with them. While this has been most noticeable in the healthcare and insurance industries, over the next decade, we’re going to feel it in every industry.
In an article written in 2013 by Dr. Andrew M. Pena, SHRM, he sounded an alarm about the loss of institutional knowledge and its impact on businesses.
“Today, as Baby Boomers prepare for retirement, some Gen. X’ers and many Millennials are not remaining employed in one organization long enough to learn from their older colleagues. As a result, the institutional knowledge, history, and business continuity possessed by the veterans and Boomers might vanish with little or no knowledge being retained by the Gen. X’ers and Millennials. The failure to retain and transfer institutional knowledge could result in a steady increase in employee turnover and further loss of institutional knowledge, translating into higher costs and lower institutional efficiency.”
Fast forward eight years, factor in a pandemic, a significant labor shortage, and more than a year of “The Great Resignation,” and the threat of institutional knowledge losses have increased substantially.
The Generational Divide
Because Boomers have worked longer and are retiring later, Gen X and Millennial employees, in many cases, have not had the opportunity to rise through the ranks as quickly. As Boomers now begin to disappear at an alarming rate, they are leaving behind very inexperienced replacements who have had much less time and opportunity to enter leadership positions. Consequently, these replacements have limited high-level work experience, creating a giant skills gap. The choice to delay having children quickly enough to create future replacements, combined with the shift in attitude about staying with the same company longer than a few years, and the gap and skills shortage will continue to widen.
What Does This Have to Do with Retail?
Retailers often benefit from younger generations working in their stores. Digitally native brands inherently understand what traditional brick -and-mortar brands often fail to realize: The brand is the brand, regardless of how or where the shopper engages with the brand. While operations and other aspects are feeling the pinch on the front end of the talent pool – on the corporate side of retail –a painful loss of institutional knowledge on a regular basis in lease administration – and it is a costly and painful deficit.
Lease Management Is a Negotiation Game that Requires Expertise and Finesse
As experienced lease administrators retire and take with them their considerable understanding of leases, settlement negotiations, and relationship building, their younger replacements simply are not armed with the information and knowledge needed to properly defend contracts and protect their companies. In one instance with a national retail brand, the lease administrator retired. When the new administrator started, he immediately invested in a new system that included a lot of promised bells and whistles. They spent a ton of money on it – and promptly missed a kickout, costing them over $300,000. When we audited the system after taking over, 82% of their expiration dates were wrong.
Why Outsource Lease Management
Outsourcing lease management offers several benefits, including more efficient administration and expertise that saves you money. Outsourcing retail lease management has a measurable ROI. By placing lease administration in the hands of dedicated experts, there is a team proactively seeking opportunities, ensuring you’re not overcharged, and helping maintain compliance.
Lease management is often overlooked as a contributor to a company’s bottom line. But the benefit derived from expert lease management in terms of cost avoidance, negotiations, and credits that can be offset against monthly expenses is often immeasurable.
Outsourcing lease management ensures that you have the best experts handling the second-largest expense item for many retailers. Relying on experts can help transform a game-changing expense item into a hidden profit center.
For many companies, internal lease management is just one of many responsibilities that an employee shoulders, and they often don’t have the time to fully analyze and manage leases. Outsourcing to a company that specializes in lease management can free your employees to focus on the primary duties of their jobs – often allowing the company to realize measurable savings in labor and efficiency.
Outsourcing provides your company with depth and breadth of experience that can improve your negotiations and ensure that you do not miss cost savings. Because outsourced lease administrators manage leases across multiple industries and niches, they are familiar with retailers of all sizes, ages, and types. And, they have a finger on the pulse of the industry, staying abreast of and ahead of changes that might impact your costs.
What to Look for in an Outsourced Lease Management Service
When seeking an outsourced provider for lease administration, seek a partner who has:
Provided this service for portfolios of all sizes, for retailers that are at the height of success, and for those experiencing their last days
Read thousands of lease clauses and has learned to detect the nuance of how they are written.
Experience disputing billing errors and demonstrated success in getting revisions for most disputes
An in-depth understanding of co-tenancy failures retroactive to previous years
The ability to play a key role in obtaining the best possible lease terms for you
A demonstrated track record processing billions of dollars in lease-related payments.
What You Should Expect with Outsourced Lease Management
One of the most essential functions of an outsourced retail lease administrator is auditing. The lease manager should ensure that all your lease documents, dates, and detailed information about your leases for each property as accessible. They should meticulously audit your invoices and conduct regular reviews to ensure you are not overpaying and that all your negotiated concessions are being met.
Building operation expenses (CAM charges) are a significant expense and one of the biggest areas in which there can be errors. When you work with a retail lease management partner, they can often save your organization more than what you pay for the service provided.
Preservation of Institutional Knowledge
If you rely on one or two internal lease managers, and one or both leave or retire, it is almost impossible to replace that industry knowledge. By outsourcing to a firm with a specialty in lease management, you get depth of experience without the risk of the loss of institutional knowledge.