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News Release

London

JLL reveals five golden rules for occupiers of commercial real estate

Five Golden Rules that occupiers of commercial real estate should follow to deliver greater value to businesses from their portfolios and to solve some of their property problems


London, 17th November 2014 – JLL has unveiled its Five Golden Rules that occupiers of commercial real estate should follow to deliver greater value to businesses from their portfolios and to solve some of their property problems.

Michael Evans, director in JLL’s UK Corporate Capital Markets team, said “The executive focus on real estate has intensified bringing greater scrutiny to the cost and structure of the portfolio and its impact on financial statements. Understanding the true cost of real estate and ensuring that it meets financial targets and business objectives is crucial to maximising shareholder value.”

JLL highlights that real estate costs typically account for 5-10% of annual revenue and is often the second largest item in the profit and loss account. Michael Evans continued: “Real estate portfolios can deliver significant operational and financial benefits but occupiers must address some tough questions: does the net book value of property exceed market value significantly? Is the cost of capital charged by landlords in leases higher than funding property yourself? How well are surplus properties being dealt with? Are you ready for lease accounting changes? Coming up with solutions that address these questions will help organisations deliver a property portfolio that meets their financial objectives.”

Karen Williamson, associate director in JLL’s EMEA Research team, added: “It is time that occupiers get realistic about the measurement of the real estate portfolio in financial statements. JLL’s solution for businesses is that they should use the following guidelines when measuring and assessing the financial impact of their portfolios:

JLL’s Five Golden Rules
· Get ready for new lease accounting proposals
· Depreciation mark real estate to market
· Own versus lease? Calculate your cost of capital for real estate
· Raising capital? Consider all your options
· Outsource surplus real estate to the experts”

Michael Evans concluded: “With the IASB expected to issue a new lease standard in 2015 there will be an increased focus from senior management on real estate. Now is the time to be pro-active and take forward solutions that can transform the property portfolio, not just for now but for the future.”