In the ever-evolving landscape of commercial real estate, staying ahead of rising expenses is paramount for businesses aiming to optimize their operational costs.
Lease expense reviews play a key role, enabling tenants to scrutinize and potentially recover funds left on the table, all while mitigating escalating expenses. Our in-house experts have identified three key areas of interest for 2024 market trends, all of which highlight the importance and value of conducting thorough and timely lease expense reviews.
These three areas are of particular interest to tenants, and show where additional rents will continue to rise:
1. Insurance
The cost of insurance for commercial properties has been on an upward trajectory, a trend that accelerated in 2023 and is set to persist throughout 2024. Catastrophe-exposed property insurance costs are projected to rise between 10% and 25%, while properties less susceptible to such events could still witness an increase of around 10%.
By conducting regular lease expense reviews, tenants can identify clauses related to insurance provisions in their leases and explore opportunities for cost containment.
2. Utilities
There has been an observed escalating cost of utilities over the past three years, with many factors impacting the energy sector. Various factors contribute to this upward trend, including extreme weather events such as cold snaps and heat waves, wildfires, geopolitical tensions affecting energy markets such as wars, and the ongoing transition to renewable energy generation.
Through comprehensive lease expense reviews, tenants can assess clauses regarding utility costs, seek provisions for energy efficiency measures, and uncover potential savings.
3. Wages
With early forecasts indicating a projected rise in annual salaries by an average of 3.6%, coupled with the ongoing increase in minimum wages across Canada, labor expenses represent a significant component of overall operating costs for businesses.
By conducting lease expense reviews, tenants can evaluate provisions related to wage escalation clauses in their leases and explore opportunities for negotiation. Proactive lease expense reviews empower tenants to effectively manage and mitigate the impact of rising operational costs associated with insurance, utilities and wages.
By leveraging insights gained through thorough scrutiny of lease agreements, tenants can identify opportunities for cost savings, negotiate favorable terms with landlords and ultimately maximize the value of their commercial real estate investments.
As the commercial real estate landscape continues to evolve, strategic lease expense management remains an indispensable tool for businesses seeking to maintain competitiveness and financial sustainability in an increasingly challenging environment.
Reach out to Cresa Toronto for expert advice from our team of industry specialists, who can step in and ensure you're being charged accurately and within your lease agreements.
Lease expense reviews play a key role, enabling tenants to scrutinize and potentially recover funds left on the table, all while mitigating escalating expenses. Our in-house experts have identified three key areas of interest for 2024 market trends, all of which highlight the importance and value of conducting thorough and timely lease expense reviews.
These three areas are of particular interest to tenants, and show where additional rents will continue to rise:
1. Insurance
The cost of insurance for commercial properties has been on an upward trajectory, a trend that accelerated in 2023 and is set to persist throughout 2024. Catastrophe-exposed property insurance costs are projected to rise between 10% and 25%, while properties less susceptible to such events could still witness an increase of around 10%.
By conducting regular lease expense reviews, tenants can identify clauses related to insurance provisions in their leases and explore opportunities for cost containment.
2. Utilities
There has been an observed escalating cost of utilities over the past three years, with many factors impacting the energy sector. Various factors contribute to this upward trend, including extreme weather events such as cold snaps and heat waves, wildfires, geopolitical tensions affecting energy markets such as wars, and the ongoing transition to renewable energy generation.
Through comprehensive lease expense reviews, tenants can assess clauses regarding utility costs, seek provisions for energy efficiency measures, and uncover potential savings.
3. Wages
With early forecasts indicating a projected rise in annual salaries by an average of 3.6%, coupled with the ongoing increase in minimum wages across Canada, labor expenses represent a significant component of overall operating costs for businesses.
By conducting lease expense reviews, tenants can evaluate provisions related to wage escalation clauses in their leases and explore opportunities for negotiation. Proactive lease expense reviews empower tenants to effectively manage and mitigate the impact of rising operational costs associated with insurance, utilities and wages.
By leveraging insights gained through thorough scrutiny of lease agreements, tenants can identify opportunities for cost savings, negotiate favorable terms with landlords and ultimately maximize the value of their commercial real estate investments.
As the commercial real estate landscape continues to evolve, strategic lease expense management remains an indispensable tool for businesses seeking to maintain competitiveness and financial sustainability in an increasingly challenging environment.
Reach out to Cresa Toronto for expert advice from our team of industry specialists, who can step in and ensure you're being charged accurately and within your lease agreements.
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