Why New Accounting Standards Will Raise Real Estate’s Corporate Profile

Posted on by MRI

New accounting standards on leases represent a burden for real estate, but functions that leverage their property management technology effectively have an opportunity to become trusted strategic advisers to the business

Property will account for a sizeable chunk of the $2.8trn worth of assets that will move on to the balance sheets of publicly-listed companies once new rules on accounting for lease obligations come into force from 2019. So while some real estate professionals may be cursing the International Accounting Standards Board and the Financial Accounting Standards Board, whose IFRS 16 and Topic 842 standards will add to their workloads, the reforms should also be seen as a real opportunity for the property function.

Given the sums at stake – and the way in which IFRS 16 and Topic 842 have the potential to alter the perceptions of stakeholders such as investors about businesses with large numbers of leases – the implementation and ongoing management of the standards is going to be a high-profile activity for many companies. Real estate professionals therefore have a choice: they can seize the initiative and raise their profile as strategic partners to the C-suite, or they can leave finance to take the lead.

From the perspective of both real estate itself and the business, the former option represents the preferable option. While finance will clearly have a very significant role to play in managing the impact of these reforms, real estate has the technical knowledge and experience of the business’s existing property leases, and its approach to new leases, to make a very valuable contribution.

Business leaders recognise this. Research published recently by PwC reports: “Active management of real estate assets is becoming a strategic imperative for users and the newly established lease accounting standard is an incentive to reconsider real estate strategy.”

However, if real estate is to play an active role in recasting its strategic role, it cannot be a passive participant in the process of adjusting to IFRS 16 and Topic 842. And that may require a change of mindset – in some cases, real estate already appears to have accepted a secondary position in this shift, simply responding to the requests coming from finance, rather than helping to lead the response.

That’s unfortunate, for the property management technology tools employed by many businesses can provide real estate with the data required to inform both the best way to account for existing leases under the new standards and the right leasing strategy for the business in the future. And where your property management technology does not currently offer this level of functionality, investment will be required in order to support compliance in future.

Armed with this data – and its technical understanding of the nuances of leasing – the real estate function is ideally placed to add significant strategic value when working alongside finance to manage the new standards. That’s in the interests of the wider company, of course, but will also see real estate move front and central amongst those functions consider business critical by senior management.

Real estate functions that don’t make this leap, meanwhile, will still have a role to play, but as a support service rather than a strategic partner. That would be a missed opportunity – while businesses will continue to demand technical expertise from real estate, they will also be increasingly open to the function playing this much more strategic role.

Takeaways:

  • New accounting standards that come into force in 2019 will require companies to record the value of real estate leases on their balance sheets
  • The scale of the potential impact of leases on the balance sheet will focus attention on the real estate function
  • The standards therefore represent an opportunity for real estate to prove its value as a strategic business partner

For more information on our lease accounting solution, please visit the IFRS 16 page.

Benefits of using FM software for planned preventative maintenance (PPM)

Posted on by MRI

One of my customers recently asked me to sum up the main benefits of using facilities management software for planned preventative maintenance (PPM). Here are just some of the key reasons I gave them as to how FM software can improve PPM. Continue reading “Benefits of using FM software for planned preventative maintenance (PPM)” →

Why are so many people concerned with space usage?

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I recently found myself discussing space management challenges with Realcomm attendees.

Strikingly, I recall it was the Qube Space software screen – specifically a CAD drawing with heat map that clearly illustrates space usage – that most caught the attention of attendees. At a glance, they could see where office space was put to good use and where there were opportunities to make improvements.

So why exactly is space usage such a hot topic? I thought I’d explore some of the questions and topics that came up the most to try to get to the bottom of this issue.

How much does a workstation cost?

You may be surprised to hear that your annual rent or mortgage payments are likely to be comparable to the cost of a single desk in the area you live.

When you factor in associated costs, such as ground rates, applicable taxes, service charges, FM, data comms and electricity, you could be looking at more than $20,000 per desk per year in big cities such as London, New York and Chicago.

What impact does underused space have on the environment?

When you consider the energy use of a building and pro-rate down to a more granular level, a single desk can contribute as much as one ton of carbon dioxide into the atmosphere each year. So this is a serious problem for many businesses.

What is a good level of space usage?

This was the subject that came up the most. In the US and Europe, office space usage ranges from between 40-60%. This means that offices are half full and space is wasted. This cost of this wasted space is approximately worth $100 billion /year.

Why are so many desks empty?

There are many reasons for empty desks in office hours. They include:

  • Mobile workers
  • Temporary workers
  • Sick days
  • Vacations
  • Meetings
  • Breaks
  • Forgotten spaces
  • Beach towels (grab a desk for your own use – “jacket over chair” and leaves)
  • Undesirable locations

The good news is that while these problems are common for any employer based in an office, there is a better way. An effective space management software solution can help you ensure your space is used effectively as possible (e.g. appropriate deployment of desks and staff, implementing hot desking etc.) and reduce your lease costs.

If you would like to find out how, want answers to your space management questions or are looking to discuss your challenges in more detail, get in touch (contact details below).

5 questions people forget to ask when choosing a visitor management solution

Posted on by cmarson

To raise new questions, new possibilities, to regard old problems from a new angle, requires creative imagination and marks real advance in science

– Albert Einstein.

I love this quote from Einstein because asking questions encourages curiosity and here at MRI OnLocation we encourage our team to be curious – to explore better ways of doing things, to look at problems as opportunities – by asking questions.

I’ve had the opportunity to respond to thousands of questions (via our Helpdesk or assessment form) coming from organisations deploying a visitor management solution.

We’ve done this for small, privately held businesses through to some of the largest corporates, utilities, security facilities, health care providers, schools, universities, and manufacturers in the world.

The number of questions from a potential customer can range from a just a couple through to one hundred+, which is understandable, it’s all in the context.

What often amazes us is the questions many potential and existing customers don’t think to ask.

If you are looking at a visitor management solution here are 5 questions you may not think to ask but definitely should.

When our teams put these questions to potential customers they are always surprised they didn’t think of them and are thankful we asked.

Question 1: Hazard alerts and acknowledgments

Do you want visitors to confirm they understand any hazard alerts that they are notified of at sign-in?

Why do we ask this?

If there’s a hazard needing to be brought to the attention of visitors when signing onto site.

Would you like to be able to post a hazard alert to the reception lobby teams and/or onto any of the kiosks so that visitors immediately are notified of the hazard and are prompted to confirm their understanding of it?

We have a high number of customers that did not think about temporary hazards and the ability to broadcast time-stamped alerts and warnings through their visitor management solution.

When people think about this and apply it to their own environments they quickly realise it’s a ‘must have’ if they are to manage safety awareness and incident awareness on-site.

Question 2: Compliance, auditing, and reporting

If a visitor had an accident on-site would it be useful to prove that your organisation advised the visitor of the hazard that caused the incident during the post-incident investigation?

Why do we ask this?

Compliance, compliance, compliance.

Most organisations are legally obligated to comply with good Health and Safety practices.

In the event of a workplace injury or death the ability to demonstrate good practice can be the difference between brand and reputation damage and survival.

Question 3:

If you want visitors to be pre-registered as a rule, that is you do not permit unauthorised visitors onsite, would you like your self-sign-in kiosk to advise non-approved visitors to wait until someone comes out to meet them. Meanwhile, a red flag has been sent to security or another nominated person to advise them that an unauthorised person has attempted to sign in.

Why do we ask this question? Many research centres, local and central government facilities, data centres, and other high-security sites prohibit walk-up visitors; those being people who don’t have an invite from an employee. Managing these potential security breaches by automatically alerting security to the fact a person has attempted to sign-in and is in fact on your premises in the reception area, is often a much-overlooked requirement until it’s too late.

Question 4:

Do you want specific conditional warnings, instructions or questions to be presented to a visitor, and, do you want to notify anyone internally of this?

Why do we ask this?

Say you are a food manufacturer following GMP and your visitor answers ‘Yes’ to having visited a farm in the last 30 days or ‘No’ to a request to wear a hairnet at all times while onsite.

Firstly; would you want specific warnings, instructions, or conditional questions to be presented to this visitor?

Secondly, would you need to bring their red flag response to the attention of their host, and/or any specific people in your security or health and safety team?

We obviously re-word this question when the potential customer is not a food manufacturer however you get the idea. Triggering alerts against pre-defined red flags is a must otherwise all you have with your visitor management system is a cool badge label printer.

Question 5:

Do you need to ask visitors the same set of questions every time, even if they are a repeat visitor?

Why do we ask this?

Again this a bit of a two-part question.

Firstly; do you need to ask every visitor every question, every time they visit? Or, can you capture visitor information on their first visit and then only ask them for it again after their 10th visit, or after a specified amount of time has passed (1 month, 3 months etc.…)?

We want our customers to think about creating amazing visitor experiences for their visitors and customers.

If John Doe arrives on-site for his first visit and is asked for his name, where he is from, if he is parked in your vehicle lot, who he is meeting with and his expected duration of stay it may, and then he is asked to acknowledge your NDA, evacuation procedures, and other visitor policy rules. So it ends up taking John 4 minutes to sign in. But does it have to take John 4 minutes every time?

When John comes back 9 days later do you send him through the full 4-minute visitor sign-in process again? Or do you only ask him to verify the answers he gave when he was visiting last? Or do you only ask him to verify his name and host and that’s all? And, do you set a rule that says John should be asked every question when he signs in every 3 months?

There are of course many questions you should ask, some unique to your organisation, some more relevant to different departments than others, and some to your visitors themselves.

Living Spaces: how residential property managers are getting back to the basics of customer service

Posted on by MRI

Due to increasing property prices and the continuing rise of Generation Rent, there are more opportunities for property investors to earn a steady and long-term rental income stream. Continue reading “Living Spaces: how residential property managers are getting back to the basics of customer service” →