Managing lease spaces without mistakes
After 12 years of experience and measuring 5 million sq.m of commercial buildings areas, the Geodetic company in consultation with commercial property owners has created a tool that eliminates mistakes in managing areas for lease purposes. What is managing with the Geodetic Rent-Roll (GRR) like? How much information is stored and provided by this calculator? How secure is the data and what locks have been put on the tabs in GRR? What benefits do managers get from using this tool?
New quality of lease management
Geodetic Rent-Roll was created in 2019 and is a tool used for managing commercial property areas. It is a combination of rent-roll and the results of area measurement and allows for automatic data generation essential for the invoicing process. It is a tool containing separate tabs for the manager and the area measuring/calculating team, secure data and encoded cells. The features mentioned are just a fraction of what the tool offers. On one hand the sides have limited access to certain data, and on the other hand there is control over the values generated for lease agreements (lease area, floor R/U Ratio and building R/O Ratio). This provides the manager with 100% certainty that correct values have been used in invoices and lease agreements. Geodetic Rent-Roll was first implemented in an investments in Gdynia and Łódź. Why have we developed our own calculator for managing areas for lease purposes?
„3 years ago, three tenants shared the floor. As of today, this floor is occupied only by 1 tenant. Despite using the same area measurement standard, we get a different floor areas. As a result we have a different a building area than 3 years ago. Why is that?”
The building increases and decreases in size
It is a classic and widely made mistake. Thanks to the use of created algorithms and formulas, locked cells in excel, references to measurement or area calculation values in the rent-roll, GRR prevents from any changes of the Gross Area of a building resulting from a change in tenants. After announcing that we were going to bring GRR to the market and organized the premiere training, the first remarks made concerned two issues. The first objection concerned the fact that the floor R/U Ratio and the building R/O Ratio are subject to change as a result of modifying tenant distribution or a different space plans. It was also mentioned several times, that in the end the Gross Lease Area is subject to change as well. A change in the value of the floor R/U Ratio, and as a result a change in the tenant’s Net Area of the floor in mentioned cases is obvious. But the Gross Building Area can’t be subject to change while using the same measurement standard. The building, after all, doesn’t increase and doesn’t decrease. Next objections were a reaction to the problem of discrepancies in areas. The training listeners claimed that such differences can occur only when the area measurement standard is changed. The remark is obvious. In a situation where we use different standards, we finally get different values. It comes from the fact that each of the standards dictates different rules of measurement. However, it’s about other reasons here. Let’s assume that the office building is leased according to the BOMA Office standard. And the building is managed for lease purposes for years using only this standard. Then despite applying the same measurement standard, when the number and distribution of tenants is changed, the managers get different results – the building area is different.
The number of tenants can’t influence the building area. A building measured using the same standard always has to be the same size. The record differences in building areas over 5 years of management were up to 30%.
Geodetic Rent-Roll calculator structure
GRR consists of 3 tabs: Geodetic, Rent-Roll and Invoicing. In the first tab you can find all area calculations resulting in the final value – the Gross Area, which is managed by each tenant The next steps necessary to achieve this value provide us with a lot of valuable information, such as the Floor R/U Ratio, the Building R/O Ratio, the number of common areas etc. In the Rent-Roll tab you can find part of the data from the Geodetic tab necessary to calculate the value of rent and service charges. There is also a place for amounts and descriptions about the lease. The Invoicing tab separates data from the Rent-Roll tab in order to make the invoicing process simpler. Only basic information necessary for invoicing and the preparation of agreements is compiled.Its intuitiveness makes it easy for a person not familiar with the real estate market to handle. This is the general framework of GRR, but how does it look in detail?
A calculator for the measuring team
The first tab contains measuring data and is intended for the Geodetic team, which measures or calculates the area of a building. It contains a wide range of information, such as: results of preliminary calculations, which are not a basis for lease; a compilation of: Interior Gross Area value, Major Vertical Penetration area value, which consists of technical shafts, vertical passages, elevator shafts etc., and empty surfaces (voids) on the each floor. Also compiled are tenant’s warehouses and parking areas. Next there is a place for information about potential excluded area values. Finally, we get the value of the Preliminary Floor Area, which is the difference between the Interior Gross Area and the sum of all the values mentioned above. The next part is the division of the previously determined Preliminary Floor Area. There is a place for an appropriate space designation, given the choice of: Building Amenity Area (e.g. mother-and-child rooms, smoking rooms, chillout rooms – one for the whole building); Building Service Area (technical rooms, ground floor hall, reception, BMS, etc.); Floor Amenity Area; Floor Service Area (shared hallways, shared kitchens etc.). Lease area is labeled using an ID given to a tenant. In the next columns you’ll find values of a previously determined area type.
Allocated tenant’s area on the floor
At this stage of calculations, we are done with presenting the measurement data or calculations based on the project, and we begin calculations based on the data. To be precise we begin with calculating the Floor R/U Ratio, accurate to within 6 decimal places. Why so much? I refer you to the following article: “Czy najemca może skontrolować powierzchnię lokali za którą płaci?”.
There you’ll find a detailed description of the mistakes that managers make concerning mathematical operations basing on the Buildin R/O Ratio and Floor R/U Ratio. The Net Area of each of tenant, which corresponds to the sum of the tenant area and the allocated area on the floor, is determined based on the Floor R/U Ratio. Besides a compilation of these values, the tenant area on the floor has been singled out, as an additional piece of information. It is not common, but possible, for an arbitrary R/U Ratio to appear. If the client provides its value, all values mentioned above will be calculated based on the arbitrary value.
Tenant’s participation in the entire building
GRR also contains information about the area’s participation in the whole building. The area is in percentage form and is crucial in calculating service charges. It corresponds to the product of multiplication of the Preliminary Floor Area and the Net Building Area and is stable for the whole building. The product of the Net Lease Area and the building factor allows to obtain the Gross Lease Area, so the rentable area. Gross lease Area is a sum of the Occupant Area and allocated Common Floor Area and Common Building Area. Every component of the Gross Area, meaning the allocated area in the building, as well as the sum of the allocated area on the floor and in the building are separated and compiled in the excel sheet. An additional information set out in one of the columns is the Load Factor A. It is a product of multiplication of floor R/U Ratio and building R/O Ratio. It’s important for companies which require that only one factor to lease agreements. It cann’t be a sum of the factors; it must be a product of their multiplication. We pay attention to this, because this kind of mistake happens very often.
Building R/U Ratio
Similarly to the floor R/U Ratio, the Building R/U Ratio can also be arbitrary (conventional). We rarely encounter an arbitrary Floor R/U Ratio, and its value is usually determined based on real measurements. However an arbitrary Building R/O Ratio is used in 95% of cases on the Polish real estate market. In this case allocated area values in the building, as well as the final values of the Gross Lease Area are based on an arbitrary Building R/O Ratio, and information about these values is compiled in the calculator.
A calculator for the manager
The next tab, dedicated to managers, is Rent-Roll. Information contained in its first columns is used to organize data (ordinal number, a list of tenants in order according to their given ID, etc.). In this section there is also a place for the manager to mark tenants according to individual preference (apart from the given ID). Next there are the 3 area types compiled, which are referenced in the Geodetic tab. The area types are: Net Area of each tenant, Common Building Area and the Gross Area, which is the sum of the two areas listed before. Next there is a place for the number of the parking spaces belonging to each tenant.
Vacant and area oversupply
In the Rent-Roll tab there is a section titled “vacant or oversupply”, where you’ll find automatically calculated area values that you’re losing as a result of applying an arbitrary Floor R/U Ratio (rarely happens) or an arbitrary Building R/O Ratio (happens almost always). When do we have a vacant, and when an oversupply? If the arbitrary Floor R/U Ratio value or the arbitrary Building R/O Ratio is smaller than the measurement value, we get a vacant (meaning an area that’s not rented) and if the situation is opposite, we have an area oversupply.
Rent accounting by the real estate manager
In the rent tab of the calculator there is a place for the manager to specify the rates for the Net Area, Building Common Area, and parking places. The rest of the columns are rent values, which are automatically calculated based on the simplest multiplications of the rate and the area charged. How does using this tab by a manager really look after receiving a ready GRR? Well, the section is partially locked in the last stage before handing the GRR calculator over to the client. All formulas and data referenced in the previous section are locked. All this in order to protect from data loss or an incorrect edit. However, the date and the tenant’s name remain unlocked, as well as the number of parking places, rates based on which rent is calculated, and the description cells with which the manager works.
The third section of the calculator was created in order to separate some of the data from the Rent-Roll section in order to achieve a simpler, clearer picture of the data necessary for further invoicing. This section is completely locked when handing the GRR calculator to the client, and editing it by the client is not possible. Data from this section is the final data, which should be included in an invoice or a lease agreement. With such algorithms, codes and formulas we have 100% certainty that the generated value is correct. Check sums serve as confirmation that the building area hasn’t changed as a result of a change in the number or distribution of tenants.
Data safety in the cloud
The last important issue of GRR is safety and the many locks put on the tool. After handing the GRR over, the client is instructed on how he can block and put passwords on the Rent-Roll and Invoicing sections so that they are not accessible for the Geodetic team. Information about calculated rent values, ultimately chosen factors or tenant’s data is unnecessary to our company. It is important to note that when a finished GRR is handed to the client, the whole Geodetic section is locked. The manager or owner of the building can look at its contents, but is not able to change anything in it. Why? First, it prevents accidental deletion of data or changing real measurement values. Second, you can be certain that this data is safe, and even though many people work with it, there will not be any discrepancies in the future. Third, you can check the Gross Area value of the whole building with the initial measurement or calculation based on the project.
Who should have access to the tool?
Access to the Geodetic Rent-Roll Calculator should be granted to the measuring/calculating team of The Geodetic (usually two people, who ultimately work on the building plan). On the building owner’s side, it should be the lease-, asset- or property- manager. Access is also worth giving to the lawyer who inputs data about the lease area and the R/O Ratio and R/U Ratio in lease agreements. Lawyers often say that including definitions and terms which are, in their opinion, legally appropriate, in lease agreements is better than including those suggested by surveyors. We formulate these records in accordance with the used measurement standard, and what will adopt on the market. Mistakes in definitions are another serious mistake of real estate managers and lawyers serving real estate for lease purposes. An accountant who fills in invoices can have access as well. Everything is stored in the cloud on secured servers with the possibility of recovering lost data for free for up to 120 days. Why is the data stored in the cloud? Many of our clients work with us on a stable subscription service, which consists of measuring particular premises or floors after a change in tenants, or the floor/office arrangement itself. An access to the same files granted to all parties eliminates the risk of working on outdates files by anyone. It also allows for quick access from any device with an internet connection in any place in the world. It’s a nod to international teams, whose members are temporarily or permanently abroad and need current access to up-to-date data. As an additional information – all of the features of the Geodetic Rent-Roll have not been mentioned in this article on purpose, in order to protect years of development of the know-how from competitors.
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Translation: Julia Pająk