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TRIRIGA: Proposed major lease accounting changes must be addressed at the portfolio level March 30, 2010

Posted by Bob Cook in Financial Planning & Analysis, Lease Accounting.
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Tririga has a another posting about the impact of new lease accounting on corporate real estate.  See:   TRIRIGA Insights | Knowledge to shape your real estate and environmental strategies.   I think, though, the lease administration system vendors have quite a bit of work to do to augment their offering to support the processes that are going to be needed once the new standards are in place. 

Tririga and most other such integrated workplace management systems (IWMS) had their roots serving facility managers.  They’ve been good at addressing things such as tracking office assignments, managing work orders, making calculations for chargebacks, and facilitating budgeting.   I have a question in my mind, th0ough, as to whether these IWMS can be modified easily to provide the data that will be needed for the new accounting.  For example, rent obligations will need to be projected for each lease, including for renewal periods that are likely.   As far as I know, IWMS do not have this capability. 

There’s a lot of work that needs to be done by IWMS vendors to either augment their software or provide easy interfaces into accounting system or to other systems that may be developed specifically to address the challenges of the new lease accounting.

There is really a lot to be done by the industry — software vendors, IT integrators, accountants, real estate consultants, and corporate real estate departments — to get ready for these new standards.

While Tririga’s post is right on target in pointing out the need for a portfolio view to address the new lease accounting, I would like to see it post about what it is doing to prepare its software …. although, I suppose they might be holding their cards close to their vests, so as to not clue in their competition.

Cisco’s water conservation March 23, 2010

Posted by Bob Cook in Company Case Studies, Green Initiatives, Silicon Valley.
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There’s some good press coverage on Cisco’s water conservation efforts. It’s part of Forbes coverage of World Water Day (March 22nd) for which Forbes proclaims that the “next oil” is “water”.

For some reason, the article highlights Cisco’s waterless urinals when I think the really interesting story, and the one with wider ranging implications, would have been how they’ve linked their sprinkler system to web-based weather forecasting systems to manage their landscape watering.

Entertainment by CoStar March 16, 2010

Posted by Bob Cook in Financial Planning & Analysis.
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Today, I’ve been watching what-CoStar-bills-as “The First Ever Real-Time View of the Commercial Real Estate Market”. It’s a relaxing bit of entertainment… something like watching a fish tank — or maybe watching a Lava Lamp is more apt. Blue, green and red dots fade-in and then fade-out on a map of the U.S. Green = locations of available properties added to CoStar’s database; Blue = locations of searches of CoStars database; and Red = locations of actual deals added to database. You see lot’s of greens and blues; not so many reds.

As I watch it, annother (a bit darker) analogy springs to mind: it’s like watching a big “Dr-Strangelove-era” map on the wall at NORAD and seeing ICBM’s blowing up key American cities.

I’m not sure the real-time map is all that informative, though. It’s the usual suspects that get “blown up” the most: New York, Washington DC, Chicago, LA, San Francisco, etc. Outside of seeing how late the folks on the East Coast work (New York keeps getting blown up way past normal working hours), I didn’t gleen much useful info from the map.

It is entertaining, though, and good for a mid-afternoon diversion occassionally.

Are corporates getting serious about earthquake risk yet? March 15, 2010

Posted by Bob Cook in Financial Planning & Analysis, Silicon Valley.
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National Real Estate Investor reports that “Earthquakes Spur Interest in Seismic Risk for Properties”. It cites a grocery chain with stores along the San Andreas Fault in Southern California and how property insurance concerns led to a seismic risk evaluation. The big risk for companies, though — particularly in Silicon Valley — is business disruption. Companies won’t seriously address the concern, though, until there is an accepted way to quantify the risk such that stock investors can take it into account in valuing companies.

Is San Jose Really a Supply-Constrained Market? March 9, 2010

Posted by Bob Cook in Real Estate Markets, Silicon Valley.
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ING/Clarion has released some thoughtful work that suggests that San Jose and San Francisco are among the most supply constrained metropolitan office markets in the country.  The work uses the relationship between increases in rental rate and supply increases as a measure of price elasticity, which ING/Clarion thinks is a good proxy for how constrained supply is.  

It’s no surprise that San Francisco is high on the list of constrained metros with it’s challenging  geography and its regulatory constraint on downtown growth — the so-called “beauty contest” that allows only so much office space to be built each year.

San Jose, though, is not quite so clear.  There have been and continue to be plenty of good sites to develop along the 237 corridor, in the Moffett Field area, along the 101, and in downtown San Jose — not to mention many sites with one story office structures that are prime for redevelopment.   In fact, there have even been some developer-requested downzonings in recent years — commercial to residential.  All this had me thinking that office supply is not particuarly constrained in the San Jose metro – which most people, of course, call “Silicon Valley”.

Nevertheless, one of the benefits of a statistical study is that it can challenge our thinking which tends to be based on anecdotes.    And so I’m going to be doing some rethinking.  And I’m wondering what others are thinking.

Here’s the article:

Why Supply-Constrained Markets Hold So Many Advantages.

Please comment.