Office Lease Transparency Is More Important Than Ever: A Q&A With Marc Betesh, CEO And Founder Of Visual Lease

• Frustrated that most office leases end up in a desk drawer “never to be seen again”, Marc Betesh founded Visual Lease to make managing office leases more transparent.
• The platform provides easy access to vital lease information, which is increasingly important as workspace operators seek to renegotiate during Covid-19.
• In this Q&A with Allwork.Space, Betesh discusses his thoughts on the future of office leasing and where he thinks the market is heading.

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Companies can’t afford to be complacent when it comes to their commercial leases — particularly at the moment. Many firms, including office operators, are deliberating over whether to renew, exit or consolidate. 

As such, lease transparency has never been more critical. 

Yet office leases are notoriously complex and difficult to navigate without the right expertise or system in place. Marc Betesh is CEO and founder of Visual Lease, a lease accounting and administration software solution that simplifies and streamlines lease management. 

Earlier this year, Inc. ranked Visual Lease in the top 10% of the fastest-growing private companies in the US. We caught up with Marc to find out more about his business and chat about where he thinks the office lease market is heading.

Allwork.Space: Where did the idea for the Visual Lease platform originate?

Marc Betesh: When I was an attorney I became increasingly frustrated by the fact that, after working hard to make sure leases were carefully and comprehensively negotiated and finalised, they would often end up relegated to a desk drawer somewhere, never to be seen again. 

It was frustrating because I knew how much effort everybody involved had contributed to craft a fair and well-balanced deal, only to find that it wasn’t being adhered to later on. Real estate leases are complex and expensive, and failure to monitor and manage them properly increases the risk of incorrect payments, overcharges and missed opportunities.

“The core of the issue was that companies simply didn’t know what their leases said.”

I initially addressed the problem by setting up a company called KBA Lease Services. The company focuses on analyzing the bills that come through leases to ensure they’re in line with the underlying transaction and that they are consistent with what the leases stipulate.

Most landlords bill their commercial tenants for rent, operating expenses and taxes according to the standard building lease, and rely on their tenants to check their bills and bring any errors to the landlord’s attention. However, most tenants assume that bills from landlords are correct and have been tailored to their individual leases. Because of this, many charges are inconsistent with the leases and never get corrected.

KBA built its business around checking these charges and bringing them in line with the underlying lease. We call this process “lease auditing.” We pioneered this practice in 1985 and over the years have saved our clients many millions of dollars.

Allwork.Space: Did “lease auditing” turn out to be an effective remedy?

Actually, after about a decade we realised we were trying to solve the problem with a Band-Aid. Why didn’t companies catch these errors on their own?  We realized that they simply didn’t know what their leases said. So, we came up with a virtual platform to create visibility and transparency; technology that enables the user to access lease information quickly to avoid mistakes.

We built the programme with input from a dozen of the Fortune 50 companies for which we were doing lease audit work. Having the input and experience from these large corporations enabled us to organize their leases in a way that saved significant money on a regular basis.

In addition, Visual Lease standardizes a company’s leases so you can look across a portfolio and understand what’s going on. The thing to realise is, if you’re a landlord and have 50 tenants in your building their leases are all very similar; but if you’re a tenant with 50 leased locations, the leases are all with different landlords and can differ substantially. Our programme allows companies to be more strategic about how they utilize space.

Allwork.Space: How do flexible workspace providers use your technology?

We have lots of coworking operators as clients. We help them to analyse their leases to make sure they’re not overpaying their landlords and we also help them to organise and manage their leases through our Visual Lease platform. 

Allwork.Space: In your opinion, how is Covid-19 accelerating emerging real estate trends?

Over the past 15 to 20 years the increase in available technology has enabled companies to work remotely; Covid-19 has accelerated that process and most companies have quickly learned the capabilities and limitations of telecommuting. 

I think there’s going to be a profound impact on the market generally because companies are realising that they can work remotely almost as effectively as when they’re in the office. That will put a significant damper on real estate demand, particularly when it comes to office space. 

Some companies are allowing their employees to work permanently from home or at least for the next year. One of our clients is a law firm in NYC that employees 600 people. After several months of closure they reopened the office on a limited basis and allowed up to 200 people to return. Only 20 showed up. In my view there’s going to be an 8 to 10 percent reduction in demand which will have profound implications on pricing and density. 

There’s a slight countervailing force whereby companies are going to require a larger footprint for the people who they need to accommodate. But I don’t think it’s going to completely offset the reduction in demand that comes from the ability to work from home. 

That said, there’s still an appetite for office space among the workforce. People still want to have physical, spatial interaction with people and while communicating on Zoom, etc, is almost as good, it’s not quite there. 

So the question is: are companies going to commit to large office spaces or are they going to take the compromised position which is to use coworking spaces as a resource for social and physical interaction because it’s less expensive and committal? I expect the market will respond with smaller offices, shorter term commitments and more coworking.

“…lease contracts are fixed and firm; they are part of an ecosystem that is interdependent between the landlords and the lenders who fund the buildings.”

In the business circles I see, companies are not able or willing to make long-term commitments and as a result leases are being delayed — including our own. We were moments away from signing a very significant lease for our office and Covid put it on hold. We’re now six months from when we made that decision and we’re still not sure. 

Allwork.Space: What are commercial landlords doing to retain tenants?

We polled our customers by asking them if their landlords had offered rent concessions, holidays and deferrals and only a small percentage said they had. However a large percentage said they were approaching their landlords affirmatively and asking for some form of relief.

You have to remember that lease contracts are fixed and firm; they are part of an ecosystem that is interdependent between the landlords and the lenders who fund the buildings. 

It’s very difficult for landlords to offer significant rent concessions because they have a firm contract that is binding; unless they are forced to, there’s no real reason for them to reduce the amount of rental income they would receive. 

Allwork.Space: How are Fortune 500 companies changing the way they utilise workspace?

Fortune 500 companies are reevaluating their property portfolios which is why it’s important for them to be able to leverage technology to gain insights quickly. We’re seeing a lot of activity around the decisions to renew or leave leases. Most companies will stay in a lease for 15 to 20 years and go through multiple renegotiations because it’s usually too expensive and disruptive to leave. 

“Leases are becoming much more frequently reviewed and discussions around consolidation are taking place.”

Yet since Covid, leases are becoming much more frequently reviewed and discussions around consolidation are taking place. It’s also no longer necessary to hire people within your geographical area. You can hire people from anywhere remotely. But remember — this has a converse impact in that your employees are now looking at positions and alternative jobs in other parts of the country that they don’t have to move to.

Allwork.Space: Do you think companies should be obliged to give employees the option to work in an office?

Here’s the question that it raises: if you’re going to require your employees to work from home, how do you compensate them? Do you need to compensate them for using their personal space for office purposes? Some people are working from home and see it as a convenience whereas others see it as a burden.

Employers have to accommodate that burden. For example, we are providing a stipend for employees who are using their home internet. If you take that concept and expand it, do you need to provide employees with equipment and contribute financially elsewhere? If that’s the case and it becomes part of the norm the demand for physical office spaces could rise again. At the end of the day, if I’m going to pay an employee to be at home I’d rather require them to be in the office.

For culture-building purposes, I think it’s necessary to have that physical presence and I don’t think companies that operate entirely remotely are going to have the same bonds.

Allwork.Space: Have you had to adjust your platform to meet the changing needs of your customers in the wake of the pandemic?

Our platform has been extraordinarily flexible from the day we designed it. It had to be flexible because it was designed to cater to a very wide range of industries and client types. 

We have companies using our platform from the office, retail and industrial sectors and everything in between, as well as assets that aren’t so space-orientated such as cell phone towers and windmills. As such it really hasn’t required much adjustment!

Follow @VisualLease on Twitter for updates on lease transparency and flexibility.