Rethinking own versus lease decisions

Pressure to optimise costs, deliver value to shareholders and maintain a healthy balance sheet is firmly on the corporate agenda. Leadership is increasingly looking to real estate to satisfy these pressures whether through optimising costs or generating meaningful cash through the disposal of assets. JLL’s Global Corporate Real Estate Trends report reveals 40% of survey respondents reported increasing demands from senior leadership to raise capital through the real estate portfolio.

At the same time momentum continues to build in the real estate investment market, with activity continuing to expand vigorously. Global real estate investment volumes during the first half of the year reached US$177 billion, up 9% on H1 2014 and an impressive 19% higher when denominated in local currencies. The weight of money is pushing yields to new lows, with yields compressing at their fastest pace for five years.

Investment activity will continue to be fuelled by a range of factors. On the one hand there is a greater propensity to save and a greater proportion of these savings are expected to target real estate. On the other hand, activity has and will continue to be driven by the rise of private equity with evidence of strong inflows into real estate funds.

Strong demand from investors will encourage many companies to consider raising capital through real estate disposals. Yet, for some organisations ‘selling the family silver’ remains a huge psychological barrier. Cash rich companies with ready access to corporate debt at attractive rates are unlikely to sell off core properties to raise capital at a higher cost. Other companies are increasingly looking at ways of utilising their portfolio as an alternative source of capital to equity and debt. Senior leadership have been quick to take advantage of such favourable market conditions. According to new JLL Research, 2014 saw the highest number of corporate disposals in seven years. Activity has been witnessed across all sectors and asset types.

Demand from investors has fuelled innovation and there are a range of options available for companies considering disposal as a means of raising or recycling capital.


Faced with a once in a cycle opportunity to raise capital or dispose of unwanted problems at historically high values, now is the time to rethink own versus lease decisions. Given the current market and with lease accounting changes imminent, companies should review the corporate real estate portfolio, asses how well it meets business and financial goals and develop an own versus lease strategy. It is a great way of connecting with senior leadership and creating a framework for the property portfolio.

About the Author

Karen Williamson Associate Director

With over 8 years’ experience in the field of property research Karen is currently an Associate Director within JLL’s EMEA Corporate Occupier research team. She is primarily responsible for analysing corporate occupier market trends across the EMEA region. This includes analysis of economic and real estate market trends to help inform strategy. Karen has developed a wide range of thematic research on issues ranging from the accelerating threat of obsolescence to looking at the corporate financial impact of real estate.

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