As the shared economy continues to evolve companies – both big and small – are managing their expense lines and testing new urban markets with co-working spaces.
“Companies will have to start treating leases for office or retail spaces as liabilities on the balance sheet, not as public expenses,” says Alex Cohen, lead commercial specialist for CORE, a real estate brokerage firm in New York City. “Tenants will have to take a net present value of their remaining lease obligation as a liability.”
This will have a major impact on reducing earnings before interest, taxes, depreciation and amortization (also referred to as EBITDA) in leased office spaces, Cohen says. “It’s going to encourage companies to take shorter-term leases,” he says. “So there is less of a liability they have to apply against their earnings.”
If the lease obligation is less than 12 months, companies won’t have to treat it as a liability, Cohen says, “and that makes co-working with a six- or nine-month commitment much more attractive.”