Leases return to pre-pandemic levels but at post-pandemic prices
The average number of leases held by companies has returned to or exceeded pre-pandemic levels, according to the 2022 Lease Benchmark Report from LeaseQuery.
“...With hundreds of million square feet of office space expiring this year, we are only in the early days of the great reshuffle. As companies consider their footprint for the future, they will do so with new priorities of flexibility and diversification, but most will not disappear from the map altogether.”
While the resurgence signals impressive resilience, companies are finding that the cost and liabilities of leases are on the rise amid an inflationary environment and lessors looking to recoup losses.
The analysis of more than 2,000 organizations found that average lease liabilities are up 38% from 2019. Equipment, land and vehicle leases are relatively steady, but building leases have not yet returned to 2019 levels.
Lease accounting compliance changes
Private companies are also preparing for major accounting changes under ASC 842, which moves all leases onto the balance sheet. Companies must now navigate a 21% increase in lease liabilities on their balance sheet post-transition.
Industry overview
The report also analyzes the “Tested 10” industries most impacted by lease accounting and market changes. While they impact every industry differently, the common theme in lease portfolios and cost trends is change.
Banking, energy, healthcare, higher education, professional services and restaurant leases are expanding over pre-pandemic levels. However, financial services, logistics and transportation, manufacturing and retail leases are flat or lower than pre-pandemic levels.