What is Lease Abstraction?

In simple terms, real estate document abstracting is the process of extracting data points critical to the management of a real estate portfolio and compiling that data into a report and uploading that data into a database to which will enable your organization to make better-informed real estate decisions.

A lease abstract report provides details of the key business, financial and legal information contained in a real estate lease and related documents such as owned property documents, deed of sale or valuation reports.

Typically a lease abstract report contains details about the property location and basic lease details, cost schedules, key events, terms and conditions, car parking arrangements, landlord and tenant obligations.

Traditionally, lease abstraction has been performed by non-real estate administrative resources as companies did not place importance on the process nor realize the technical nature of lease abstraction.

It has only been in the last 5-10 years that companies in Asia Pacific have really seen the importance of using specialized teams trained specifically in lease abstraction. As the globe shrinks and many organizations operate across boundaries, these specialist teams should be multilingual, operate across multiple currencies and be expert in the typical lease terms of multiple geographies

This will ensure a more accurate and cost-efficient lease abstraction process. Another approach has been lease abstraction undertaken by the broker conducting a transaction. Some organizations have been attracted to the potential lower-fee, and the knowledge the broker has of the intricacies of the lease, as well as in-depth market knowledge.

However, this creates an inconsistent approach as the lease abstraction process is only ever undertaken when a transaction is negotiated. In addition, if organizations use multiple brokers, there is an inconsistent approach in terms of methodologies and systems meaning there is a lack of standardized data across the portfolio.

As a result of this ad-hoc approach and lack of cross-checking of information, the costs and risks could be a lot higher than implementing a robust lease abstraction process.

A key trend which has emerged and is now developing is the automation of the abstraction process. This new wave in technology is characterized by OCR scanning and web-based data change and management work of tools which allow highly effective cross-checking techniques, and error tracking and productivity statistics and automated workflow.

The benefits of using software for abstraction:

Abstraction has a fundamental role to play and has become a critical foundation for:

  • Cost saving initiatives
  • Risk mitigation
  • Strategic portfolio optimization