New accounting standards are in the works that will require companies to recognize new and existing lease payments as a liability on their taxes.
In this market most companies are burdened with poor financials and heavy debt. According to Shahab Moreh, a partner with accounting firm WeiserMazars LLP “Additional liabilities on the balance sheet for these companies will impact debt covenants with lenders, alter investor perception, and possibly affect credit ratings.”
If companies are required to record significant lease liabilities, they will choose to sign shorter leases. Alternatively, companies will likely consider the option to own their space.
The changes in accounting laws will make office condominiums an even more attractive option for all companies.
For more information on the changes in the accounting laws please read the article from the NY Times titled “New Accounting Rules Ruffle the Leasing Market.”