The current economic climate is presenting most businesses with unprecedented levels of challenge. Naturally the commercial focus is firmly on the core business. Real estate issues may not be a top priority, however, the commercial property market has changed significantly in a very short space of time. And with change comes opportunity. So, it’s well worth any occupier looking at their current position and needs. For most businesses there are some excellent opportunities to cut costs and put themselves in a more advantageous position for the future.
Recognise the value in your lease
Your lease is an important bargaining tool. Landlords want commitment and a steady income stream. Currently the balance of power lies with the tenant. Break clauses and renewals are valuable opportunities for you to improve your terms or the conditions of your tenancy.
Early negotiation can pay dividends
You don’t need to wait for an upcoming event such as a break or the end of a lease to enter into negotiations. Landlords are also looking for security of income and are now willing to reduce costs for longer tenures. Break clauses can be traded for better terms and there are other possibilities for securing a more settled future for your business on more favourable terms.
Scrutinise your business rates
Experience has taught us that many companies are frequently overpaying on rates. Often they are unaware of their entitlement to rate relief or have little knowledge of what might qualify them for a reduction in rates.
Don’t let planning permission lapse
Most planning permissions now have a life of 3 years. With many developments being delayed it is important not to let these permissions lapse or asset values could be seriously affected. Renewing lapsed consent can be both costly and challenging with the continual changes in planning.
Renegotiate or seek to remove section 106 legal agreements
With falling values and finance harder to obtain, the level of financial contributions sought through some Section 106 Agreements can seriously impact on the financial viability of some developments. Some Local Planning Authorities recognise this, so now is a good time to re-negotiate to reduce or remove such obligations.
Look at what you are paying in service charges
Most occupiers never question their service charges. They should. Frequently landlords overcharge or include items that don’t conform to the terms of the lease. A simple audit can often rectify matters, saving important costs and avoiding time-consuming and unnecessary disputes at a later stage.
Use your bargaining power to mitigate dilapidations
This isn’t just about cost saving but cost avoidance. It pays to take a more sophisticated approach to your repairing responsibilities. Your own accurate assessment of the extent of your liabilities at an early stage means that you can take a more prudent approach to budgeting. It also means that you can use this as a factor in future lease negotiations to mitigate your liabilities.
Plan maintenance to create cost certainty
Planned maintenance of your property has two great advantages. Over time a proactive approach will undoubtedly reduce costs. It also means that costs are spread better over time, improving cashflow and providing greater cost certainty for the business.
Take stock of your space requirements
Are you using your space effectively? Is there scope to consolidate your accommodation? It could well be that there is an opportunity to restructure your lease and secure a better deal on less space.
Now could be the time to invest
With the fall in commercial property prices and interest rates at their lowest for decades, now could be a good time to consider buying a freehold. Mortgage payments are often less than half the cost of renting, whilst the company or pension fund also gains an asset.
The advice we have outlined here represents some of the ways in which occupiers can make the most of the current economic conditions. We are working nationally with a wide variety of organisations to reduce their real estate costs and create commercial advantage for them where they may not recognise the possibilities. We would very much like to discuss how our advice could benefit you.
