Your property could be the key to some significant financial savings
There are some real opportunities available
On the face of it, there may not seem to be much value in your lease. Typically, companies don’t really give much consideration to such matters as they are simply too busy concentrating on their core business. But, just as the economy has changed, so has commercial property and there are now some excellent opportunities for occupiers to improve the terms of their leases, delivering much more favourable terms, savings in rent and other unexpected benefits for their businesses.
Early negotiation pays dividends
By entering into negotiations with landlords well in advance of the end of a tenancy, or by taking advantage of the negotiating position brought about by an upcoming break clause, there is the possibility of securing a more settled future for the business on more favourable terms. Equally, there may be an opportunity to reduce or increase space or to secure some much-needed investment in the property by the landlord.
Break clauses can be worth a lot – to you, the occupier
Sometimes landlords are willing to make significant payments to ‘buy back’ break clauses or to obtain commitment to a new lease from a tenant before it’s due. For them, they end up with a longer period of guaranteed income which can greatly enhance the value of their asset.
Having helped create this value, it’s important that you share in it. So, if you know that your business has no need of an upcoming break clause, it could be well worth looking into the potential for ‘trading’ it. This could take the form of a rent ‘holiday’ or capital contribution. One client recently received £350,000 for giving up a break on a 20,000 sq.ft. office building. Agreeing to take a new lease early can also result in significant financial savings.
It could be that you need to reduce or increase your space. By exploring the options with your landlord, you may well find that there is now flexibility you didn’t think existed. Landlords don’t want to lose tenants. So they may opt for a lower income from a good quality tenant.
Changing business needs – see what’s on offer
You need to be proactive
Not many landlords will approach you with proposals and they certainly won’t be identifying the maximum value in the deal for you. You need to be proactive and drive the deal.
Make sure you share in the benefit
Typically these deals can derive benefit for both the landlord and the tenant. It is important that the tenant realises this and is well represented during negotiations to achieve maximum benefit.
Consider the alternatives
Don’t lose sight of the alternative of moving. There are some great incentives on offer in the current market. Even when considered against moving costs, relocation can prove to be a genuine alternative. Our agency teams are well placed to identify both on and off market opportunities so you can take an informed decision.
Act sooner rather than later
Exploring all opportunities takes time in research and planning. It’s also important to be in a strong negotiating position, so the sooner you act, the better.
Vail Williams – delivering genuine commercial value
We have extensive experience advising occupiers in such situations, with specialist personnel and excellent market intelligence. We are always looking for opportunities that go beyond the brief, taking the initiative, considering all the options from a financial and commercial perspective. Ultimately, for us, it’s all about delivering genuine commercial value for our clients’ businesses.
If you would like to discuss any of the points raised above, please contact our Lease Advisory team.
