Strategic Property Advice Case Study - Konecranes Demag UK Limited

Challenge

Konecranes wished to relocate the production element of their business to Scotland.

This made up the majority of their existing 82,000 sq ft industrial unit in Banbury, presenting a potentially costly property problem for the Finnish firm.

With seven and a half years remaining on their lease, we were appointed to provide a solution for Konecranes, which would enable them to relocate their production capability, whilst retaining the sales, services, parts and supply elements of their business in Banbury.

As the landlord was not willing to surrender part of the lease and, faced with the potential of having to relocate the business’ office staff and parts warehouse at significant cost, we developed a solution which would meet both our client’s and the landlord’s needs.

How we helped

• Understanding the Banbury industrial market as we did, we recommended the potential to sub-divide Konecrane’s surplus space, to be sub-let for the remaining term of their lease.
• Working closely with the landlord, we achieved consent in principle for this approach.
• We recommended the creation of smaller industrial units which would quickly sub-let, reducing the financial impact on Konecranes
• A dilapidations assessment was undertaken and, working closely with our client’s facility manager, we developed a specification of works to divide the facility into lettable units, each with Building Control approval, Fire Risk Assessments and services adapted.
• Unit design, regulatory approval of the works, securing of landlord’s consent and construction were all completed in parallel with Konecranes’ production plant decommissioning works.
• To avoid speculative CAPEX cost for the subdivision works, an agreement to lease some of the space was secured before works started.
• Meanwhile, short term Transition Agreements were put in place to allow our client’s training facility to relocate up to 6 months after the letting.
• Having recommended a best-in-class local agent to the client, the remaining vacant space was let at a premium to the passing rent.

Results

• Our knowledge of the Thames Valley industrial market and understanding of our client’s business objectives, allowed us to develop a strategic solution to meet their needs, whilst minimising the financial impact on their business.
• The whole transaction was negotiated with one eye firmly on a probable long-term exit at lease expiry.
• We avoided the need to relocate certain business functions, mitigating relocation costs of some £6.1 million, down to circa £1 million
• As a result of the approach taken, we saved Konecranes circa £4.8 million over the remaining term of their lease, whilst avoiding business interruption risk and enabling the client’s office function to be ‘housed’ at industrial rents.
• The vacant space was fully let within 15 months of instruction.