After staff costs, rent will probably be your biggest business cost.
That is why it is so important to proactively manage this cost and, the good news is, that there are many ways to achieve this – whether on a single building or a whole portfolio.
Here are some top tips from our occupier advisory specialists, on some of the ways in which you can reduce property costs – from lease negotiation and regear, to sub-letting surplus space and potential business rates savings.
Negotiate the best terms
When leasing commercial property, it is important to get the best possible deal, to mitigate property costs to your business. Our occupier advisory experts can negotiate the best terms with your prospective landlord, on your behalf, drawing on our knowledge of the property market and asset type in question.
Regear your lease
If you are approaching the end of your existing lease and want to remain in the premises, negotiating a new lease early can help you to reduce property costs. For example, your landlord may be amenable to offering a longer rent-free period if you commit to a new lease early. Our occupier advisory experts understand the right approach to take with landlords and can help you to get the best possible incentives.
Sub-let surplus space
More occupiers than ever are seeking ways to jettison surplus space because of the COVID-19 pandemic. Given the likelihood that most office workers will be WFH more often for the foreseeable future, you may have the opportunity to sublet floors or divide occupation (where permissible and practical), all of which could reduce your property costs. This is dependent on the specific terms of your lease, which we can explore and confirm on your behalf.
Cap your Service Charge
As a result of COVID-19, landlords are experiencing significant increases in operation costs due to social distancing and deep cleaning requirements, the cost of the latter is up 20% on pre-covid levels.
As an occupier of commercial property, it is important to be aware of this, and to consider negotiating a service charge cap during pre-lease negotiations. This will protect you from significant increases in charges and will help to ensure your building is run more efficiently.
Existing occupiers can assess whether their service charges are too high when compared with industry norms, and can seek to reduce these, provided there is sufficient evidence to do so. Our team of occupier advisory experts can conduct a benchmarking review to assess this on your behalf.
Undertake a business rates review
Undertaking a review of your business rates is always advisable, and our team of business rates experts can carry out a business rates audit on your behalf. Rates are a function of rent and quite often rating assessments can be wrong. In this instance, they can be appealed and, in certain cases, you can be eligible for a refund, which can go all the way back to the 1 April 2017.
Assess Capital Allowance qualification
Capital allowances are a great way of reducing occupational costs by recovering tax already paid on capital spent buying or improving commercial property. However, items such as lifts, heating systems, security systems, sanitary installations, kitchens also qualify. Many occupiers do not realise they could qualify for these allowances, but our team of occupier advisory experts can advise.
Improve energy efficiency
Up to half the cost of running commercial premises is on heating and cooling the building, so another way to reduce your occupancy costs is to check your Energy Performance Certificate (EPC) rating.
From there, you can explore ways to increase the energy efficiency of the building via a programme of planned repairs and maintenance. This might include things like having your boiler or air conditioning system regularly serviced. You should also regularly review your energy and water utility companies, and consider installing energy saving electrical services such as LED lighting, power management software and PIR occupancy sensors.
Avoid costly dilapidations bills
To avoid a costly bill at the end of your lease, it is first necessary to conduct a pre-occupation survey of the premises, to identify potential risks and defects before you sign the lease agreement.
After this, you might consider agreeing a Schedule of Condition of the premises. This is a record of the condition of a property at the time of taking the lease, and acts as a reference point for any dilapidations claims from the landlord at lease expiry. Our team of building consultancy surveyors can assist with this process.
