As you might expect, in recessionary times, the level of vacant commercial property stock increases. Property Asset Managers are generally busy, but there are invariably ways to improve value or minimise outgoings. With an economic downturn and the weakened demand for commercial property, the pressure increases dramatically to ensure the impact of voids is kept to a minimum.
Credit control is an important feature of any economic cycle, but a weak economy amplifies its prominence and it is an invaluable tool for providing early warning of possible future voids. The usual focus for discussion with tenants at such times is the payment of rent and other charges, but what about property maintenance? Faced with financial difficulties this is generally one of the first areas to suffer. An easy target for Finance Directors looking to make savings to ensure the tenant company remains solvent. But will the landlord then end up picking up the cost?
Other areas, such as business rates, can pose a significant issue for any company with vacant property, but ignoring planned maintenance can store up significant future costs and may have a far reaching adverse impact upon the lettability of a property. If maximum letting advantage is to be achieved in a competitive market, maintenance has a vital part to play, as it can lessen re-commissioning costs later in the letting process and may make the difference between successfully achieving a letting, or not.
Property or portfolio planning is a valuable tool for the Asset Manager allowing foresight to predict milestones within the lifetime of a property and set in place strategies for reacting to events, whether predicted or not. Consider a similar economic period twenty years ago: in the late 1980s, standard institutional letting terms demanded twenty five year leases. Where these leases remain they will probably now have five years or less to run - the process of planning for a potential void in occupancy needs to begin early. The cost of plant replacement, for example, can force a tenant to consider the cost implications of a move to a new property. When a tenant isn't wholly responsible for maintenance, service charge planning in multi occupied property is key to ensuring that the landlord is not left carrying the cost of repairs that should be recoverable under the terms of occupational leases. At Vail Williams, our experienced teams work with clients to plan for the future and help to maximise their assets.