Commercial Property Issues

How do you get rid of surplus and or vacant shops and retail space cheaply and efficiently?

In the current climate many retailing businesses are faced with the dilemma of having surplus shops/ retail space but are unsure of how or what to do next. How do you go about letting it.

The problems facing them are things like:

• Attracting a market?
• Is there enough money involved to warrant asking an agent?
• The costs involved?

There is a new website that has been specifically set up to deal with your sort of problem called www.wantspacegotspace.co.uk.

The way wantspacegotspace.co.uk see’s the property market, is that it is basically split into two sections;

those that have got space, and

those that want space.

As with all business the trick is putting the two together!

Those people who want space, usually live within 5 miles of the space that they want. The problem for those that have got space, is getting that space in to the market and letting those know that want the space, that they have got space available.

This is the whole reason for creating www.wantspacegotspace.co.uk.

www.wantspacegotspace.co.uk puts those people who have got space in direct contact with those who want space, giving those who have got space a little more control.

How does some one who has got space, start using www.wantspacegotspace.co.uk; well clearly you have to register an account, you are then given a simple dash board of options to add a building, add a contact, delete a building. After selecting the type of building or space, you fill in a very simple form , upload a photograph or two and seek to have it listed.

Even more than this, you can try the system for 7 days free, if you want to stay on all you have to do is pay your registration fee and there you have it, on the web!

Try it, you might find it useful…………..

Simples

How do you get rid of surplus office space? you know that extra room you have over there, the one that you know is costing you money and you keep meaning to advertise?

Small to medium businesses are often faced with the dilemma of having surplus office space to let but are just not sure how to go about letting it.

Problems facing you are things like:

Attracting a market?

Is there enough money involved to warrant asking an agent?

The costs involved?

There is a new website that has been specifically set up to deal with your sort of problem called wantspacegotspace.co.uk.

You see the property market is basically split into two sections; those that have got space, and those that want space. The trick is putting the two together!

People that want space, usually live within 5 miles of the space that they want. The problem for those that have got space, is letting those know that want the space, that they have got space available.

This is the whole reason for creating wantspacegotspace.co.uk.

wantspacegotspace.co.uk puts those people who have got space in direct contact with those who want space, it gives those who have got space a little more control.

How does some one with space, start using wantspacegotspace.co.uk; well clearly you have to register an account, you are then given a simple dash board of options to add a building, add a contact, delete a building.

After selecting the type of building, you fill in a very simple form , upload a photograph or two and seek to have it listed. Pay your registration fee and there you have it, on the web!

Try it, you might find it usefull…………..

Have you ever thought that it would b e a good idea to “off load” some of that surplus business space that you have? Lets face it the expense of the running costs, heating lighting power, water rates, rent, business rates all adds up…………….then there is the problem of how do I do this? Well the internet is a great way of marketing anything and everything these days. The problem is of course is how some one is going to find the space you are marketing?

This is an age old question and is generally answered by having an agent on board. They will come and measure the building, produce particulars of the space, be that office, retail, industrial or workshop space. Costs associated with the letting of this space? Well, usually an agent will charge 10% of the 1st years rent, probably subject to a minimum fee of £500 plus VAT, then there are the disbursements- Boards / details / postage / plans / photographs / web designs, adverts in local papers etc. These can add up to between £500 - £1,000 before you have started!!

What are the problems associated with this approach? well lets look at this shall we?

So here is a thing, the government says that it wants the people to provide for their own pensions in the future. So those who are in a position to do so have gone out of their way to start to do just that. Great says the government!

Of course what a lot of small businesses do is they buy a building and, in many cases, lease it back to their own company. All well and good, no rocket science there then, I hear you say. And to be fair this is a good strategy and makes good economic sense both from the governments point of view and the individual.

The problem is of course that no one expected what the government did next….which was to move the goal posts! in fact they didn’t move the goal post at all, what they did was moved the game entirely to a different field and didn’t realise that they hadn’t told anyone!

What ? I hear you say, well what they did was that they changed the business rates relief rules on vacant property thinking “aha more money for the Treasury!!!”  Then they put the most ridiculous spin on it saying “well stop complaining, as a landlord you will have to reduce your rents to entice occupiers wont you?”

This approach (and my over simplification) you might say is complete nonsense….well is it?

The following is an extract of the crass and naive review and report by both ministers and central government, which incidentally is run by full time career  politicians without a shred of business experience and thus no understanding of the impact of ther actions on the economy:

Landlords of retail and office property now have to pay full business rates after a three month grace period – whereas previously they received 50 per cent tax relief. A Treasury spokesman said: “Reforms to empty property relief are aimed at ensuring a fair balance between incentives to re-let property, and giving property owners a period of relief while they manage vacancies.”

There are a couple of worrying themes from this ridiculous position taken by central government as cited above. Yes the treasury has “whipped in” some £980 million each year into its coffers but the impact is far wider and far far more deeper reaching. One of the biggest employers in this country is the construction industry, and the one sector of that industry that was doing well was the industrial and distribution sector. The reason for this was that developers like Prologis and Goodman s had joint venture arrangements with the large pension funds. The developers found the site, the funds bought the site, the developers developed the site THE CONTRACTORS BUILT THE BUILDING (employement) the fund then retained the finished article.

However, it would seem that even they didn’t bargain on Mr Darling and Mr Browns kick in the teeth; the loss of empty rates relief on such large buildings. Over night the Treasury not only stopped the speculative development of large warehousing sites, they turned the construction industry work force into the “great unemployed” as well. The pension funds (oh yes they would be the ones we have been paying into for our retirement then!) have now got to carry the burden of a cash flow liability until these units are let which they never had to do before!!!

“Lower the rents then provide more incentives” says the arrogant politician….ummm well before you can lower the rents and entice a tenant to take the space, there has to be some demand to create a market, or didnt they teach you that at LSE?

And what about the small building owner that has done everything he was encouraged to do, by setting up his own pension scheme by buying his building? Well basically he is stuffed because the company that he had as a tenant - his own - has now gone into liquidation, and as such he has to now carry the burden of the loss of empty property rates relief, this has now gone, so his pension fund has gone as well!!

Thanks agin Mr Brown and Mr Darling, carrer politicians who would have them? not me not at any price!!! The likes of Hestletine and and even Tony Benn have more to offer by way of experience than these two.

As bad as the property market is, it seems that freehold property values are falling but leasehold rents seem to be, for the time being, holding their values. However the more savy tenant is now looking at ways to strike a favourable deal by looking at the length of the lease and the flexibility that they can build into it by having break clauses, rent free periods, reverse payments as inducements, these are all areas to look at.

More and more tenants are aware that rent is only part of the total cost on the revenue side of the cost of occupation equation; rates, and service charge all add up and tenants are now looking at the “total cost of occupation” rather than just the rent. Property prices are falling, due to what was the seemingly bottomless pit of readily available credit and thus mortgages taken out on interest only borrowing basis by developers and landlords alike. Quality is becoming available at a more affordable rate than ever, due to the financial pressures being put on landlords and developers alike to keep cash flowing in the right direction. Is recession a hidden opportunity to consider moving your business. Well this is a good question but more importantly the answer depends upon the lease contract and the conditions contained therein to which you are tied in too. In a market where the prospective tenant is king (with a small “k”) the existing tenant may be the one who will suffer rather than the landlord. But what are steps you need to consider for a relocation?

1. Why are you considering moving in the first place ?
2. How much space do you really need
3. Where, as a location, do you really want to operate from
4. Do not forget the costs of stationery, telephone lines. Broadband relocation etc.
5. Then there is the cost of the move itself plus the down time before you are up and running.
6. What about the costs associated with your existing space….how long have you budgeted for that to run.
7. And don’t forget, you will still be expected to pay the rates and the service charge!!

But the really the most important question is “is why are you considering moving in the first place?”

Is this to reduce overheads, thereby reducing the floor area requirements? And who do you need to speak to?

The main answers are as follows:

1. Start with a a team that includes a surveyor, this is because a surveyor will take an objective view and look at options that the finance team will invariably not even begin to think about.
2. Do a space audit! look at the way your business is functioning…..could it re process engineer its operations thereby removing processes that are unnecessary.
3. Look at the environment that you are already working in….can it be re configured / remodelled to create a sub letting? Meaning you can stay but someone else helps to pay the bills.

Invariably a surveyor will help you find new premises, a surveyor will walk you through the finance and legals issues , and a surveyor will give you the right counsel on the myriad of other vital decisions.

I hope that this may be of some use to you out there it is an abridged version of a full blown article for the papers. Take a look at the Gillespie & Co website, you never know it just might help you.

Is it time for co-ordinated action in North Solihull, for far too long it has been the poor relation of the Borough of Solihull.

When we think of Solihull and the majority of people who do not live there will probably think of its upmarket housing in leafy suburbs, good schools and first-class shopping. Well that is only part of the story, the other side to the borough has the one of the largest unemployement records in the country and it is this area that would make an ideal candidate for a dedicated Urban Development Corporation to help to drive change, at a far quicker pace thus far and to take responsibility for its strategic development.

North Solihull is how the areas of Chelmsley Wood, Smiths Wood, Fordbridge and Kingshurst are now branded. They are increasingly coming under the eye of both politicians and Solihull Metropolitan Borough Council alike and not before time. Chelmsley Wood itself is part of the wider regeneration of North Solihull, a partnership between Solihull Metropolitan Borough Council and the private sector. It has been estimated that something like £1.8 billion will be invested over the next 15 years. Plans are currently underway to carry out the largest renovation of older parts of the town since the demolition of many tower blocks in the early 1990s.

The current plans are changing the central shopping centre area, which includes the construction of a large supermarket. Both Advantage West Midlands and Fordgate should be congratulated on investing some £41 million in its redevelopment and overhaul. It seems that in addition to these works, the library and surrounding buildings are to be renovated as well, although how you renovate a concrete carbuncle still remains to be seen!

All this is very positive for this part of the borough, albeit with a large caveat.

If this investment is to be forthcoming, we must hope that the infrastructure is going to be improved along the way to ensure that the investments that are being made are both worthwhile and sustainable in the long term.

We all recognise that the M6, M5, M40 and M42 provide excellent communication links in and, around Birmingham, as well as links to various parts of the country. What this area desperately needs is significant investment in creating links to this major arterial road network in order to open up the area and justify the long term investment for which it has been earmarked. Once these works have been put into place then the real opportunity to bring jobs in the form of new industry and the like will become a reality. Sceptics may say that this can never happen, but for evidence of this approach working, you only need to look at what the Black Country Development Corporation did over there, during a 10 to 15-year period and how it changed that area. Let us also not forget what Heartlands Development Corporation managed to achieve with its much more limited resources in the area around parts of Bromford, which happens to be adjacent to North Solihull. The point here is that both of these areas have seen a lot of change over the period. There is then no reason why this cannot happen here in North Solihull as well.

To take the Black Country example, the decision to commit to a new spine road linking the various towns and development sites so they could have quick access to the motorway network was a key factor in its success. It required the full range of planning legislation and a strategic overview that ignored some of the more petty objections to achieve this, coupled with a sustainable budget to do this. Such investments do not come cheap but the danger of not committing the sums required to the infrastructure means that the entire strategic objectives never moves into a proper stride. This is where central government and inparticular the Treasury can help. This can be in the form of such as Rates holidays, special dispensation on capital allowances and tax incentives should come into play to here to not only help to create jobs but keep those jobs by allowing businesses to re-tool and develop new technologies to compete with and in Europe. This is where I often feel that those in power often talk a good game but to be honest, actually do not understand what is really needed.

Central government has for some time coined the phrase “Joined-up Thinking” which is great but to deliver those aims and asperations that come about as a result of this “thinking” requires centeral government to embrace my phrase of “Joined-up Funding” as well.

Wealth creation means jobs and these usually require some form of manufacturing, which means creating products that can be exported. This brings a cash injection into the economy. With interest rates at historically low levels and exchange rates so low, coupled with flexible working practices and a real ‘can-do’ attitude, there is a fantastic opportunity to see North Solihull develop and take its place in the Midlands economy.

North Solihull (how Chelmsley Wood, Smiths wood, Fordbridge and Kingshurst areas are now branded) is increasingly coming under the eye of both politicians and the Borough Council alike. Chelmsley Wood itself is part of the wider Regeneration of North Solihull, a partnership between Solihull Metropolitan Borough Council and the private sector. It has been estimated that something like £1.8 billion will be invested over the next fifteen years. Plans are currently under way to carry out the largest renovation of older parts of the town since the demolition of many tower blocks in the early 1990s. The current plans propose changes to the central shopping centre area, which includes the construction of a large supermarket, both Advantage West Midlands and Fordgate should be congratulated on investing some £41million in its redevelopment/overhaul. It seems that in addition to these works, the library and surrounding buildings are to be renovated as well, although how you renovate a concrete carbuncle still remains to be seen!

If this investment is to be forth coming, all that we can hope is that the infrastructure is going to be improved to ensure that the investment is both worthwhile and sustainable. We all recognise that the M6, M5, M40 and M42 provide excellent communication links in and, around Birmingham, as well as links to various parts of the country. This area desperately needs its links to this road network improving to open up the area and justify the long term investment for which it has been ear marked.

Once those works have been put into place then the real opportunity to bring jobs in the form of new industry and the like will become a reality. Sceptics may say that this can never happen, but if you look at what the Black Country Development Corporation did over there, during a 10/15 year period and look how that has changed that area. Let us also not forget what Heartlands have done with their limited resources in the area around parts of Bromford, Maybe they could have done more? Who knows but the point here is, that both of these areas have seen a lot of change over the period. There is then no reason why this cannot happen here as well. Lets face it this can only be good from the property perspective as improved links to the infrastructure will bring new development opportunities and the steel girdle of the Green Belt around Birmingham and in particular in this location will at some point have to be relaxed to encourage new development to take place for industry and commerce to continue to flourish and encourage investment.

Developers, planners, contractors etc and those of us who act as advisors should take this as a call to arms and see what we can do by influencing those in a position to make change happen, actually make change happen!

This article was originally featured in the February 2008 issue of Property News Midlands

How can you reduce you overheads when times are hard?

As the market starts to shrink, many companies are now starting to look at how they can reduce their over heads. The one area that a lot of people forget to look at is their occupational space requirements. Many Finance Directors feel that they are trapped by the constraints of a lease that they wished that they could get out of but just do not know how to go about it.

There are allsorts of ways of doing this…………maybe not necessarily getting out of the lease but reducing the fixed over head. The best starting point is to carry out a space audit.

When we carry out an audit we look at Space Optimisation, looking at ways to better utilise the space that is currently occupied, then look at the costs associated with that fixed overhead. The next step is to start by picking away at the costs, things such as the Ratable Value the Rents and Service charge costs. We look at ways that we can minimise a client’s exposure to repairs and their dilapidation liabilities whilst in occupation.

Then there is the lease, is it breakable? Can we sub let space? Or should we just move? All of these points and more are all considered when carrying out an audit.

Sometimes you are unable to do anything but more often than not, you can. We are working for some world class organisations including retailers and industrial companies. Just recently one of our retailing clients has just added over £250,000 to his P&L due to a windfall reduction in his operating costs of occupation. Who knows we may even be able to do the same for you and put money into your P&L that you haven’t even thought of.

We have a reputation for negotiating settlements in rent review, lease renewal, rating and dilapidation disputes. We carry out acquisition programs for retailers and look to deliver real results as quickly and efficiently as possible.

Whilst we may not be lawyers our expertise in understanding various parts of the law and how it affects commercial property is always tinged with a great deal of commercial realism. So an email or a telephone call asking us to come and talk to you may just improve you bottom line; what have you got to loose?

Our illustrious Government has not only managed to steer our economy on the home front into what could be the worst recession that this country has seen for 30 years, it has decided to hammer the prospects of future inward investment from foreign company’s by introducing the most crass and shambolic piece of legislation “seen in years as well.

Up until the 1st of April 2008 vacant industrial property received 100% Business Rate relief, where as all retail and office properties paid only 50%, after an initial three month exemption. As a result of this change, empty Business rate relief now costs owners and developers of office or shop premises double the amount previously, and owners of vacant industrial property who had not been required to pay any empty rates, now face a substantial rate liability.

The new rules for business rates for empty property was introduced will see reliefs limited to three months for offices and shops and six months for factories and workshops from 1 April 2008. After this period, full rates will be payable.

“So what” I hear you say?

Well here are some of the consequences of this seemingly inconspicuous change.

I sometimes am fortunate enough to act on behalf foreign companies who for some reason or another wish to open up a facility here in this country. Such inward investment has been encouraged by not only central government but local government as well. Local, Unitary, and County authorities have all been doing their bit to compete with, not only their foreign counterparts but their local counterparts as well. Inward investment departments / teams do all that they can to entice companies to their area by various means and financial inducements.

This has to be good for the economy, inward investment brings jobs, spin offs like infrastructure investment, re generation of derelict and defunct areas that have suffered through depravation and the lack of investment generally.

Wouldn’t you say that the job of a government is to encourage all of this rather than discourage investment? Particularly when an economy is heading for, if it’s not already in, a major down turn?

During the last 10 to 15 years we have seen a massive growth in the warehouse and industrial sectors of development. Large sheds have sprung up along major transport corridors encouraging a central hub and spoke distribution style of distribution of goods through out the country. Major office parks have been developed and encouraged by local planning departments to bring services and clean jobs to an area. A good example of this is the New York area of Tyne & Wear. Developers, working in conjunction with our pension funds have invested in these developments to bring these new working environments to us.

Then Mr Gordon Brown and his best mate Alistair Darling dream up this idea to tax the empty buildings by removing the reliefs from them. So “where is the inducement now chaps” “what is going to be the motivation of the developers and pension funds to invest in new areas of regeneration or industrial space etc WITHOUT A PROSPECTIVE OCCUPIER BEING SIGNED UP FROM DAY ONE!!!!”

Why would some one abroad look at coming here when they have to wait between 9 to 18 months to get into there new facility? They are going to have to wait at least that long for a planning permission and then building regulations approval then the contractors have to build the unit…..This is because once the existing stock of high quality warehouse and Industrial space has been taken up no one is going to risk the burden of paying “empty rates” on the finished product.

The consequences of this “Empty Business Rate” legislation is that no new buildings we be readily available, therefore the construction industry will suffer which will lead onto even more unemployment – er wont that increase the payments from Government to the unemployed?

The investment goes to elsewhere in the EU. Oh and I am sorry chaps (those of you in the inward investment departments) you are no longer needed either.

“Yes but according to the Government this change is supposed to be an incentive to make landlords reduce rents and make the market more flexible”

Trust me if you believe that then clearly you believe Gordon Brown will win the next election? That is pure “spin”

Michael Gillespie

Taking a lease or occupying shop premises can be as easy or as difficult as you want it to be. However, be warned, it is not like buying a house or a car, its just a bit more complicated than that.

The easy way is by taking professional advice from people who specialise in dealing with commercial property. For my part, I always advise people who call my office, to consider the savings and the real usefulness and benefits that a qualified Chartered Surveyor can bring into a negotiation. Not only will the property surveyor/agent assist you in finding a suitable site and location for your business, what ever that business may be. They will also work with you to evaluate the desirable qualities required for a successful business location given the type of business you are. Whether that is to identify a new location for manufacturing, retailing or for a service based business utilising office space, businesses, all have there own special needs and requirements.

Here are some of the ways a Chartered Surveyor can help you:
• They can identify suitable locations in specific towns and cities where you may want to be located and advise as to why some units may be inappropriate.
• They can negotiate the best financial terms on your behalf for your business
• They can tell you what should and just as importantly what should NOT be in your lease.
• They can help with the instructing of your legal representative and with your legal negotiations
• They can tell you what problems to anticipate and how to avoid them Once a location or property has been found

Surveyors/Agents are there to assist you throughout these negotiations, and are there to advise you on the best financial terms. Your agent will assist you in dealing with any queries and advise you on the most suitable action to take, given your operational requirements and business needs. Some times, as drastic as it sounds that advice may be to walk away, as this may not be the right deal for you.

Michael Gillespie

Director

Gillespie & Co 0121 711 2810