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?
- Why are you considering moving in the first place ?
- How much space do you really need
- Where, as a location, do you really want to operate from
- Do not forget the costs of stationery, telephone lines. Broadband relocation etc.
- Then there is the cost of the move itself plus the down time before you are up and running.
- What about the costs associated with your existing space….how long have you budgeted for that to run.
- 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:
- 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.
- 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.
- 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.
