property
By Dan Smith, of M4 Property Consultants
finally re-negotiating the terms as the tenant has several
options on the table. If you are lucky you get to the stage where you are
instructing solicitors but then the tenant approaches you to inform you that their current landlord has offered them better terms to remain where they are and the negotiations start again. Sigh. This process is basically the same across all commercial
sectors with a few exceptions. The freehold market across most sectors has also seen a
fall in demand however industrial premises in certain areas have been seen to ‘buck the trend’. Freehold industrial demand by owner occupiers, who
regard rent as ‘dead money’ has in certain parts of South Wales ensured that retained values have been maintained at a decent level. These deals are usually driven by local manufacturing warehousing companies either in the process of expanding or contracting from or to larger leasehold properties. It is important for investors, developers and agents not
to be ‘stuck in the moment’ and to look forward to a time when hopefully development funding and bank finance will be more readily available. It will be at this time that the lack of development and
investment over the past few years may cause inflationary problems with a lack of quality supply across most sectors linked with what hopefully will be increased demand leading to a lack of occupier choice and an increase in both rents and freehold prices. I believe it is up to both the private and public sector
to identify these potential issues on the horizon, assist developers and investments with sound advice and possible financial incentives, public sector, to begin developing new stock for what we fervently hope to be an improving market.
A report recently published by the British Property Federation and the Investment Property Databank confirms average lease lengths in the UK commercial property market have fallen significantly to an average of 4.8 years.
The report provides the following data:-
• Average leases lengths have fallen from 6.2 years in 2007 to 4.8 years in 2011
• Lettings to SMEs are even shorter, at 4.1 years • High streets retail units saw a small reduction in lease lengths, falling from 7.7 to 7.6 years this year, however in 2007 this was 9.7 years.
This is similar to the case locally in south east Wales and
believes the average lease length here may be shorter still. South Wales has traditionally offered more flexible lease
terms than other locations across the UK. The majority of the stock is suitable for the SME sector,
which has always demanded much greater flexibility. In cities such as London, Birmingham and Bristol, multi- national companies are willing to sign longer term leases on substantial buildings in order to secure good deals. However, we are not blessed with too many such tenants in south Wales. This trend towards shorter leases has been happening for
a number of years. However market conditions may have forced the issue yet further. Many landlords are realising that they need to adjust their aspirations in the current market. They are willing to be a lot more flexible to help attract tenants to their properties. There is a lot of risk and uncertainty in business in the current economic climate and businesses need to ensure they have sufficient flexibility to deal with this. We are working with our landlords to ensure we are offering terms that match the nature of business requirements. For example, we are offering start up industrial units in
Newport on monthly licence agreements to minimise risk for potential tenant and have offices in Chepstow that offer the same flexibility. We also have been offering retail units on the edge of the Kingsway Shopping Centre on initial six- month licences. All these allow businesses the flexibility to take the risk and set up or expand which is essential if we are to grow the economy. Businesses considering securing their first commercial
property or those looking to relocate, now really is a good time to be in the market. Landlords are keen to secure tenants, are willing to offer
incentives to secure tenants and, as confirmed above, are willing to be a lot more flexible in terms of the length of lease they are willing to offer. Businesses should consider the opportunities presented by the current market conditions and exploit them now, while they have the advantage.
42 THEbusiness QUARTER
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60