Posts Tagged ‘Negotiation’

Commercial Rental Property

Commercial Rental PropertyIn large cities if a business needs to take space it will invariably be a lease which is available which brings me onto commercial rental property.  It is rare for freeholds to be available at affordable prices.   It is the preserve of investors, wealthy landowners and financial institutions looking for secure rental income.   Most businesses will be looking at commercial rental property.   So what are the disadvantages of rental property as opposed to freehold properties?

Commercial Rental properties are granted for varying terms.  25 year leases used to be the norm.  This was the length of a so-called “institutional lease” ie. A lease which would be suitable as an investment vehicle for a financial institution.  However, the length has been steadily decreasing and the recent credit crunch has given potential tenants the bargaining strength and brought rental terms crashing down.

Most tenants are now looking for no more than a 5 to 10 year commitment and sometimes they want shorter break options within that term.   In strict terms a lease should only be regarded as the length to the earliest break option.  So if a 10 year lease contains a tenant’s break option at year 3, then this should be regarded as a 3 year lease.  The tenant may not exercise his break but you cannot rely on more than 3 years rental income as a landlord.   There is a glut of office premises in most cities especially the secondary properties ie. Not new built offices but existing offices.   Landlords are open to negotiation.

So what terms should a tenant be seeking in the current climate? Read the rest of this entry »

How To Choose Commercial Property Agents

Commercial Property AgentsYou need to find a tenant for the new office you have just finished refurbishing and so you go on the internet looking for Commercial Property Agents.  You are instantly assaulted with thousands of companies offering properties throughout the UK and abroad.  Often the agents are offering the same properties, so how do you choose which commercial property agent to use?   Here are some key things to look for when choosing an agent.

Initial Negotiations: Offers and Counter-offers

A good commercial property agent should guide the commercial landlord or commercial vendor as to the terms to offer tenants before the property is put on the market but often the property is offered as a lease or for sale and the agents will wait for offers to come in and then negotiate with the buyers.  So it is a good idea to set out your worst and best position to the agent in terms of sale price or rent so that the agent does not come back with an offer which just does not work commercially.   The negotiation will go back and forth with the tenant or purchaser making an offer and the agent going back to the Landlord or Seller with a steer as to whether the offer is realistic fair or not competitive.    If you are new to the world of commercial property then the good agent will not use jargon and will not try to patronise you but will guide you through the process providing explanations in plain English of any technical terms being discussed and there is plenty of jargon in this area. Read the rest of this entry »

Dominic Beeton, Solicitor
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