Dividing up commercial property - what to take into account?
Dividing up commercial property - what to take into account?
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Skyway

Original Poster:

360 posts

188 months

Saturday
quotequote all
I own an ex small car main dealership (around 8500sq/ft internal space with locked yard and forecourt) which we have been trying to rent out for the past few months. Everyone that has showed an interest has quickly realised the property is too big for what they want to use it for as it looks much smaller from the outside (anything from antiques dealer, vet, convenience store etc) so we are now looking at splitting the property into a 4 sections in order to rent them individually.

Does anyone have experience of doing this as there are various items to consider such as splitting and monitoring utility supplies, separate addresses, revised business rates based on size of the smaller sections etc?

Utilities seems to be a tricky one as it doesn't seem viable to have 3 additional registered meters installed so that each section can be monitored and invoiced directly by the utility supplier due to the vast amount of work that would be required, same with water but not so much of a problem with the gas. Should we look at monitoring usage ourselves with basic meters and billing tenants accordingly?

Any advice on such a conversion would be most welcome.

Paddymcc

1,160 posts

209 months

Watching with interest as I've a 5000sqft warehouse and had similar trouble to you getting it rented.

Its an old farm/chicken style round roof warehouse so the roof height was a problem for people that needed 5ksqft and people thst didn't mind the height didn't need 5ksqft.

We have someone renting at the minute but I can see us demolishing it in the future and using the footprint to make 3 or 4 smaller warehouses.

In an ideal world we would be fitting each with their own electric supply but I know the cost will be ££££s. I can see it being a nightmare chasing tenants for their portion of a shared supply.

Jockman

18,304 posts

178 months

Mr Overheads might chip in with advice on utility separation if he clocks this thread. I'm sure there is a viable workaround.

Coincidentally I've just bought a third commercial property into my SIPP - this one 25,500 square feet - and they had done exactly what you are proposing. Bit of a nightmare for me to unravel but I'm happy with the challenge.

Business Rates were divided into 4 portions with the local council and I note that one of the portions was so small there were no rates payable after small business relief (I may be misreading that tbh). Gas was capped on site and as ALL the Occupants were related by family they simply applied all Electricity costs to one portion and all water costs to another portion. I appreciate this doesn't help you !!

Whilst you decide on a future direction, take advantage of zero business rates for 3 to 6 months. Good luck.

Panamax

7,001 posts

52 months

Dividing a commercial property needs planning permission if it creates separate, self-contained units or changes the use class.

Lynch91

486 posts

157 months

Splitting the rates is the easy bit.

The harder / expensive bit is the utilities and drainage - as most tenants will want their own toilets. On the utilities the cheapest way to do it, is to sub meter it using your own contractors - but then you generally pay the main supply and charge back, which is a management head ache. And if businesses start to struggle, another debt that will land on you. So may pay in the long run “to do it properly”.

Would you sell it? Where is it located?