Commercial Rents at the moment
Discussion
We are looking for a small office to rent or buy at the moment (>1000SqFt) and was wondering what the market is like at the moment.
Is commerical property in a similiar state to the residental market or is it completely different? How long is a typical lease?
Looking in the Southampton area and quoted rates seem to vary from £10psf to £14psf and there doesn't seem a lot to choose from. Wouldn't mind buying a place but can't find anything for sale-are there web sites for this sort of thing or shall I keep ringing around the agents?
Not interested in serviced offices.
Is commerical property in a similiar state to the residental market or is it completely different? How long is a typical lease?
Looking in the Southampton area and quoted rates seem to vary from £10psf to £14psf and there doesn't seem a lot to choose from. Wouldn't mind buying a place but can't find anything for sale-are there web sites for this sort of thing or shall I keep ringing around the agents?
Not interested in serviced offices.
Hi!
I work for Hollis Hockley and we have offices in Farnborough and Basingstoke, and cover the M3 and Eastern M4 corridors, basically from Southampton up to Staines, and from Petersfield in the East to Newbury in the West.
The commercial market has not been effected in the same manner as residential (at the moment!). Naturally sales have slowed as people have been struggling to raise finances, but none the less we have got several sales transactions going through at the moment.
In some regards this plays in to the hands of Leasehold landlords as those that perhaps were considering purchases are now looking at leases.
Whilst that sounds slightly rebust, there is definitely a lack of confidence in the market place and whilst we haven't seen rents move there is perhaps a little more available by way of incentives from landlords (rent free, or perhaps a period of reduced rent).
One thing to consider is that because of the change in rates liability in April of this year a landlord, or tenant, now has to pay rates for a space, even though they aren't using it! As a result they are burning a bigger whole in their pockets than they were before, so someone looking for space is in a relatively strong position.
Those rents sound about right to be honest. I have got some space in Southampton at the moment (fairly basic flexible offices) on Bitterne Road West which we're doing on an inclusive basis (inc. rates, utilities, buildings insurance etc, but exclusive of telecomms, furniture, contents insurance etc). If you wanted to pop me over an email at tsc@hollishockley.co.uk then I'll happily send over a set of details.
Alternatively we also have an acquisition service, which might well suit if you wanted to pursue the purchase route. Effectively we undertake all the leg work and searches, reporting back to you, and then enter in to negotiations on your behalf using our market knowledge to secure you the best possible deal. Obviously we charge a fee for that - but I'm sure we can come to a PH'ers discount arrangement!
You could try www.investinsouthampton.co.uk as well.
If you want any advice on it, then feel free to give me a buzz in the office (01252 545848) and we can have a chat through it
I work for Hollis Hockley and we have offices in Farnborough and Basingstoke, and cover the M3 and Eastern M4 corridors, basically from Southampton up to Staines, and from Petersfield in the East to Newbury in the West.
The commercial market has not been effected in the same manner as residential (at the moment!). Naturally sales have slowed as people have been struggling to raise finances, but none the less we have got several sales transactions going through at the moment.
In some regards this plays in to the hands of Leasehold landlords as those that perhaps were considering purchases are now looking at leases.
Whilst that sounds slightly rebust, there is definitely a lack of confidence in the market place and whilst we haven't seen rents move there is perhaps a little more available by way of incentives from landlords (rent free, or perhaps a period of reduced rent).
One thing to consider is that because of the change in rates liability in April of this year a landlord, or tenant, now has to pay rates for a space, even though they aren't using it! As a result they are burning a bigger whole in their pockets than they were before, so someone looking for space is in a relatively strong position.
Those rents sound about right to be honest. I have got some space in Southampton at the moment (fairly basic flexible offices) on Bitterne Road West which we're doing on an inclusive basis (inc. rates, utilities, buildings insurance etc, but exclusive of telecomms, furniture, contents insurance etc). If you wanted to pop me over an email at tsc@hollishockley.co.uk then I'll happily send over a set of details.
Alternatively we also have an acquisition service, which might well suit if you wanted to pursue the purchase route. Effectively we undertake all the leg work and searches, reporting back to you, and then enter in to negotiations on your behalf using our market knowledge to secure you the best possible deal. Obviously we charge a fee for that - but I'm sure we can come to a PH'ers discount arrangement!
You could try www.investinsouthampton.co.uk as well.
If you want any advice on it, then feel free to give me a buzz in the office (01252 545848) and we can have a chat through it
Edited by TimCrighton on Tuesday 5th August 15:13
I'm a commercial property lawyer and I work mainly for landlords. IMO this is very much a tenant's market and my client's are being pushed into very tenant friendly deals in order to get their premises let.
The impact of them now paying rates shouldn't be overlooked.
If I were a tenant now I'd be trying to chip away at the deal from the start, get your agent doing this, don't let him do a deal just to get the deal done and then try to chip it at the legal stage. Get the agent to do the very best deal that can be done at the start and THEN chip it at the legal stage.
Quite a lot of landlords are pretty desperate at the moment (obviously depends on the type of landlord, big institutionals will be more secure but if they are losing tenants they will want to plug voids.
The impact of them now paying rates shouldn't be overlooked.
If I were a tenant now I'd be trying to chip away at the deal from the start, get your agent doing this, don't let him do a deal just to get the deal done and then try to chip it at the legal stage. Get the agent to do the very best deal that can be done at the start and THEN chip it at the legal stage.
Quite a lot of landlords are pretty desperate at the moment (obviously depends on the type of landlord, big institutionals will be more secure but if they are losing tenants they will want to plug voids.
Interesting. My 10yr 5000sqft factory lease is up for renewal June 09, so I'm preparing to start negotiations in the new year.
I didn't know about the rates liability until now. Several units on this estate have been empty for years, and there is a massive glut of newbuild here too (Eastbourne).
The asking prices on empty units here, same landlord, slightly less than what I've been paying the last 5 years (£6.50)
The rates = about a third of the rental cost: a fair chunk.
My landlord is a large pension fund (L+Gen). I'm wondering what incentives to stay I can ask for, and whether I negotiate myself, or through an un-connected local agent? If this route, what sort of fee would be reasonable?
I'm thinking a shorter lease (5yrs), £6, and ext.refurb (windows, door, roller shutter) as that's what they've done to the empty units between lets.
I didn't know about the rates liability until now. Several units on this estate have been empty for years, and there is a massive glut of newbuild here too (Eastbourne).
The asking prices on empty units here, same landlord, slightly less than what I've been paying the last 5 years (£6.50)
The rates = about a third of the rental cost: a fair chunk.
My landlord is a large pension fund (L+Gen). I'm wondering what incentives to stay I can ask for, and whether I negotiate myself, or through an un-connected local agent? If this route, what sort of fee would be reasonable?
I'm thinking a shorter lease (5yrs), £6, and ext.refurb (windows, door, roller shutter) as that's what they've done to the empty units between lets.
Hi Richard,
At the end of the lease the rent would be reconsidered at its 'market level', and thus could come down, or go up depending on conditions.
You are likely to find that with L&G they are reluctant to move away from their ERV (Estimated Rental Value) for the estate as this is where there investment value is secured (even though yields have moved right out the investment will still be calculated from the 'headline rents'). As a result they are more likely to provide you with an incentive by way of a rent free period. We have seen rent free periods growing in length over the course of the last year, and some substantial incentives can now be achieved, particularly where, as in your case, there are other vacant units on the estate and the landlord won't want more vacancies! My contact details are above if you wanted to have a chat through some of the points that might effect you in a lease renewal.
An agent is likely to charge a fee of around 10% of the annual rent for a lease renewal, not dissimilar to a letting, but this should be more than offset by the savings that a decent agent can make on your behalf. There are obviously other considerations as well, with regard to dilaps, the lease structure, such as whether it falls inside or outside 'The Act' (The Landlord and Tenant Act 1954 Part II), service and estate charges etc.
I hope that helps a little
Tim
At the end of the lease the rent would be reconsidered at its 'market level', and thus could come down, or go up depending on conditions.
You are likely to find that with L&G they are reluctant to move away from their ERV (Estimated Rental Value) for the estate as this is where there investment value is secured (even though yields have moved right out the investment will still be calculated from the 'headline rents'). As a result they are more likely to provide you with an incentive by way of a rent free period. We have seen rent free periods growing in length over the course of the last year, and some substantial incentives can now be achieved, particularly where, as in your case, there are other vacant units on the estate and the landlord won't want more vacancies! My contact details are above if you wanted to have a chat through some of the points that might effect you in a lease renewal.
An agent is likely to charge a fee of around 10% of the annual rent for a lease renewal, not dissimilar to a letting, but this should be more than offset by the savings that a decent agent can make on your behalf. There are obviously other considerations as well, with regard to dilaps, the lease structure, such as whether it falls inside or outside 'The Act' (The Landlord and Tenant Act 1954 Part II), service and estate charges etc.
I hope that helps a little
Tim
Thanks for the replies.
It's interesting about the rent free period. I'd prefer the rent being lower across the rental period than a rent free period but landlords seem to prefer it the other way. What rent free periods have you been seeing on 3-5 year leases?
The April change in rates on empty property is certainly interesting.
Tim can you give me a idea of what you would charge to negotiate a lease or purchase of a small office?
It's interesting about the rent free period. I'd prefer the rent being lower across the rental period than a rent free period but landlords seem to prefer it the other way. What rent free periods have you been seeing on 3-5 year leases?
The April change in rates on empty property is certainly interesting.
Tim can you give me a idea of what you would charge to negotiate a lease or purchase of a small office?
very interested in this!
Currently looking at a 1500sqft factory in Wimbledon, and have a basic agreement of 3 months rent free, no deposit and a break after 2 years for tenant only. They have agreed to all this but want 19k p.a. when we were trying for 17.5k (it was advertised at 20k p.a.)
seems like a good deal, but would prefer a lower rental as i see us being in there for a long time.
do you think it is worth pushing for a lower rent or maybe a longer rent free period? plus anything I'm missing? Interested in any responses!
Currently looking at a 1500sqft factory in Wimbledon, and have a basic agreement of 3 months rent free, no deposit and a break after 2 years for tenant only. They have agreed to all this but want 19k p.a. when we were trying for 17.5k (it was advertised at 20k p.a.)
seems like a good deal, but would prefer a lower rental as i see us being in there for a long time.
do you think it is worth pushing for a lower rent or maybe a longer rent free period? plus anything I'm missing? Interested in any responses!
It is always a difficult one balancing a lower rent against rent free periods, what you need to do is effectively amortise the rent free over the period of the lease, and this will effectively reduce your rent. So for example, with VXSmithers: £19,000 pax equates to £1,583.33 a month in rent, giving you rent free to the value of £4,750, thus bringing the effective rent down to £16,625 pax if that makes sense. A tenant will generally prefer a cheaper rent role, but its important to understand that sometimes you'll get a better deal but compromising on the rental figure and pushing for rent free which brings the effective rent down.
Its impossible to say what rent free periods are as it varies according to the property, the landlord, and the location, but I would have thought you'd be looking at approximately 1 month per annum at present, possibly in the case of tenant space (ie space already under lease to a tenant) more as it tends to be hurting them more than a landlord. The government missed the target with this legislation as it was primarily introduced to promote redevelopment of redundant buildings, but it actually hurts the small private investors and tenants more than institutional landlords that are in a better position to consider redevelopment all short term transactions to get round the rates liability.
VXSmithers - without knowledge of your companies covenant (accounts) its difficult to comment in too much detail, but I would suggest that getting away without having to pay a rent deposit in the current market is pretty good going (naturally lots of companies are worried about firms defaulting on leases as economic conditions continue to tighten). This is 3 or 6 months cash flow that would otherwise be tied up in a deposit. 3 months rent free for a 2 year deal does not sound uncompetitive, but again without knowledge of the property its hard to comment it may be that there is a rent free provision to allow you to improve the condition of the property, and then they will expect you to return the property in a better condition at the end of your lease, through your dilapidations. If you're a sole trader then you just need to bare in mind that the lease will be secured against you, and thus they can take action against your personal property if you default on the lease, if you're a limited company then you have some protection and you've done very well in the current climate not to pay a deposit! As for a lower rent, I wouldn't be too hung up on that, as if you only took a 2 or 3 year lease then the rent would be reviewed to 'market rent' at the lease renewal and you would be likely to simply find it reverted to the higher level at this time.
Greenie - I will drop you an email regarding fees.
Its impossible to say what rent free periods are as it varies according to the property, the landlord, and the location, but I would have thought you'd be looking at approximately 1 month per annum at present, possibly in the case of tenant space (ie space already under lease to a tenant) more as it tends to be hurting them more than a landlord. The government missed the target with this legislation as it was primarily introduced to promote redevelopment of redundant buildings, but it actually hurts the small private investors and tenants more than institutional landlords that are in a better position to consider redevelopment all short term transactions to get round the rates liability.
VXSmithers - without knowledge of your companies covenant (accounts) its difficult to comment in too much detail, but I would suggest that getting away without having to pay a rent deposit in the current market is pretty good going (naturally lots of companies are worried about firms defaulting on leases as economic conditions continue to tighten). This is 3 or 6 months cash flow that would otherwise be tied up in a deposit. 3 months rent free for a 2 year deal does not sound uncompetitive, but again without knowledge of the property its hard to comment it may be that there is a rent free provision to allow you to improve the condition of the property, and then they will expect you to return the property in a better condition at the end of your lease, through your dilapidations. If you're a sole trader then you just need to bare in mind that the lease will be secured against you, and thus they can take action against your personal property if you default on the lease, if you're a limited company then you have some protection and you've done very well in the current climate not to pay a deposit! As for a lower rent, I wouldn't be too hung up on that, as if you only took a 2 or 3 year lease then the rent would be reviewed to 'market rent' at the lease renewal and you would be likely to simply find it reverted to the higher level at this time.
Greenie - I will drop you an email regarding fees.
thanks for the reply, lease is for 5 years with a 2 year break clause. I think we have quite a good deal to be honest - I can't even find anything of a similar size, especially in the Wimbledon area let alone at a lower price that has a half decent location - so it is difficult to benchmark.
Agree about the cashflow, although we are quite cash rich at the moment so it is not a huge issue, but better to be in my pocket than someone elses! Would prefer a lower long term cost than immediate cash flow, but I think this strikes a fairly good balance.
Btw the factory has been updated and refreshed prior to occupancy, and we plan to make a few further improvements, so that is probably why they are happy with the no deposit/ 3 months rent free period.
Agree about the cashflow, although we are quite cash rich at the moment so it is not a huge issue, but better to be in my pocket than someone elses! Would prefer a lower long term cost than immediate cash flow, but I think this strikes a fairly good balance.
Btw the factory has been updated and refreshed prior to occupancy, and we plan to make a few further improvements, so that is probably why they are happy with the no deposit/ 3 months rent free period.
The reason Landlords want high rents is that is the headline figure and the one on which the estate is valued (or is by the unwary!).
Don't forget though that the Landlord is anticpating that if you pay a high rent now you won't expect it to go down, either at review or lease renewal. So if you have a short lease term you need to work out the total amount of rent you will pay over the lease divide it by the number of years, then divide it by the floor area. That will give you your actual rent per sq ft.
At lease renewal you will need to ensure that you do the same sum and argue for a reduction in rent if necessary. Try to ensure your lease is protected by the Landlord and Tenant Act 1954, it makes your negotiating position much better! No threats of being evicted!
Don't forget though that the Landlord is anticpating that if you pay a high rent now you won't expect it to go down, either at review or lease renewal. So if you have a short lease term you need to work out the total amount of rent you will pay over the lease divide it by the number of years, then divide it by the floor area. That will give you your actual rent per sq ft.
At lease renewal you will need to ensure that you do the same sum and argue for a reduction in rent if necessary. Try to ensure your lease is protected by the Landlord and Tenant Act 1954, it makes your negotiating position much better! No threats of being evicted!
TimCrighton said:
Hi!
The commercial market has not been effected in the same manner as residential (at the moment!).
What utter rubbish!!!The commercial market has not been effected in the same manner as residential (at the moment!).
Edited by TimCrighton on Tuesday 5th August 15:13
Landlords are facing rent defaults every quarter date, nationally there is over supply of all types of commercial property (retail, general sheds, cold storage and office space) and with a slow down in the economy there is and will be a lack of growth to take up the slack.
As with every market, highly desirable property will let and landlord's won't suffer too much from void periods but as another poster says, this is a tenant's market
Stitch said:
TimCrighton said:
Hi!
The commercial market has not been effected in the same manner as residential (at the moment!).
What utter rubbish!!!The commercial market has not been effected in the same manner as residential (at the moment!).
Edited by TimCrighton on Tuesday 5th August 15:13
Landlords are facing rent defaults every quarter date, nationally there is over supply of all types of commercial property (retail, general sheds, cold storage and office space) and with a slow down in the economy there is and will be a lack of growth to take up the slack.
As with every market, highly desirable property will let and landlord's won't suffer too much from void periods but as another poster says, this is a tenant's market
You wanna see some of the dreadful deals my retail landlord clients are doing to get rid of voids, in some cases someone in, turning the lights on and trading is of huge value. OK this is less relevant in industrial units but in an estate with lots of voids don't underestimate the value of just having units let. I think it is fair to say all property sectors are feeling the pinch at the moment.
With regard to the OP and anyones elses position for that matter the deal you can agree all comes down to your options. If you can find 3 suitable premises then ask for terms on each and see how far you can negotiate them down.
Flexas.com is a site which is geared towards occupiers and may have suitable space advertised - I have no involvement.
With regard to the OP and anyones elses position for that matter the deal you can agree all comes down to your options. If you can find 3 suitable premises then ask for terms on each and see how far you can negotiate them down.
Flexas.com is a site which is geared towards occupiers and may have suitable space advertised - I have no involvement.
vxsmithers said:
very interested in this!
Currently looking at a 1500sqft factory in Wimbledon, and have a basic agreement of 3 months rent free, no deposit and a break after 2 years for tenant only. They have agreed to all this but want 19k p.a. when we were trying for 17.5k (it was advertised at 20k p.a.)
seems like a good deal, but would prefer a lower rental as i see us being in there for a long time.
do you think it is worth pushing for a lower rent or maybe a longer rent free period? plus anything I'm missing? Interested in any responses!
That's not a bad deal because from the landlord's point of view with a potential break after 2 years he only has a term certain of 2 years, of which 3 months rent are consumed by the rent free. You'd do a better deal by pushing the break back a year, or losing it altogether, but it's obviously horses for courses.Currently looking at a 1500sqft factory in Wimbledon, and have a basic agreement of 3 months rent free, no deposit and a break after 2 years for tenant only. They have agreed to all this but want 19k p.a. when we were trying for 17.5k (it was advertised at 20k p.a.)
seems like a good deal, but would prefer a lower rental as i see us being in there for a long time.
do you think it is worth pushing for a lower rent or maybe a longer rent free period? plus anything I'm missing? Interested in any responses!
Stitch said:
What utter rubbish!!!
Landlords are facing rent defaults every quarter date, nationally there is over supply of all types of commercial property (retail, general sheds, cold storage and office space) and with a slow down in the economy there is and will be a lack of growth to take up the slack.
As with every market, highly desirable property will let and landlord's won't suffer too much from void periods but as another poster says, this is a tenant's market
Stitch, Landlords are facing rent defaults every quarter date, nationally there is over supply of all types of commercial property (retail, general sheds, cold storage and office space) and with a slow down in the economy there is and will be a lack of growth to take up the slack.
As with every market, highly desirable property will let and landlord's won't suffer too much from void periods but as another poster says, this is a tenant's market
You've chosen to quote very selectively from my comments. However, without knowing your experience I can assure you that we are not faced with an oversupply in all sectors, in all locations. Indeed, at present with Grade A office accomodation for example in parts of Surrey/Hampshire/Sussex there is very little supply. The examples above refer to Southampton, and Wimbledon respectively, neither markets are suffering dreadfully at this time, both are somewhat tighter than they were 12 months ago without doubt, but neither are in freefall either. I'm not in the Nottingham market to comment, but regional discrepancies are not unheard of
There are some good deals to be had, but don't expect to be given the earth either is probably the best sentiment at the moment (that we're finding). If we were talking retail then perhaps my comments might have been different, but none the less we're not suffering in the same way. Remember that commercial covers more than just multi million pound investment sales, which yes have crashed, but for small landlords with a decent product and a sensible approach there are still plenty of deals to be done. I appreciate that everyones experiences are different, and there is a lot of negative press around at the moment, but we are finding that things are not as bad (at the moment) as they are generally reported to be. Naturally the sales market has dropped away, but leasehold deals are still there to be done.
Edited by TimCrighton on Monday 11th August 14:58
Well we've just completed on a lease for some new offices.
We decided to use PHer TimCrighton to help us through the process. Several of the landlords did not seem particuarly interested in negotiation and I don't think reality has sunk in yet for some of then. However with a bit of effort we managed to secure the right property with a landlord that was keen to lease their property at a sensible price.
During the process Tim found the properties (some of which we would never have found), arranged and attended the viewings, negoitated, advised on the lease terms and generally put up with my stupid questions. Everthing was done very professional and promptly and at a price that would make residential agents blush.
We decided to use PHer TimCrighton to help us through the process. Several of the landlords did not seem particuarly interested in negotiation and I don't think reality has sunk in yet for some of then. However with a bit of effort we managed to secure the right property with a landlord that was keen to lease their property at a sensible price.
During the process Tim found the properties (some of which we would never have found), arranged and attended the viewings, negoitated, advised on the lease terms and generally put up with my stupid questions. Everthing was done very professional and promptly and at a price that would make residential agents blush.
Greenie said:
Well we've just completed on a lease for some new offices.
We decided to use PHer TimCrighton to help us through the process. Several of the landlords did not seem particuarly interested in negotiation and I don't think reality has sunk in yet for some of then. However with a bit of effort we managed to secure the right property with a landlord that was keen to lease their property at a sensible price.
During the process Tim found the properties (some of which we would never have found), arranged and attended the viewings, negoitated, advised on the lease terms and generally put up with my stupid questions. Everthing was done very professional and promptly and at a price that would make residential agents blush.
That's nice to hear that you're pleased with the service you got, though I am biased as doing this is my everyday job! We decided to use PHer TimCrighton to help us through the process. Several of the landlords did not seem particuarly interested in negotiation and I don't think reality has sunk in yet for some of then. However with a bit of effort we managed to secure the right property with a landlord that was keen to lease their property at a sensible price.
During the process Tim found the properties (some of which we would never have found), arranged and attended the viewings, negoitated, advised on the lease terms and generally put up with my stupid questions. Everthing was done very professional and promptly and at a price that would make residential agents blush.
Although some people baulk at our charges as they reckon they can do better (or think we're the same as estate agents), you've given a good indication of how a surveyor can be of service.
richardxjr said:
Interesting. My 10yr 5000sqft factory lease is up for renewal June 09, so I'm preparing to start negotiations in the new year.
I didn't know about the rates liability until now. Several units on this estate have been empty for years, and there is a massive glut of newbuild here too (Eastbourne).
The asking prices on empty units here, same landlord, slightly less than what I've been paying the last 5 years (£6.50)
The rates = about a third of the rental cost: a fair chunk.
My landlord is a large pension fund (L+Gen). I'm wondering what incentives to stay I can ask for, and whether I negotiate myself, or through an un-connected local agent? If this route, what sort of fee would be reasonable?
I'm thinking a shorter lease (5yrs), £6, and ext.refurb (windows, door, roller shutter) as that's what they've done to the empty units between lets.
Hi Richard,I didn't know about the rates liability until now. Several units on this estate have been empty for years, and there is a massive glut of newbuild here too (Eastbourne).
The asking prices on empty units here, same landlord, slightly less than what I've been paying the last 5 years (£6.50)
The rates = about a third of the rental cost: a fair chunk.
My landlord is a large pension fund (L+Gen). I'm wondering what incentives to stay I can ask for, and whether I negotiate myself, or through an un-connected local agent? If this route, what sort of fee would be reasonable?
I'm thinking a shorter lease (5yrs), £6, and ext.refurb (windows, door, roller shutter) as that's what they've done to the empty units between lets.
Where abouts in Eastbourne are you? I am looking to rent some commercial premises.
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