Commercial rents going up or down?

[richardxjr]

Just wondering. Where I am in coastal SE there is an absolute GLUT of newbuild stuff and existing empty units.

My 10yr lease comes to an end in June 09 and I have just been offered renewal terms from our large insurance co pension fund landlord:
(This IS a S25 Landlord & Tenant Act lease)

In 1998 we paid 24k
In 2008 we pay 32k

Tenant in identical unit next door (same LL) signed for 10 years last year
at a not unreasonable 30k

I have been offered 10yrs (with upwards only break at 5)
at £38,330 (that was not a mis-type. Thiry EIGHT!)



Oh well, got a few months. Let battle commence.

Perhaps they know that it would cost me about £50k to move our industrial manufacturing into one of the many shiney newbuilds?

[edb49]

Our experience is rents are falling a bit at the moment. Ask an for independent valuation?

[Chrisgr31]

If your lease is to have a break clause after year 5 (I assume that it is you that has the choice to operate it not the landlord) then arguably you should pay a small amount more than for a straight 10 year lease. This is because of the potential void the landlord could have in 5 years, against the guaranteed income for 10 years next door. However at the same time Landlord will know that most tenants don't activate break clauses, and they can be very difficult to activate!

Its unlikely that rents have increased in the last year, and did your neighbour get a rent free period? If he did then you need to take account of that.

Don't forget that if you vacate the unit the landlord after 6 months will have to pay rates on your unit, so he won't want the unti empty.

So check what the total deal was next door and report back. But certainly you want to suggest you should pay no more until next year.

[Piglet]

richardxjr said:

Perhaps they know that it would cost me about £50k to move our industrial manufacturing into one of the many shiney newbuilds?

..but don't forget that the landlord of the shiny newbuild will almost certainly give you a rent free period of a couple of months maybe six if you push it and your existing landlord would have to give a new tenant a rent free period as well.

Push it...it's a tenant's market at the moment.

Is your existing landlord a big commercial LL or someone small? Big landlords are more likely to take a pragmatic longterm commercial attitude, little ones are more driven by their rental income.

[mel]

Out of interest what the square footage for that? I'm paying £40K for 7,000 sq ft late 60's shed style industrial, but I'm a bit further up towards London.

[Ade355]

I would definately be shopping around if I were you, dont let the landlord bend you over. If you have another option (factoring in the 50K) his bluff will be called.

[Chrisgr31]

Incidentially is the OPs lease protected by the Landlord and Tenant Act 1954? If so you don;t need to be in a rush to vacate or agree new terms. If the Landlord wishes to bring the lease to an end he will need to give between 6 and 12 months notice and serve whats called a Section 25 Notice. That Notice will tell you when the lease is to expire and whether the Landlord will grant a new leas and if so what terms he wants. You can then negotiate on those terms. However to protect your interests you <b>MUST</B> apply to the Court before the lease expiry date given by the Landlord if either a new lease has not been signed by that time.

At the end of the day if you cannot agree terms with the Landlord they will be determined by the Court and you have 2 months (I think it is) after that decision to decide whether to accept them or not.

If the Landlord does not serve a S25 Notice that might be because he is worried rental values have fallen so there is no incentive for him to determine the lease. In that case you can serve a S26 Notice seeking a new lease.

[richardxjr]

Thanks for all your replies.

Yes it is a Section 25 letter I received with the lease ending June 09, and their new suggested terms.

Existing lease and next door's are both 10yrs with 5yr break.

Engaged solicitor and surveyor.

[SmokinV8]

Hmm I got this sort of battle to fight when my lease up for renewal in 18 months, 3000sq ft of decent retail unit on garden centre @ £46k pa,sure I can get better location or cheaper rent for much the same.

[Stitch]

Might cost you £50K to move - but check out what reverse premium or rent free period deal the landlords on the new units are willing to do.

Landlords seem to be going one of two ways at the moment - some are helpful and realistic in relation to the current economic climate. The second camp seem to think that everyone is out to screw them and use the issue of the economy as an excuse - hence they play hardball to avoid any precedents being set.

regards

John

[Chrisgr31]

richardxjr said:

Thanks for all your replies.

Yes it is a Section 25 letter I received with the lease ending June 09, and their new suggested terms.

Existing lease and next door's are both 10yrs with 5yr break.

Engaged solicitor and surveyor.

Ensure your surveyor speaks to all the other occupiers on the estate to ensure no one does anything silly!

Also I'd instruct him to look for a new unit, yoiu don't need to move but it will give you an idea of whats available, and who knows it might be cheaper to move!