Breaking through the fear of getting property decisions wrong

Clients I speak with regularly say the commercial property market has become increasing stressful and complex. So much so, that it inhibits businesses from making decisions about future locations; whether to upsize, downsize, move or stay.

The message I hear is that there is a general fear that making the wrong decision about their property needs could tip a business over the edge. Because of this worry, the inclination is to defer doing anything.

There are also businesses that are focussing all their energies on business growth in a slowly recovering market and are too busy to consider their future property portfolio.

Even though we are continuing to experience a tenant’s market, there is a worry that landlords can still invoke clauses in leases that could adversely affect a business and send it to the wall.

Case in point…
I recently dealt with a situation where a client had extended their business to an adjoining property owned by the same landlord. They had not got any advice on the details of the agreement and ran into trouble when their turnover dropped off, and they needed a significant input of capital, which is very difficult to do when turnover is down.

Their only chance of survival was to seek a reduced rent but the landlord was not prepared to do this.

It may sound crazy, but I have come across more than one case where a landlord refused to be flexible about a lease, even though the refusal to negotiate will leave them having to find new tenants in an oversupplied market with high vacancy rates, and offer incentives to get them to sign up to a lease. It may sound like “cutting of your nose to spite your face” but it is not as uncommon as you might think.

In the case I have just mentioned, the tenants had not sought external advice on putting the lease together and got caught out with a landlord’s lease that gave no room to move.

All of this adds to a climate of fear, and sometimes businesses are not operating from leased properties that are optimum for their needs.

As property is often the number two expense on the P&L, there is a significant opportunity to make savings by ensuring a business is supported by its property, not dictated by it.

The feedback I get from clients is that independent advice from organisations such as ourselves can offer a great deal of peace of mind. It does this by assessing property needs and working to identify premises of the right size, in the right location and at the right price for the right time period, all supported by a lease document appropriate to their needs.