New trend in commercial property leasing Posted 2010, 13 April In the past few months I’ve noticed a definite trend towards organisations searching for new premises. A year ago, this was not the case at all. The bulk of our work then was negotiating rent reviews and lease renewals. People were still nervous about making decisions in recessionary times. What’s also interesting is that we are now seeing more and more new clients who previously would have taken a DIY approach to managing their commercial property leases and negotiations. Executives are increasingly recognising that property is more and more complex and involves significant risk. They see the value in outside expertise such as that offered by us at Parallel Directions Ltd. That value is tangible and can be directly related to profitability and direct return on investment. Take for example a franchise A franchise holder may have plenty of expertise in the product or service they offer, but know little about the complexities of searching for premises and negotiating a commercial property lease. The biggest pitfalls are the ones people are completely unaware of. There are known unknowns… things that we know we don’t know. But there are also unknown unknowns… things we do not know we don’t know. It is the latter category that tends to be the difficult ones. – Donald Rumsfeld The risks involved really struck home when I told one client that the entire profit from their franchise over the 3 year period of a property lease could be completely wiped out by the tough “make good” clause. This is the clause that requires a tenant to restore the property to the state it was in when they signed the lease. It can involve huge costs, such as removing partitions and all alterations made during a fit-out, relocating lighting and air conditioning, and painting and redecorating parts of the property that may have changed during the term of the lease. So while many organisations have personnel with some property management expertise, there are a large number of increasingly complex matters that many are unaware of and therefore unprepared to handle effectively. As I often say, smart management of property leases can have a significant impact on profitability. In complex and increasingly volatile environments, it pays to have the right expert advice.
