BLOG: Commercial Property - taking advantage of the recession

By Philip Gray on Sep 15, 09 02:52 PM

Philip Gray.jpg

ONE characteristic of the downturn in the property market is a swing in the balance of power towards business tenants involved in lease negotiations.

Unsurprisingly the last twelve months has seen a general decline in new commercial property tenancies coupled with an unfortunate but inevitable rise in tenant insolvencies.

The result has been a significantly reduced demand for business tenancies causing landlords to suffer lower rental incomes and increased rates for the empty properties, this is something tenants can exploit to their advantage.

Simple economics tells us that low demand coupled with high supply moves power away from landlords and into the hands of tenants.

Whilst it is in both landlords' and tenants' interests to ensure that a tenant's business survives until the end of a tenancy, those tenants coming to the end of their existing lease who are looking to renew or relocate often hold the upper hand in lease negotiations.

In particular, tenants should be seeking competitive rents coupled with favourable rent review provisions, rent free periods and adequate break clauses all of which will continue to benefit a business long into the future and beyond the current downturn.

In our experience many landlords are taking a pragmatic approach in the current climate and are working with their existing occupiers and prospective new tenants in order to survive the recession.

Tenants should be looking to take the lead in active lease negotiations and taking advantage of increased landlord flexibility and should look to involve their solicitors and professional advisors in the negotiations in order to obtain the best possible lease.

Philip Gray
Kirwans Commercial Property