Commercial Property To Let Uk – Every commercial property lease will be different, but there are actions you can take as a landlord to increase the likelihood of a good outcome.
Getting the best rent is what every landlord wants. As a commercial landlord, how do you ensure you are doing everything you can to achieve a successful business? Below I have listed 13 tips for leasing commercial real estate!
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Commercial real estate transactions can be time consuming as they involve people, administration and regulatory requirements. Assets are illiquid assets that cannot be traded in the same way as more liquid assets such as stocks and bonds.
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Commercial real estate leases tend to be more complex than residential leases because such transactions are not as standardized and impose very different sets of obligations on the landlord and tenant.
It can take time for the parties to agree terms and so it makes sense to ensure that plans are made early to take this into account. Be aware that some commercial properties can take many months to find a tenant, and in weaker markets even longer. Keeping commercial buildings vacant often results in the landlord being required to pay interest on vacant business, mortgages, insurance and general maintenance costs.
If you have a tenant who is occupying the property in the last year of their tenancy, it is crucial that you find out your tenant’s intentions as soon as possible.
Depending on your tenancy agreement, you can get anywhere from 0 to 12+ months notice that your tenant is leaving. Most leases will allow the lessor to begin selling the commercial property within the last 3 – 6 months of the lease. Having more time to plan and find a tenant gives you a better chance of closing the deal, minimizing the void period.
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If you live in a property and want to rent it out, then you have the flexibility of when and how to sell your property. However, don’t just consider your personal requirements, consider the demand for the type of property in the market and how long it may take to complete the letting.
If you can afford more time and it doesn’t affect your existing business too much, prepare early. Plan ahead and minimize downtime and potential maintenance costs!
The Minimum Energy Efficiency Standards (MEES) which have already been introduced mean that from 1 April 2018 every commercial property being let will require a valid Energy Performance Certificate (EPC) with a rating of at least ‘E “, unless there are applicable exceptions or where the EU Treaty does not apply. Landlords who do not comply could face fines or find the property difficult to rent.
Acting early to determine what the EPC rating is and whether work is needed to improve the rating and carrying out the appropriate work will ensure that new lettings go smoothly. You can check whether a non-domestic property has an EPC on the National Register website. Get a valid Energy Performance Certificate (EPC) for your property as soon as possible.
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Providing information about your building to a potential tenant should help in the marketing process by identifying any problems at an early stage. Good file and record keeping can take time and effort, but having such documentation can minimize any delays and failed contracts in the future. Make the regulatory documents available to the potential tenant as soon as possible.
If your property is a rental property or you have lived in your property for a long time, there is a good chance that changing trends mean that alterations or works could generate more income.
Please note that any planned work must be considered alongside the deterioration from the departing tenant. Understanding the market demand within the trade sector and location is vital before undertaking such works.
In some situations, the market for a certain type of property has fundamentally changed. It may be wise to consider alternative planning consent or hold preliminary discussions to consider a change of use.
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Understanding market dynamics is important when deciding whether to consider a switch. Alternatively, you can consider the interest of potential commercial tenants who can sign a new lease upon a change of use.
It is important to consider rezoning your property to increase value or make your property marketable.
If you decide to sell your commercial property for rent, you will need to specify the appropriate marketing rent level.
There is no exact science to determining the “right marketing hire,” but understanding market dynamics is important to achieving optimal results. Depending on the market conditions at the moment, you may have very different negotiating positions.
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Finally, the marketing rent should reflect a number of factors related to the market and the particular property. If you understand the commercial real estate market, you should be able to confidently determine the marketing rent for the property.
To find a tenant for your commercial property, potential tenants will need to know about the property.
In 2020 (as it has been for most of the last decade), the most dominant way to gain exposure to a wider range of potential commercial tenants will be through online real estate marketing.
There are many ways you can advertise digitally, some better than others, but advertising commercial real estate online is the most cost-effective way to maximize exposure. In a short period of time, you can potentially guarantee that thousands of potential suitors will be introduced to your property for a relatively low cost. Commercial property portals to consider advertising on include:
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Another key marketing element I would recommend is branding with a V-board, poster, banner or similar. For many properties, the most likely tenant will be found by a tenant who either regularly drives or passes by the property.
It is important to have a clear sign advertising that the property is available for rent. This is especially important if the property is on a busy main road.
The size and scope of your property will determine what resources you invest in advertising your commercial property. More marketing can provide more exposure, but it will come at a higher cost.
Marketing costs should reflect the level of rent and type of property. Marketing activities for a 10,000 square foot Class A office will be distinctly different from a small indoor suburban store.
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In general, I would always recommend billboards and online commercial real estate advertising to advertise the property. In this way, it reduces gaps, creates more interest and gives you a better chance to make the most of the working conditions.
It really depends on the type and scale of the property to determine which of the above marketing elements are appropriate.
In order to lease your commercial property, you will need to negotiate the terms of a new lease. Not only rent must be considered, but also the terms of the lease, including the following:
The above is just a selection of aspects you may want to consider when negotiating the terms of a commercial property lease. Depending on the property, there may be many other issues that need to be negotiated.
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As a landlord, it is important to understand your negotiating position and be aware of your negotiating position. Depending on the type of property, location and market conditions will determine how far you can (or cannot) negotiate the above terms. If you don’t know the market, how can you go into negotiations and negotiate terms with confidence?
Whether or not you give a rental incentive will depend entirely on the dynamics of the market for this type of property. There are no rules as to what incentive should or should not be given as it comes down to a negotiating position between landlord and tenant.
For a residential unit, it would be common for the landlord to provide some form of rent-free period. As long as the property requires minimal work and attracts several potential competing offers, there may be no need for the landlord to offer a rent-free period.
If the tenant re-offers an extensive list of works to the tenant, it would be normal for the landlord to consider an appropriate tenancy incentive. The beginning of the lease is when most tenants need help, so it makes sense to front-load the incentive.
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Some landlords may prefer the incentive to be phased in over time for cash flow reasons, so the context of each deal needs to be considered. A landlord can also use a rental incentive to provide additional incentive to a tenant in a weaker market.
Also, the incentive should reflect the length of the lease and the strength of the lessee (contract). The appropriate level of incentives will be different for each business, and there is no one-size-fits-all policy.
As most experienced commercial property owners know, it’s not just about finding a commercial tenant, it’s about securing a tenant who will pay the rent and fulfill the lease obligations. Having enough information to make an informed decision about your prospective tenant is essential before entering into a contract.
To determine whether a potential commercial tenant is a good fit, you may consider some or all of the following
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