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Commercial Property Jan 12th, 2021
The inside of a warehouse

Warehouse lease: negotiating heads of terms

With demand for warehouse space currently outstripping supply, BLB’s Head of Commercial Property, Richard Bowater, considers the need for care in negotiating heads of terms. Our Commercial Property Team are available on 01225 755656. You can also contact them by email, or by completing the contact form at the foot of this page.

Empty retail units displaying agents’ boards have become the most visible sign of the blighting of our high streets by the pandemic. But over the same period, online retail has seen a very different picture and with e-commerce booming, storage and distribution space is at a premium.

According to international real estate services provider, JLL, the amount of warehouse space taken up by UK businesses in 2020 was more than two thirds higher than in 2019, a trend set to continue through 2021. This prediction is reinforced by news that the UK’s largest asset management company, Aberdeen Standard Investments, has acquired a 60% stake in warehouse investment firm, Tritax Management.

Lease negotiations

With warehouse space at a premium, potential lessees should exercise caution. As other interested parties jostle for position, you may fear losing the deal and feel pressured into agreeing terms with little or no negotiation. But, frankly, that would be foolhardy.

A common mistake is to think it’s all about the rent. It’s not! You will also need to consider issues including (but not limited to) the term of the lease, repairing obligations, break-clauses, 24-hour access, shared facilities, security of tenure, the potential need to sublet and personal guarantees. Have you considered requesting a rent-free period or even a reverse premium? Commercial landlords do often agree to them.

Lease heads of terms

Always put yourself in the driving seat. Before confirming your interest in the property, produce your own heads of terms. This will help to put you on the front foot in negotiations. However, producing and then negotiating heads of terms is far from straightforward and if you are not an expert, there is every possibility you will overlook crucial issues, ultimately ending up with lease terms that you come to regret.

It’s therefore vital that you instruct a commercial property solicitor at the outset to discuss the required terms with you. They will assist you through the negotiations helping to ensure you end up with lease terms that are commercially acceptable and help protect you and your business going forward. And if the deal is a large one, prospective tenants will often instruct their own agent to negotiate on their behalf.

Richard Bowater
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