BLB’s Head of Commercial Property, Caroline Entwistle, considers the need for care in negotiating heads of terms for your warehouse lease.
Our Commercial Property Team are available on 01225 462871. You can also contact them by completing the contact form at the foot of this page.
Empty retail units displaying agents’ boards were the most visible sign of the blighting of our high streets through the pandemic. But online retail saw a very different picture over the same period, with e-commerce booming and storage and distribution space at a premium.
According to international real estate services provider JLL, the warehouse space taken up by UK businesses in 2020 was more than two-thirds higher than in 2019. And that upwards trend continues even as our high streets slowly recover.
Logistics is now one of the most attractive income and capital growth sectors within commercial real estate, and that is unlikely to change any time soon. Indeed, the UK’s largest asset management company, Aberdeen Standard Investments sensed the direction of travel early, acquiring a 60% stake in warehouse investment firm, Tritax Management.
Warehouse lease: negotiating heads of terms
With warehouse space at a premium, potential lessees should exercise considerable caution. As other interested parties jostle for position, you may fear losing the deal, feeling 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 also need to consider issues including (but certainly not limited to):
- the term of the lease;
- repairing obligations;
- 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.
Commercial property solicitor
Always put yourself in the driving seat. Before confirming your interest in the property, produce your own heads of terms. Doing so helps 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 you come to regret.
From the outset, instruct a good commercial property solicitor to discuss the required terms. We will assist you through the negotiations to ensure you end up with commercially acceptable lease terms, helping to protect you and your business going forward. And if the deal is large, it’s worth noting that prospective tenants also often instruct an agent to negotiate on their behalf.