Rent Reviews - they’re back!

Market forces are applying upward pressure on commercial rents

6 December 2016

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As we all know, the recession of 2008-2013 saw a collapse in lending, the economy and demand for commercial premises. Couple that scenario with shorter fixed-term leases of five years, and the art of negotiating rent reviews was practically dead. The idea of upsetting a good tenant who was managing to pay their rent in order to seek an uplift was considered nonsensical.

Not any more. The market in South Wales is back. Demand in a number of sectors has risen and supply is now limited. The result? Rents are rising and we are dusting off the rent review and lease renewal handbooks with references to case law and new transactions to help in negotiating higher rates, or at the very least, to maintaining the existing level. And it’s not all about what they’re paying next door. You need to have access to the full set of information about the market and the latest transactions to be successful. Compare it to playing cards, where one party has a full deck and the other has only a handful. Generally we know who’s going to win. Information is key - you need the full deck.

Negotiations will revolve around the specification of the premises, the location and size. The current lease will dictate the hypothetical lease to be evaluated at review, taking into account whether to reflect or disregard the tenant’s improvements, their occupation and many other factors.  Knowing your way around this subject can pay dividends and the party with the full deck often attains the best results for their client.

At Cooke & Arkwright we have a team dedicated to handling rent reviews and lease renewals. The surveyors have expert knowledge of the markets, deals done and the latest transactions. We have a complete understanding of the construction of rent review clauses and how other aspects of a lease will affect the review procedure. We also have significant knowledge of arbitration procedures and third party referrals, and hence are geared up to provide you with the correct advice whether you are a landlord or tenant. We usually have the full deck of cards.

So the game is on. There is the prospect of rises in rents for landlords, while clever tenants will take professional advice from a specialist to try to limit or even reduce their outgoings.

If you have a rent review or lease renewal due, then give us call to discuss what we can do for you. It may be the best New Year’s resolution you make.