AS I’m currently set to deliver a series of talks through Business Link and Rics regarding how businesses can reduce their occupancy costs, I thought it pertinent to reflect on this issue through my column.
Given the current state of the economy we really need to be thinking about what can be done to help support the region’s businesses, enabling them to become more competitive and withstand the impact of the recession.
Second only to labour costs, occupancy costs are the highest expense businesses face. Every year a whopping £13bn is estimated by Capital Economics to be wasted by businesses not addressing these property costs. So what can be done to help reduce this figure? Careful consideration needs to be made before signing a rental agreement, during occupancy and after you have decided to move on.
It is vital that you choose the right premises for your business. You want to be looking for premises that help you operate effectively.
When you have chosen your site, make sure you negotiate your rent, rates, insurance and other costs – now more than ever landlords appreciate the need to be flexible with rents and terms so it is worthwhile having an open and honest discussion about what you can afford, and what length of time you can commit to on your lease, for example; agree your rent and lease renewal dates upfront.
Ahead of moving in be mindful of what you might need to repair and agree that the landlord does this work before your occupancy or gives you a rent-free period. Service charges can be particularly costly so ensure you’re aware and are happy with the additional fee per square foot your landlord will be charging you. Similarly, ensure you shop around for property insurance.
If you do works to your property make sure it has the landlord’s consent and that they are not classed as improvements. If they are you may get the landlord to do the works in return for an increase in rent.
Or, the landlord should pay you compensation at the end of your lease and agree that a future rent increase disregards these works.
When you’re in occupation simple record-keeping for repairs and planning of your cash-flow can really make a difference. You might also want to consider subletting or hiring out areas of your office.
To learn more about ways to reduce your occupancy costs and for more information on my next seminar please call (0191) 206-4144.
Kevan Carrick is partner in JK Property Consulting LLP and policy spokesman for Rics North East