Navigating the Changing Landscape of Commercial Property: A Landlord’s Guide
In the ever-evolving landscape of commercial property, landlords find themselves facing shifting market forces and legislative changes that demand action. Particularly on the high street, where landlords must now navigate through over-supply, changing consumer habits, and legislative shifts.
In this blog, we delve into the latest developments in commercial property, focusing on tenant-friendly leases and the proposed High Street Auction legislation, to equip landlords with the knowledge they need to thrive.
Changing Market Forces Within the High Street
The high street, once bustling with retail activity, now grapples with an over-supply of retail units and the encroachment of online retailers. Traditional retailers often find themselves unable to afford the high rents and non-domestic rates of town centres, leading to a transformation of these spaces, and alternative and ancillary uses becoming more widespread as landlords seek to fill vacant units and adapt to changing consumer preferences.
In response to market demands, tenants are increasingly calling for more flexible commercial property lease terms. These "tenant-friendly" leases may include variable rents based on turnover, favourable break options, or less restrictive permitted-use clauses. This shift in dynamics impacts the relationship between landlords and tenants, requiring a more collaborative approach to lease agreements.
The uncertainty brought about by the COVID-19 pandemic and subsequent lockdowns has further underscored the importance of flexibility in commercial lease terms. In the current commercial property landscape, it is important for landlords who seek to retain or attract good tenants to become more accepting of tenant-friendly leases, recognising the need to share risks and accommodate changing business landscapes.
To remain competitive, landlords must adapt their leasing strategies in consultation with asset managers, surveyors, and valuers. While tenant-friendly leases offer benefits, they also come with risks that need to be carefully mitigated. Poorly modified lease clauses can lead to disputes down the line, emphasising the importance of thorough negotiation and drafting prior to signing a legally binding contract.
New High Street Auction Legislation for Commercial Properties
The introduction of the new High Street Auction legislation will mean commercial property landlords are required to rent out continuously empty commercial properties to new tenants such as local businesses or community groups. This comes with new challenges for landlords.
In preparation for this significant change, it is important for landlords to assess their portfolios and identify whether any of their properties may be subject to the upcoming legislation. Additionally, suitable occupancy arrangements need to be put in place in order to retain control of these premises and prevent them from being auctioned off by local authorities.
The impact of the High Street Auction legislation will depend on the willingness of local authorities to utilise these new powers. While some landlords are already offering favourable lease terms to secure occupancy, the legislation may incentivise further efforts to prevent loss of control over premises. It may also lead to an increase in supply, but without a subsequent increase in demand.
In light of the upcoming legislation, landlords must consider their investment strategy. While some may view securing occupancy on their own terms as preferable, others may face challenges if they wish to redevelop or sell with vacant possession. Understanding the risks and opportunities associated with this legislation is crucial for informed decision-making. If you would like to learn more about the new legislation, click here.
In a rapidly changing commercial property landscape, landlords must stay informed and proactive if they wish to thrive. Tenant-friendly leases and the introduction of the High Street Auction legislation present both challenges and opportunities, requiring landlords to adopt flexible strategies and embrace collaboration with tenants. By understanding these new market dynamics and legislative changes, landlords can navigate through uncertainty and secure success in the ever-evolving high street environment.
If you're seeking expert guidance for commercial property matters, don't hesitate to reach out to our seasoned legal team at Howard and Over. We're here to offer clear, jargon-free advice and support to help you navigate the complexities of the evolving landscape and aid in the success of your business ventures.
