Dipping your toe into commercial property? Make sure you don't belly-flop!

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By Daniel Russell

At about the same time that John Hancock was furiously dipping his quill into an inkwell to sign the Declaration of American Independence, the world’s first great economist was busy describing Britain as a nation governed by shopkeepers.

If the latest research from the Royal Institute of Chartered Surveyors is anything to go by, Adam Smith’s definition is soon to be rendered defunct.

In its latest Commercial Property Trends report, the RICS points to continuing lack of tenant demand sending the UK retail market into a downward spiral.

The evidence of this lies everywhere. Toys R Us has gone. Electronics chain Maplin, the apparently indefatigable Prezzo restaurant chain and even the monopolistically bombproof Mothercare have all announced significant store closure plans.

Debenhams has pursued an altogether different strategy to offset declining profit, chasing diversification in the way it uses its floor space – subletting space in prime High Street stores to gyms and beauty bars - as a way of keeping the retail wolf from the shop window.

By contrast, corporate and industrial premises remain in healthy demand with the sector continuing to grow year on year.

So apart from possibly thinking twice about investing in retail space – though a robust business plan and a winning idea should always buck a trend – what else should potential investors be considering when it comes to the commercial property market?

Price is clearly a key consideration. With desirable properties still seeing significant upward movement on rent – in some cases up to 70% year-on-year – being clear on affordability is an important first step in insulating yourself against future price fluctuation.

It also pays to consider your future needs. Does any given property offer your business the space to grow? It makes no business sense to locate or relocate, only to find you have to go through what can be an expensive process all over again within two or three years. Equally, there’s no point in paying over the odds for a vacuous space you’re not fully utilising.

Property has always been about location of course, so finding somewhere in a reputable area, away from competitors and which is easy for your staff and customers or clients to get to is a sensible strategy.

And when you arrive, you’ll want to be able to trade immediately. So what’s the electrical and technological infrastructure like? Making sure you have the scope to do business quickly and efficiently from the get-go is vital.

Beyond that, you’ll want to know that the building you’ve chosen to buy or rent isn’t likely to be disrupted by long-term building work that might be planned nearby – or, worse still, that it’s in the path of a new road or, if you’re near Heathrow or City airport, runway.

Making sure there are no hidden surprises in store for you is just one of the ways in which having a specialist commercial property lawyer can either help to make your property deal go smoothly or help you avoid becoming trapped in a property contract from which it is either impossible or prohibitively expensive to extricate yourself.

If you’re planning to move your business into new commercial premises, have commercial property or land you want to sell or are simply considering investing in commercial property, why not get in touch and see how we can help you to make the right decisions about your future.

Mark Norman