This is clearly a significant percentage, so why do so many businesses fail to regularly review the value and running costs of their commercial property when they cannot function without it? Market conditions mean that all businesses are looking for ways to get into shape. The current focus remains on conserving cash and managing costs. Despite being the second highest business cost after wages, property rarely makes it onto the boardroom agenda. Yet, there are some quick wins to be had to reduce property purchase and overhead costs, and to improve efficiency.

Our day-to-day experience suggests that where commercial property is concerned, businesses generally buy at the top, do nothing in the middle and sell at the bottom. What other valuable commodity or asset in the business is treated that way? The true position is rarely that simple when factors such as debt guarantees and defensive balance sheet make-up are taken into account. Looking at your bricks and mortar asset base throughout the whole economic cycle can easily reap rewards. We know that few businesses have the luxury of an experienced property director and it is common for HR or the finance team to have the sole property strategy role. It is worth knowing that practical guidance is available, often based on saving costs alone.

Property health checks
When talking to our clients across the property sector – whether manufacturing, distribution, retail or offices, our suggestion is the consideration of a ‘property health check’.

It starts with a one-off analysis, which examines the portfolio, the key decision dates, and how the property fits within business strategy. This is followed by a shorter annual review and targeted medium-term planning. Such an exercise can reap easy rewards and the tasks are only those that the UK’s property developers and speculators make their living from.

Currently, securing an allocation for alternative higher value land uses in the local development framework needs to be done through representations, but this can take between three and five years to achieve. If you plan your space requirements, and your property assets have potential for significant alternative use, this could be a key objective.
Occupiers can utilise or plan their prominent site frontages for alternative higher value uses. Retail or showroom uses on the front of sites can often complement the main facility and funds released can be re-invested.

It is also now common for tenants to ‘sell’ their break clauses in occupational leases for a rent holiday if the occupier has no real intention of actioning them. Another option would be to extend the lease. You need to understand how the property will fit in your wider plans to follow this strategy, but it increases the landlord’s asset value and they should offer to share this capital enhancement. It is important to always look at your business rates position in detail, including managing voids. Look at asset sale and leaseback as a route to releasing capital and re-investing in the business.

Fundamentally, review in your audit where you are located and the cost/benefit of moving business units to lower cost geographical areas and more efficient floorspace. Many regions in the UK still retain Assisted Area status with European Union support and offer significant grant assistance to companies relocating to these areas.

The strategy is simply one that we all apply to our own homes; planning and investing for the future and building capital growth in small steps throughout the cycles.

Paul Hobbs is a director at property consultant firm GVA Grimley